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This list of mortgage terms will help you feel more confident when you’re completing paperwork and making those big decisions.
Annual Percentage Rate of Charge (APRC) – Shows you the total cost of a mortgage, including fees, over the full term of the mortgage.
Base rate – The base rate is set by the Bank of England and determines the interest rates UK banks charge on savings and borrowing money.
Completion – This is when the sale and purchase of a property is completed, and the buyer’s solicitor or conveyancer pays the purchase amount to the seller’s solicitor or conveyancer. Once completion has taken place the buyer can collect the keys to the property.
Conveyancer – A conveyancer is a person or company licenced to represent you when purchasing a property. They will handle legal documentation, including liaising with the appropriate land registry and transferring legal ownership of the property.
Decision in principle – Also known as an agreement in principle), this is an indication of how much you could borrow from a mortgage provider. It’s based on your income details and expenditure as well as a soft credit check. It shows an estate agent that you’re in a good position to buy a property.
Deposit – The amount of money you pay towards your property. The deposit will be a percentage of the cost of the property.
Early Repayment Charge – You may have to pay this if you repay all or part of your mortgage early. This includes moving to a different HSBC product or a different lender within a certain period.
Exchange of contracts – This means the contracts are exchanged between the seller’s and the buyer’s conveyancer or solicitor. The sale and purchase of the property only become legally binding once the contracts have been exchanged.
Exit fee – You may have to pay this when you fully repay your mortgage.
Fixed rate mortgage – This is a type of mortgage where repayments are set at an agreed amount, for a set period of time, and aren’t affected by changes in interest rates.
illustration – This means it’s just an example.
Interest-only mortgage – You will only pay the interest on what you’ve borrowed with this type of mortgage. At the end of the mortgage term you’ll be responsible for repaying the original amount borrowed.
Loan to Value (LTV) – This represents the percentage of the value of the property that you want to borrow. For example, a £100,000 property with an £80,000 mortgage = an 80% LTV. The maximum LTV possible depends on your individual situation, the property, the loan you choose and the amount you borrow.
Monthly payment – This is the amount the borrower must pay the lender each month.
Mortgage deed – A legally binding document confirming that you and the lender have agreed to go ahead with your mortgage offer, using the property as security.
Mortgage illustration – This shows you all the rates and fees for a mortgage. Lenders will set this out in the same format for all their mortgages so it’s easy to compare.
Mortgage term (sometimes just called ‘term’) – This is the length of time on your mortgage – in other words, the period of time that your mortgage lender gives you to repay the money you’ve borrowed. A typical mortgage term is now 25-40 years.
New-build property – A new-build property is usually defined as a property built in the last 2 years.
Offer – This is the document issued by a prospective lender to a prospective borrower, setting out that lender’s offer of a loan to that borrower. It’s normally subject to a number of terms and conditions, which are likely to be detailed in a separate document accompanying it.
Overpayment – These are additional payments you make over your monthly payments. These can be either regular payments (for example, monthly) or occasional (for example one-off lump sum payments).
Porting – You port your mortgage when you move your mortgage from one property to another. You can port your HSBC mortgage subject to terms and conditions.
Remortgage – You remortgage when you switch your existing mortgage to a new deal with the same lender or a different lender.
Residential mortgage – This simply means a mortgage on a residential property, rather than one for business.
Soft credit check – A soft credit check is a type of background check that can be run without your permission. Unlike a ‘hard’ credit check, it doesn’t affect your credit score or any credit applications you might make in the future.
Solicitor – Like a conveyancer, a solicitor manages the legal aspects of purchasing a property, including the contracts, searches, transferring funds and providing legal advice.
Stamp Duty – Stamp Duty Land Tax (SDLT) is a tax payable by the buyer on the purchase of a property over a certain price. SDLT applies in England and Northern Ireland. The amount payable depends on other matters too, including whether the property is to be a main home and whether it is freehold or leasehold.
Standard Valuation – This is a survey of a property to confirm its value. It doesn’t advise on any structural problems or repairs that may add to your costs. This is done for the lenders benefit only.
Standard variable rate (SVR) – If you don’t switch to a new deal when your current mortgage ends, you’ll be moved to the lender’s standard variable rate. This varies over the term of the loan and is set internally. It doesn’t track the Bank of England base rate.
Switching – This is when you choose to move to a new mortgage rate with the same lender.
Tracker mortgage – This is a type of mortgage where the repayments change in line with the Bank of England base rate, so they can go up and down.
Underwriting – This is the point in a mortgage application where all the information you have provided is reviewed and a decision is made on whether you can borrow the money you have requested.
If you want more clarity on any of the above terms, please get in touch.
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Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it.