How To Understand Mortgage Jargon With Our Mortgage Jargon Buster

How To Understand Mortgage Jargon With Our Mortgage Jargon Buster

Whilst the concept of a mortgage is one you most probably understand, many people are still baffled by a lot of the jargon surrounding them. So if you want to know your “LTVs” from your “MIPs”, then read on, as we help you get to grips with the most common mortgage “industry speak”.

Ok – let’s start with the types of mortgage.

There are many, many different mortgage options on the market, too many in fact to go into them all here, so we’ll start by keeping it simple and looking at the basics…

Essentially, there are two forms of mortgage: Fixed and Tracker.

A fixed mortgage rate will stay exactly the same throughout a fixed period of time, so if you have a 3-year fixed mortgage at 4.5 per cent, then that rate will stay the same for 3 years.

If you have a tracker mortgage, then this will change with or “track” the Bank Of England’s base rate of interest. So if the base rate goes up, then so will your mortgage and vice versa.

A tracker can certainly work out a lot cheaper for you, but if you like to know exactly how much you are paying each month, as many people do, then it’s probably wise to go for a fixed term.

Now, you’ll also notice that each mortgage will mention the ‘loan to value’ or “LTV”.If the house you wish to buy is worth £100,000 and you have a £20,000 deposit, then you need an £80,000 mortgage and the loan to value is 80 per cent.

You will notice that the lower the LTV is, the lower the interest rate charged on the mortgage tends to be.

Next, when you are applying for a mortgage, you will first have to get a Mortgage in Principle or “MIP”. This is simply the lender agreeing that they could lend you the amount you need to buy your property. At the point you make an offer on a property, you will formally apply for the mortgage itself.

Lastly, within any mortgage documents you receive, you will see a reference to the “SVR”. This is the Standard Variable Rate, which is the lending rate you will revert to at the end of your fixed term.

Ok – hopefully, this has answered a few of your queries about mortgages, but if you have any more questions about buying a home, please contact us today on 020 7563 7272.