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Mortgage in Principle
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.
Capital / Capital Repayments
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.
Endowment payments
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. |
Interest rate
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 APR (Annual Percentage Rate). Even if it's termed as a monthly interest rate BY LAW it should show the APR it reflects.
Loan to value
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%.
Repayment Mortgages
The guiding principle behind the concept of a repayment mortgage is that at the end of a specified period the mortgage will be paid off. At its simplest you repay the interest and capital borrowed over a long period of time.
There are various types of repayment mortgage such as endowment and pension linked.
Interest Only Mortgages
It is down to you to save or invest enough capital to be able to pay off the mortgage at the end of the mortgage term. |
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