Mortgage Jargon Buster
Purchasing your first home is exciting, but it can be stressful. However, it does not have to be! That is why The Mortgage Centre will be there with you every step of the way, to guide you through what can sometimes be a bit of a minefield of a process.
We offer a step-by-step guide from initially getting an idea of what you can borrow, through to when you pick up the keys to your new home. We will even stick around afterwards (if you will have us!). Sound good? Get in contact!
When you’re thinking about getting a mortgage, we know that being plunged into the world of mortgage jargon can be quite jarring and make the whole mortgage process less accessible. If you’re finding yourself lost in a web of technical speak, let us help you untangle it with our mortgage jargon buster. Use our FAQ below to get jargon busting.
MORTGAGE JARGON BUSTER | FREQUENTLY ASKED QUESTIONS
Your First Payment
Your first payment will be slightly more than your regular monthly amount. Make sure you are ready to make it on time. The lender normally writes to you within 10 days of completion to explain what they are taking and when.
It’s normally more than your regular monthly payment. That’s because it includes an initial interest payment. This covers the interest for the days between the date you move in and the end of that month.
For example, if you complete on the 15th, interest will be charged from the 15th to the end of the month. We will add this to your standard monthly payment for the following month. Therefore, your first payment will be more than normal.
Mortgage Repayment Types
There are three ways you can repay your loan: repayment, interest-only, or you can combine the two:
– Each month, you’ll pay an extra amount on top of the interest. This extra amount pays off the loan over the life of the mortgage.
– During the early years of your loan, your monthly payment is mostly used to pay off the interest. However, as the loan is repaid, the interest becomes less. Which means more of your monthly payment is used to pay off the mortgage.
– Each month, you only pay off the interest, with the mortgage loan being repaid at an agreed time in the future. You must have a plan in place to repay the amount you borrow. This is regularly reviewed to make sure you’re on track to pay off the mortgage balance.
– It’s your responsibility to pay off the loan when the mortgage ends. If you don’t, you may have to sell your property.
– You can only get an interest-only mortgage if the loan you want is less than 75% of the property’s value.
Part repayment and part interest-only mortgage
– You can also combine both types of repayment. For this, your mortgage is split into two parts: capital and interest repayment and interest-only repayment.
– This means at the end of the mortgage term, you’ll still have some of the mortgage to pay off.
– You’ll need to do this using a lump sum (one payment).
– As with an interest-only mortgage, you need to have plan in place to repay this amount at the end of the term.
The Mortgage Offer
When your mortgage is offered, they will issue 3 copies; a copy to you, one to your adviser and the final copy to your solicitor direct. There is no need for you to do anything at this stage.
Bank Account to pay the Direct Debit
In order to apply to a lender, we will need sort code and account number of the account you wish to pay the mortgage from. Quite often on a joint application you may not have had chance to set up a joint account, but it is your intention to do so. In this scenario you would provide details of one of your accounts to allow us to submit the application and secure the product. One you have the new account details this can be changed with the lender during the application process.
Agreement In Principle (AIP)
A lot of estate agents are now asking you to have an agreement in principle before you can view. We can arrange this for you, we always say only arrange when you know more about what your options are to avoid having to do multiple AIP’s with lenders. Not only will we arrange this for you but we are also happy to liaise with estate agents for you to provide confirmation.
It may be useful to have access to your credit report prior and during the mortgage process. Looking at this before you speak to us is helpful to avoid any unwanted surprises. It’s also useful to have if a lender has any queries or simply to be as honest as possible when applying for your mortgage. The two main credit agencies used by lenders are Experian and Equifax. A free option is Credit Karma and another useful one is checkmyfile.
This is a fee charged by the lender. The lender usually offers a product with a fee, which is at a lower rate and a product without a fee on a slightly higher rate. We work out for you what the right option for your situation is. The fee can be added to the loan but please be aware there would be interest payable on this. This is not a fee paid to the mortgage adviser.
Types of Valuation/Survey
A mortgage valuation, otherwise known as a basic valuation, usually involves a quick half-hour survey of the property that covers any obvious problems without going into too much detail.
When you are applying for a mortgage, the lender will make their own estimation of the value of the house you want to buy to make a provisional decision on how much they’re willing to lend you for a mortgage – but most importantly, it can give you a very rough idea of how much you should be paying.
A RICS Homebuyer Report, or Home Survey, is conducted by an RICS qualified surveyor, who carries out a detailed visual inspection of your property, or the one you want to buy. The report you are supplied with following the inspection uses easy to understand ‘traffic light’ ratings, so you can clearly see the property’s condition and any areas of concern.
It includes comments on the condition of the property, provides guidance to legal advisers, highlights any urgent defects, a market valuation, insurance rebuild costs, advice on defects that may affect the value of the property with repairs, and ongoing maintenance advice.
Full Building Survey
A Building Survey is the most comprehensive home survey, and is therefore ideal for older properties, or if you’re planning any major works. This report includes all the elements of a Homebuyer Report, apart from the valuation, as well as a more in-depth analysis of the property’s condition. The report you receive will include detailed advice on defects, repairs and maintenance options.
An estimate of repair is also often offered by the surveyor as an optional extra, as part of the report.
What do you need to provide in order to get a mortgage
Please see the documents needed section of our website
How long will it all take?
The initial appointment is usually about an hour long. Once we submit an application, we would like to say that we aim to get a mortgage offer within 2 weeks. In some cases this can take longer but there are also times when we get it sooner. The more the underwriter needs to ask for, the longer it takes.
In times where lenders and solicitors are up to date you should be looking at 6-12 weeks for a purchase and 4-6 weeks for a remortgage.
To avoid any delays if you have everything ready for us at the time of the appointment this could ensure we can supply anything by return on request from the lender.