The Jargon Behind Mortgages Explained

J Finance Sales Team

Buying your first property? Or perhaps you’ve just not moved for a while! Take a read of our simple jargon buster to understand all that mortgage-related terminology…

Completion

Once contracts are exchanged, a completion date will be set. This is when the purchase and sale will be finalised and you will be able to move into your new property.

Conveyancer

A professional conveyancer can deal with the title transfer process of a property sale, ensure that all legal requirements are met, and ensure their client’s rights are protected during the process.

Decision in Principle

When your mortgage lender makes an agreement in principle or decision in principle, you will receive a certificate from them stating how much they are prepared to lend you. This is not a guarantee of them lending you the money, but an indication of how much they would be willing to lend you based on your income and credit history.

Equity Loan or Second Charge

A loan that you take out on top of your existing mortgage, based on the fact that the house is worth more than when you first bought it, so the extra equity in the house can act as collateral.

Find out more about second charges with our blog on the subject here.

Equity Release

Usually used by older couples, who own their home outright, don’t wish to move, but do need to release some cash to fund retirement or to help their children/grandchildren get onto the housing ladder. The money can be released as a lump sum or steady income, and the lender usually recoups their money when the homeowner dies or moves into long-term care and the house is sold. We have a number of blogs on the subject and our web page also provides more information.

Exchange

Contracts are exchanged by the legal representatives of the buyer and seller of a property once all surveys, searches and other enquiries have been made and agreed. At this point the buyer pays a deposit and the agreement is legal and binding. You cannot back out of the deal once exchange has taken place, without losing your deposit and being subject to other charges.

Formal mortgage offer

A formal mortgage offer is made to the buyer once all checks have been made to ensure the borrower can afford the mortgage payments, and after a valuation of the property has been completed. This states the terms of the mortgage that is offered by the lender and the rights and responsibilities of the borrower.

Freehold

If you own a freehold property, you own the building and the land on which it stands. There will be no ground rent or maintenance charges (although some housing estates do charge for some grounds upkeep) and you will be responsible for the upkeep of your property.

Help to Buy Scheme

A government scheme that helps new home buyers get on the housing ladder. The government loans you 20% of the cost of a new build property – there are no fees on this loan for the first five years. This enables the buyer to buy a home with only a 5% deposit. The rest of the payment is made through a 75% mortgage.

We can offer independent advice on all aspects of Help to Buy, visit our website here.

Leasehold

If you buy a leasehold property you only own the right to live in the property for a set amount of time – usually 99, 125 or 999 years. You need to get permission from the landlord for certain alterations and may be liable to pay ground rent and an annual fee for upkeep of the property and grounds. Leasehold properties are usually flats.

Mortgage Broker/Adviser/Specialist

The people to go to when you are considering purchasing a property. They have specialist knowledge of the mortgage market and can find the right product to suit your needs. An independent broker will be able to recommend mortgages from a number of different lenders.

At J Finance, we are a ‘whole of market’ broker which means we are not restricted to any particular lender. You can find out more about us and our team on our website here.

Mortgage Loan

In reality the terms ‘mortgage loan’ or ‘home loan’ don’t exist as they are simply a ‘mortgage’. However, occasionally these terms are referred to. It is simply a loan where your house or property acts as collateral – ie, if you don’t keep up payments, the loan company may take back the property. The borrower makes interest payments and capital repayments over a set period of time until the lender has been repaid. You can find out more on this on our website.

Re-mortgage

When you re-mortgage, you take out a loan, which pays off your existing mortgage. You then make regular payments until the new loan is paid off. You may remortgage because your current mortgage deal is for a fixed period which has come to an end, or to reduce your monthly payment, to free up some cash to use to cover debts, home improvements or to give to a child for a house deposit. Find out more about remortgaging with the things to consider on our website here.

Solicitor

A solicitor can carry out all the legal checks for you when buying a home and carry out the conveyancing – they can also offer legal advice on other issues which conveyancers may not be qualified to address.

Underwriting

Part of the process involved in reviewing your mortgage application. An underwriter will check your details and the details of the property you wish to buy against the lender’s criteria. Once fully underwritten, the lender can send you a Formal Mortgage Offer.

Valuation

A valuation is carried out on a property you wish to buy, so that a mortgage company knows it is worth the price you are paying, The valuation will be carried out by a Registered Valuer from the Royal Institution of Chartered Surveyors (RICS), and a fee will be charged. This is not, however, the same as a Building Survey or Homebuyers Report, which are more in depth.

If you would like to discuss any aspect of your mortgage or learn more about any of the terms above, we will be happy to help. Please contact us without obligation.

Established in Berkshire in 2004, J Finance Ltd is one of the leading financial planning companies in the area. We serve clients across the South of England including Oxfordshire, Buckinghamshire and Hampshire. If you would like to discuss this subject or any other financial matter, without obligation, please contact us on 01635 521 300 or email contact@jfinance.co.uk.

YOUR MORTGAGE IS SECURED ON YOUR HOME. THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.