Mortgage Interest Repayment OptionsCapital Sum The capital sum is the lump sum of money you borrow with your mortgage. Chain In the housing market, a chain is when several buyers' sales all need to complete on the same day so that they can move into each others' houses. Very common in the UK and prone to breaking down - i.e. one person withdraws and everyone's' sale has to stop. Conveyancing Conveyancing is the legal work necessary to buy or sell a property. Fixed Rate A fixed rate mortgage has an interest rate that is guaranteed not to change for a certain period of time - even if the Bank of England does change interest rates. In the UK, fixed rates are usually for 1-5 years, after which time the mortgage continues on the lender's standard variable rate. IFA Independent Financial Adviser - a qualified financial salesperson who will help you choose the best mortgage or other financial product for your circumstances. Regulated by the Financial Services Authority. Interest only A type of mortgage where you do not have to repay the capital sum until the end of the mortgage term. Instead, you just pay back a portion of the interest on the mortgage each month. Interest rate The amount extra you have to pay back on your mortgage loan. Interest rates are expressed as a percentage. Lower is usually better but sometimes the fees for arranging a mortgage are so high that it would be cheaper to have a higher interest rate and lower fees. Loan to Value (LTV) The financial term describing how much you are borrowing as a percentage of the value of your home. E.g. 90% LTV means your mortgage is for 90% of the value of your home. Mortgage A home loan secured on your home. If you do not keep up the repayments on a mortgage, your home will be repossessed in order to pay back the loan. Negative equity Negative equity is when the amount you owe on your mortgage is more than the value of your home. Negative equity can become a big problem at times when house prices are falling. It becomes impossible to sell your home as you will not make enough money to clear your mortgage. Redemption penalty A redemption penalty is the fee charged by a mortgage lender when you make the final repayment on your mortgage. If you are paying off your mortgage early, the redemption fees can be quite high. Repayment Repayment mortgages are those where the monthly payments include a mixture of capital and interest - so at the end of the mortgage term you have paid back the entire capital sum and all of the interest you owe. Surveyor A professional person whose job it is to assess the value and condition of properties before they are sold. Mortgage lenders normally require at least a basic survey of the property being purchased before they will agree to secure a mortgage on it. Term The length of a mortgage - i.e. a mortgage with a 25 year term will take 25 years to repay. Tracker A tracker is a mortgage whose interest rate is guaranteed to stay a fixed amount above the Bank of England's base rate - even when it changes. For example, a tracker mortgage interest rate might always be kept 1% above the Bank of England base rate. |