Our comprehensive mortgage glossary explains commonly-used terminology you might encounter when researching and applying for a mortgage.
Agreement in Principle: This is good news, it means your application for a mortgage (or any kind of financial service) has been agreed in principle, subject to valuation of the property or confirmation of your income.
Arrangement Fee: It’s what you might be charged by the lender for arranging the mortgage. Typically, this varies from 1.5%-2% depending on the lender.
Bank Base Rate: This is the basic rate of interest that is determined by the Bank of England and is the UK’s core interest rate. The lender’s standard variable rate (SVR) is higher than the base rate but is often adjusted by reference to it.
Completion: The moment you’ve been waiting for! All the legal necessities have been completed and your lender advances the funds. The funds usually being deposited into an account held by your solicitor.
Conveyancing fee: This is what you will have to pay your solicitor (or licenced conveyancer) for doing all the legal work for registering the property in your name. The final bill for this service should include stamp duty, land registry fees and his or her disbursements.
Land Registry fees: If you take out a mortgage or change an existing one on a property, this needs to be registered with the land registry, who will make a charge for amending the records.
Loan to Value Ratio: This is a simple ratio or percentage that expresses the proportion of a loan to the value of a property. For example, if you’re looking to borrow £150,000 on a property that is valued £300,000, you’d need to secure a 50% Loan to Value rate.
Mortgage Deed: The mortgage deed is a written agreement between you and your lender.
Negative Equity: Is something you clearly want to avoid, since it arises when the extent of your borrowing is greater than the current market value of the property
Procuration Fee: The fee that a mortgage lender will pay to an introducer for introducing the business to that lender.
Redemption Charges: These days, the term is better and more clearly known as Early Repayment charges- the penalty you’ll incur if you wish to repay your mortgage before the end of its full term.
Search Fee: It is important to make sure that there are no plans in the neighbourhood that might affect the future value of your home. For this, you need to ask the local authority to do a search for you, and of course, there is a charge.
Stamp Duty: This is a tax that is paid when buying a property or land. It’s applied on a sliding scale. Please note that stamp duty land tax changes so be sure to check the Government’s website for the latest figures. https://www.gov.uk/stamp-duty-land-tax
Disclaimer:
This article is intended to provide a general understanding of the topic. The contents should not be treated as advice. Your home may be repossessed if you do not maintain repayments on your mortgage.
