Here is a useful lexicon of the most common terms and their meanings used in the field of mortgage borrowing:
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Affordability Assessment: A check by the lender to ensure you can afford the mortgage repayments.
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Annual Percentage Rate (APR): The total yearly cost of your mortgage, including interest and other charges.
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Arrangement Fee: A fee charged by the lender for setting up the mortgage.
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Bridging Loan: A short-term loan to cover the gap between buying a new property and selling an existing one.
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Capital and Interest Repayment: Regular mortgage payments that cover both the loan amount (capital) and the interest.
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Early Repayment Charge (ERC): A fee for paying off your mortgage early, usually within a fixed period.
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Equity: The difference between the market value of your property and the outstanding mortgage balance.
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Fixed-Rate Mortgage: A mortgage with an interest rate that remains the same for a set period.
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Interest-Only Mortgage: A mortgage where you only pay the interest each month, not the capital.
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Loan-to-Value (LTV) Ratio: The percentage of the property’s value that you borrow.
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Mortgage Deed: The legal document that secures the mortgage against your property.
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Mortgage Term: The length of time over which the mortgage is repaid.
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Repayment Mortgage: A mortgage where you pay back both the capital and interest over the term.
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Remortgage: Replacing your existing mortgage with a new one, often to get a better interest rate.
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Standard Variable Rate (SVR): The lender’s default interest rate applied to mortgages once any initial deal period ends.
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Valuation Fee: A fee charged by the lender to assess the property’s value.