Mortgage

Literally means ‘dead deed’. Basically, when you are loaned money to buy a property, you sign a mortgage which conveys the property to the lender, but giving you the right to occupy it so long as you keep up repayments, and once you have repaid the loan, the lender then releases the mortgage which effectively conveys it back to you. If you don’t keep up repayments, the lender takes possession back – known as re-possession.

There are several types of mortgage residential mortgages, commercial mortgages and buy to let mortgages. A residential mortgage is the typical type of mortgage an individual would obtain if they wanted to obtain a property solely for the purpose of living in. A Commercial mortgage refers to a property purchased for commercial purposes such as for opening a shop or business. Buy to let mortgages are designed for people who purchase properties solely for the purpose of renting them out.

The way you repay your mortgage can also vary. Firstly there are repayment and interest only mortgages. A repayment mortgage means you pay off both the outstanding amount and the interest charged each month where as an interest only mortgage you just pay off the interest and have to make arrangements to settle the remaining amount at the end of the term. A popular type of interest only mortgage in the early 1990s were Endowment mortgages where by the capital is intended to be repaid by one or more endowment policies. However these are now less widely used as many people encountered shortfalls on their endowment policies which led to them not being able to cover the remaining balance of the mortgage.

When you take out a mortgage you will pay an agreed interest rate on the sum. This is usually based on the bank’s base rate so for example if this is 4% and you pay 2% over the base rate your interest rate will be 6%. This will then fluctuate as the base rate changes so if the base rate change to 5% your interest charges will be 7%. This is known as a tracker mortgage. Other types of mortgage include fixed rate where your interest rate is agreed for a set time at a set amount, capped rate where the rate cannot rise above a set limit, Variable rate which changes at the discretion of the lender and discount rate where there is reduction in the standard variable rate (e.g. a 2% discount) for a set period; typically 1 to 5 years.

Jargon Buster

Use the links below and the resulting list of terms on the right to locate the term you are looking for. If you can't locate it, please get in touch.

A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
X
Y
Z
keyboard_arrow_left

keyboard_arrow_right

We have loads of great customer reviews