Monday, July 16, 2007

Remortgage Glossary

Don't be baffled by all the finance jargon to do with Remortgages. The list below contains defintion to many of the commonly used:

Adverse Credit
This term is used to describe Credit Problems due to a poor credit history. CCJ's, Mortgage Arrears and other credit debt repayment problems leads to Adverse Credit. When used to describe: Adverse Credit Mortgages or Adverse Credit Loans they mean Mortgages or Loans for people with Credit Problems or Poor Credit Rating Mortgages

APR
APR or Annual Percentage Rate takes into account the amount of interest you will pay and the term of the mortgage. So the higher the APR the more you will pay, the lower the APR, the less you pay.

Arrangement Fees
Lenders are known to charge arrangement fees or fees for setting up your mortgage to cover any work involved in arranging your mortgage. These fees are usually added to your mortgage.

Capped Rate Mortgages
An interest rate that is set for anything from a few months to several years. This means that if the interest rate went up above the set limit you wouldn't pay any more with a Capped Rate Mortgage. However, unlike a fixed rate your interest rate can go down. The lenders make their money by locking you into a capped rate mortgage for a minimum limited period and may include a penalty clause if you try to swap.

Capital and Interest Mortgage
More commonly known as a repayment mortgage your monthly mortgage repayments to your lender covers the capital, the actual money you borrowed, and the interest the lender charges you for borrowing the money.

CCJ or County Court Judgment
If you have not made payment on any debt you have then you will be taken to Crown Court. If the debt isn't satisfied then a decision or judgment made in the County Court, normally for the non-payment of that debt will be registered on your credit file as a CCJ. If the debt is paid or satisfied and a satisfaction certificate obtained it will be noted on your credit file.

Defaults
If you have defaulted on a loan or mortgage it means that you are more than 30 days behind the date your repayment was due. This will be marked on your credit record and would lead to a CCJ if no payment was received or received very late.

Deposit
The amount of money you put towards the purchase of the property. Most lenders will require at least 10% deposit of the purchasing price. However some lenders will lend 100% or more but only to Status Applications with no credit history.

Discounted Rate Mortgage
This means interest charged on a mortgage is at the variable base rate and applies to the mortgage, less a discount for a set period. This means the rate and so your monthly repayment will go up or down depending on the variable base rate changes. This will remain until the end of the discounted rate period. These type of mortgages tend to lock you into the discount rate mortgage for a minimum limited period and may include a penalty clause if you try to swap.

Early Redemption Fee
This is often associated with fixed, capped or cash-back mortgages. If pay off your mortgage early or want to changes lenders then you may be charged a fee. The lender gives you a package with benefits but you must keep the mortgage with them for a minimum length of time. Some mortgages don't have any early redemption penalties.

Endowment
An Endowment Mortgage is savings based mortgage with life assurance. Part of your repayment pays the interest only and the other is invested by the lender. These were designed to allow you to pay a smaller monthly premium. At the end of the policy your invested amount should be enough to pay off the balance of your mortgage. However current Endowment Mortgage Policy Holders have been notified that the final invested amount is unlikely to cover the final balance of their mortgage.

Equity
This is the difference between the amount you owe on your current mortgage and the current value of your property. This amount can be used in a remortgage to allow money for home improvements, a new car, holiday of a lifetime or reduce your monthly premiums.

Exchange of Contracts
The contracts are exchanged between the buyer's and seller's solicitors. Both parties are now legally bound to the sale and purchase of the properties.

First Time Buyer
If you are after your first home and so your first mortgage, you are classed as a first time buyer. There are first time buyer mortgages available aimed at buyers new to the market.

Fixed Rate Mortgage
This is what it says. A fixed interest rate set for an agreed period of time. If the interest rates went really high then you don't pay a higher interest rate. However you don't pay any less if the interest rates go really low on a fixed rate mortgage.

Flexible Mortgage
This type of mortgage allows flexibility of repayments. Normally, a borrower will be allowed to overpay, underpay, take payment holidays. You can sometimes offset savings against the mortgage to help with payments. Certain flexible mortgages will offer daily interest rates so any overpayment will show benefits straight away.

Joint Application
A Joint Application is a Loan or Mortgage application by two people or applicants. This is sometimes called a dual application.By applying jointly you can increase the amount you borrow because both applicants credit history and earnings are taken in to consideration.

Local Authority
SearchWhen you buy a property the conveyancing process is carried out by your conveyancer, usually a solicitor. This search is based on your local council's services may affect the property. Such as proposed road improvements, and details of any planning permission given for the property or nearby property.

LTV
This term is used to describe the Loan to Value. The size of the mortgage you require compared to the value of the property. A £80,000 mortgage on a house valued at £92,000 would mean a LTV of 85%. You would then require a 15% deposit.

Mortgage Deed
This is the legal document establishing that you have a mortgage on your home or property.

Mortgage Term
The length of time in years which you take out to pay back your mortgage. Most commonly people take out a term of 25 years but it could be 5 years if you borrowed a small amount.

Negative Equity
This means the value of your property is lower than the amount you owe on your mortgage or secured on it. This will be a problem if you want to move or maybe considering either a Online Personal Remortgage.

Remortgage
A remortgage is a new mortgage with arranged through a different lender. You use this by getting a new mortgage on your house. The difference between what you have already paid of your last mortgage and the current value is classed as equity in your property. You can have a new mortgage on your existing home either the same size and have a lower repayment or make it bigger and have funds for home improvements or a holiday.

Repayment Mortgage
Sometimes called a Capital and Interest Mortgage. Your monthly mortgage repayments to your lender covers the capital, the actual money you borrowed, and the interest the lender charges you for borrowing the money.

Right to Buy Mortgage
If you have lived in a Council Property for a number of years you have the right to buy that property. The council give you a discount to buy the property. I can get you the mortgage. For how much longer councils will let you do this is a political agenda.

Self Certification Mortgage
The lender relies on you to certify your income and will not check to confirm this with an employer. If you are self employed and have less than 3 years accounts then you would need a Self Certification Mortgage. It is also called a Self Cert Mortgage and Self Certified Mortgage.
Self Employed Mortgage
Being self employed can make it harder to get a mortgage. If you are lucky you could be certified with over 3 years accounts but if you have less than 3 years accounts then you are classed as Self Certified (see above).

Stamp Duty
A Government tax you have to pay on the purchase price of any property with a value of £100,000 or more.

Valuation Report
Lenders arrange a valuation to find out the value of the property you require the mortgage on. They will ascertain if the agreed asking price is above or below the value and lend on the lowest of the two figures.

Variable Rate Mortgage
A variable base rate is a level of interest charged by lenders that depending on current market conditions can go up or down. So your interest rate on your mortgage could be within your budget and then if the market changes the interest rate could rise stretching finances. The best tactic is not to borrow to your limit but at a level that you can cope with fluctuations in interest rates.

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