MORTGAGE JARGON

Mortgages carry a lot of “JARGON” which to those not involved in mortgages on a daily basis might find confusing, listed below are just a few explanations, however please ask your broker for an explanation of anything you do not fully understand.

They will be more than happy to explain exactly how everything works.

AIP (Agreement In Principle)
This is where a lender agrees in principle to the mortgage subject to the verification of a borrowers details. An agreement in principal is obtained prior to making the full application.

APR
The APR is the compound interest rate figure used to compare different mortgages. Defined by law, it includes repayments on the loan plus any mortgage related fees such as booking, arrangement or basic valuation fees. The APR shows the true cost of borrowing over the entire term and should appear on all mortgage illustrations

CAPPED RATE MORTGAGE
A capped rate mortgage sets the maximum rate of interest that the lender can charge, the rate charged cannot go above the agreed capped rate during a specified period.

DISCOUNTED RATE MORTGAGE
A discounted mortgage will have a specified period during which the mortgage rate payable will be discounted of the lenders varibale rate. This rate can decrease and increase but will always keep the discounted percentage between itself and the variable rate.

FEES FREE RE-MORTGAGE
This is where the new lender pays for the cost of a mortgage valuation and legal costs

FIXED RATE MORTGAGE
A mortgage where the agreed rate of interest has been fixed for a specified period of time.

FLEXIBLE
This is where a mortgage will allow the borrower to make over or under payments, or take a payment holiday, it can be a associated with fixed, tracker & discounted rates, but not in all cases.

HLC (Higher lending Charge)
A fee charged by the lender when the loan-to-value (LTV) on a borrower's property is above a certain level, subject to the lender and the tpe of mortgage, this can be anywhere between 75% & 90%.

TRACKER RATE MORTGAGE
This is where the mortgage in which the rate of interest charged follows exactly any changes the in Bank of England base rate, hence the word “tracker”

KFI (Key Facts Illustration)
Illustrating the key information relating to a mortgage and any charges to it and the application process. All KFIs for UK residential mortgages will be presented in the same format for easy comparison and should be made avliable to the client prior to making the mortgage application.

TERM ASSURANCE (Level & Decreasing)
A life insurance policy that will pay out a lump sum should the borrower die during the term of a policy. Level term means that the sum will remain constant throughout the term of the mortgage, decreasing is where the amount potentially payable will decrease.

LIBOR (London InterBank Offered Rate)
The London InterBank Offered Rate, or LIBOR, is the interest rate charged when banks in the London interbank market borrow money from each other

SURVEY (Mortgage Valuation)
A survey to assess the value of a property. Carried out by a professional surveyor, this is the cheapest and simplest type of property survey and is usually the minimum survey required by a lender.

NON-STATUS
A mortgage that is offered without the need for the borrower to prove their income

RIGHT TO BUY
Is where a local authoritie offers its tenants the right to buy the public housing they occupy, usually at a discount, the amoount of discount will depend on the length of the existing tenancy

SELF CERTIFICATION
A mortgage for people who are unable to prove their income by conventional means such as payslips and fully audited accounts, but can provide alternative evidence and thereby demonstrate the level borrowing is affordable.

STAMP DUTY LAND TAX
Government tax payable by the purchaser upon purchase of a property. Currently the rates are as follows. There is no stamp duty on purchases of up to £125,000; 1% on purchases between £125,001 and £250,000, 3% on purchases between £250,001 and £500,000 and 4% on purchases exceeding £500,000. Importantly the duty is levied on the whole value of a property. Some properties in designated disadvantaged areas may be exempted from stamp duty up to a threshold of £150,000.

STANDARD VARIBALE RATE (SVR)
The standard interest rate is set by lenders, and which is subject to increasing or decreasing at thier discretion. The standard variable rate often applies at the end of any fixed, capped or discounted period.

REPAYMENT METHODS
REPAYMENT MORTGAGE (Capital & Interest)
A method that guarantees your loan is paid off in full at the end of the agreed term. With a repayment mortgage you make monthly payments that cover both the interest on the loan and the repayment of the loan itself.

INTEREST ONLY MORTGAGE
With this type of methond your monthly payments only cover the interest element of your mortgage, therefore the amount you initailly borrwed will always stay the same and will not decrease. (unless it is a flexible product and you make lump sum payments)

Interest-only mortgages normally will have lower monthly payments than a repayment mortgage. You can have an investment vehicle running along side the interest only mortgage but there is no guarantee that the investment plan you choose will generate sufficient income to pay off the outstanding debt at the end of the mortgage term

PART / PART MORTGAGE
With this type of repayment method a proportion of the loan is treated as an interest only mortgage and a proportion as a repayment mortgage. Therefore, you will use both repayment and interest-only methods to repay the loan.

If you have an existing investment policy in place before seeking a mortgage you may want to consider this option.
This type of mortgage is most common with people who already have an investment product (an endowment, ISA or pension plan) arranged prior to taking out the mortgage and want to use this to help reduce the additional cost of taking out the mortgage.

It is possible to use an investment policy to repay part of the loan, and then pay the remaining part with a repayment mortgage. For example, if you want to take out a £200,000 mortgage and already have an endowment that could pay out £100,000 in a number of years time, you could consider an interest-only element to cover the first £100,000 and a repayment element for the remainder.

JAC Mortgages is the trading name of JAC Financial Design Limited registered in England, Reg No. 04320328 , registered office, 318 -320 Regents Park Road, London, N3 2LN. JAC Financial Design is authorised and regulated by the Financial Services Authority for residential mortgages, pure protection and general insurance business. FSA No. 313818. There is no charge made for any mortgage advice, however an administration fee of up to £325 may be charged when a mortgage application is made.
Your home may be repossessed if you do not keep up the payments on a loan or mortgage secured on it. *BTL mortgages are not regulated by the FSA