This
is a conditional offer made by a mortgage lender that - provided
the information you give them is correct - they will "in principle"
give you the loan you have discussed with them.
It's
very useful to have one before
you even start looking for a house to give you the edge over
any competition. Having one means you should be able get the actual
mortgage quicker when the race to buy your chosen home begins.
Buyers market
This
is when the buyer is more in demand than the seller. The buyer is
more able to dictate terms.
Capital / Capital Repayments
Capital
means a sum of money.
Capital
repayments are what you make to repay the capital debt (i.e.
the actual money you borrowed) on your mortgage /loan. These
would usually be monthly.
Chain
Usually
when you're buying a new home you are depending on the sale of your
old home to finance the new one. If the people buying from you are
also depending on others buying/selling their homes then this is
a "chain".
The
problem is that no one can move 'till everyone's ready and one failure
along the line will beak the whole "chain."
Conveyancing
Conveyancing
is the legal work involved in buying and selling a home. It would
normally be done either by a solicitor or a licenced conveyancer.
As
a buyer you need to have one or the other for the sellers/vendors
Estate Agent to contact immediately your offer is accepted
so try to have one lined up before you get to this stage.
With
an endowment mortgage, these are payments made into an endowment
policy which is a type of life assurance. (The mortgage /loan is
eventually paid off with one lump sum at the end of the mortgage
term).
Equity
Equity
- when used in connection with property - usually means the difference
between the market value of a house and the amount
owed on the mortgage.
For example if your home is worth £200,000 and you owe £150,000
on the mortgage, you could be said to have equity in the property
of £50,000.
If the house is jointly owned with your partner, you could be said
to each have £25,000 of equity in the house.
Excess
In
insurance "excess" means the first bit of your claim which
you have to cover yourself.
So
if your excess were £250 that means you would have to pay the first
£250 of any damage you wish to claim for.
The
insurer would pay the rest. If it relates to a time period e.g.
30 days this means the insurance would start being paid after 30
days).
Gazumping
Gazumping
is where the seller has accepted your offer but then takes a higher
one. The Estate Agent is legally bound to pass on all offers to
their client, the seller and of course the higher the offer the
bigger their commission...
They
may even pretend there's been a higher offer at a crucial moment
just to see if you'll raise your offer...
"Headline
interest rate"
This
is the interest rate for a mortgage which is used to gain the public's
attention and sales. The mortgage lenders aim to attract new business
with great sounding cut-price interest rates.
However
you have to make sure you're not paying more in other ways e.g.
tie ins to the lenders more expensive insurance cover or penalties
to make you stay with them after the very low interest rate no longer
applies and you're paying over the odds.
IFA
This
stands for an Independent Financial Adviser. They
have to be qualified and are supervised stringently by the Financial
Services Authority
What
is interest?
When
you borrow money the lender makes money by charging interest.
If you've borrowed £100 and the interest rate is 5% that means you
would be paying £5 in interest - so you'd have to pay a total of
£105 back.
Interest
rate
This
is the most significant thing about a mortgage. The
Interest Rate is the amount of interest you're charged and will
affect what you have to pay back.
For example, if you've borrowed £100 and the interest rate is 5%
that means you would be paying £5 in interest - so you'd have to
pay a total of £105 back.
The
interest rate should always be referred to as an APR
(Annual
Percentage Rate). Even if it's termed as a monthly interest
rate it should show the APR it reflects BY LAW.
This
is usually a percentage which shows the size of mortgage vs the
property's value. E.g. if the mortgage is £80,000 and the property's
value is £100,000 the loan to value is 80%.
Mortgage
lender
Any
financial institution that offers and/or arranges mortgages. These
could be insurance companies, friendly societies, building societies,
banks, unit trust managers and, nowadays, even supermarkets.
Mortgage
term
The
length of the mortgage agreement. This is normally 25 years but
can be any period agreed.
National
Land Information Service
The
National Land Information Service has all the relevant information
on land and property, local government, the private sector and local
geography online onto one system/website.
In
fact you should be able to find out much more about your house than
from an old style local search.
Proposed
roads, supermarkets, residents' parking schemes, planning issues,
rights of way etc. will be revealed online within minutes whereas
this often took local authorities weeks to produce. www.nlis.org.uk
Negative
equity
When
the value of a property falls below what is owed on the mortgage.
This would happen during a property slump.
Say
you bought a house for £100,000 during a property boom. Two years
later there's a slump and it halves in value. If you sell it the
new price won't cover the repayment of the, say, £98,000 you still
owe on the mortgage.
This
happened to millions during the 1980's in the UK and meant people
couldn't move. Many had to stay with unwanted partners and friends'
they'd bought the property with during happier times.
Overhanging
lock in
This
is where the mortgage lender imposes penalties to make you stay
with them after an initial low interest rate - which attracted you
to that particular mortgage - no longer applies and you're paying
a normal rate or perhaps more than average.
Redemption penalty / Early Pay Off Charges
This
another way for the mortgage lender to make you stay with them after
you signed up to an initial low interest rate (which attracted you
to that particular mortgage). Once this is over you are forced to
pay a normal rate or perhaps more than average - or face a redemption
penalty.
Insurance
premiums are the regular payments you make for the policy.
Surveyor
A surveyor
checks property is in an acceptable condition.
Tie
you in / tie ins
Mortgage
lenders will lure you in with great sounding cut-price interest
rates (aka the "headline interest rate").
To
make up for their "loss leader" they'll try to "tie
you in" eg by making you pay a financial penalty if you change
to another mortgage
lender.
Sometimes
they'll make it compulsory that you buy their insurance policies
ie it'll be a condition of your taking the cut-price interest rate.
This would be known as an insurance "tie in". See also
Penalties.
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