Mortgage Products

At The Really Useful Mortgage People we aim to give useful, honest and professional mortgage advice. We will get quickly to the root of your problem, source the best products, fill out all the relevant documents and call round on your behalf. Let us help you find a product that will work best for you and put your mind at ease.

A guide to common mortgage terminology

APR – Annual Percentage Rate… Takes into account most of the up-front and ongoing costs involved in taking out a mortgage or loan and is therefore a better indication of the true cost of borrowing.

Capital and Interest Mortgage (Repayment Mortgage)… Your monthly payments pay part of your outstanding mortgage and part of the interest on the amount you have borrowed.

Capped rate… A mortgage rate that can rise with any rate changes until it reaches a preset maximum level.

Cash back… A cash payment you receive when you complete a mortgage. It is paid to you from the lender and can be a fixed amount or a percentage of the amount of the mortgage. Most cash backs need to be repaid if you close your mortgage before an agreed period of time.

Conveyancing… The legal process involved in buying and selling a property. It is usually completed by a solicitor.

Discounted rate… A discount from the lenders standard variable rate (SVR). The interest rate can vary but is always less than the lenders SVR during an agreed period. This option is more popular when interest rates are falling.

Endowment… A life assurance investment policy that is designed to produce a lump sum of money to pay off an interest only mortgage. There are different types of endowments including ‘with profits’, ‘unit-linked’ and ‘unitised with profits’. As with most ‘investment vehicles’ there is no guarantee that an endowment policy will pay off the mortgage at the end of the term.

Fixed… Your monthly mortgage payment stays the same for an agreed period, even if interest rates rise or fall.

Flexible… Mortgages which have special payment features. The most common is the opportunity to make voluntary overpayments. Interest is rebated on any overpayments. People who have regular pay rises, or regular bonuses may use this type of mortgage to pay it off earlier.

Freehold… You own the property AND the land it is on. Most houses are freehold. Most flats are not.

Interest-Only… Your monthly mortgage payments do not include any of the capital debt you owe the lender. The amount you owe on your mortgage does not reduce each year. You finally pay off the mortgage using the savings of a separate investment vehicle such as an endowment, ISA or personal pension.

Investment Vehicle… Needed if taking out an interest only mortgage. This could be a personal pension an ISA., or some other way of saving up to eventually pay back the capital. Its a good idea to seek the advise of an independent financial adviser. If you need advice let us know.

ISA – Individual Savings Account… A tax free way to own shares or have a cash savings account or life assurance. Some people use as ISA to repay an interest only mortgage, although there is no guarantee that the ISA will produce enough capital to pay off an interest only mortgage.

Leasehold… When you own a property for a specific number of years, after which it goes back to the freeholder this is known as leasehold. Most flats in England and Wales are leasehold.

LTV – Loan to Value… The size of the mortgage as a percentage of the value of the property or the price you are paying for the property. E.g. An £80,000 mortgage on a house valued at £100,000 would mean an LTV of 80 %.

High percentage Loan Fee (Sometimes called a MIG – Mortgage Indemnity Guarantee)… An insurance that some lenders will charge a borrower if they are borrowing a very high percentage of the value of their property. It covers the lender in the event of a borrower failing to pay their mortgage.

Mortgage… A loan to buy a home where you put the property up as security against you paying back the loan.

Equity… The difference between the value of the property and any mortgages or loans secured against the property.

Off-Set… A mortgage which also acts as a bank account. These types of mortgage enable you to pay in your wages. Any positive balances get an interest rebate which is paid into your mortgage account. Off-set mortgages usually come with a cheque book, debit card and a reserve amount which equivalent to a bank overdraft. Over a long term off-set mortgages can save many £10000′s in interest, and can enable people to shorten their mortgage term.

Repayment Mortgage…Your monthly payments are partly to pay interest on the amount you borrowed and partly to repay the outstanding mortgage. These mortgages also called capital and interest mortgages.

Self-Certified… A mortgage designed for people who have sufficient income to pay their mortgage, but who do not have the necessary standard proof of income. For example a self employed person who has not been trading for 3 years and cannot produce 3 years of accounts.

Tie in period or Redemption Penalty Period… A length of time that you are obliged to stay with your lender. If you leave your lender during that period you may be charged an early redemption fee. You will generally enter in to a tie in period when a lender offers you a competitive fixed rate for perhaps two years, if the rate is very low your tie in may be for longer that the 2 year fixed rate period. After the tie in period most mortgage rates revert to the lenders standard variable rate.

Tracker Rate… Repayment rates set at a margin above or below either Bank of England base rate or LIBOR (London Interbank Offered Rate). Many borrowers feel more comfortable having their mortgage rates set independently by the economic conditions rather than arbitrarily by their lender as in the case of SVR interest rates. Tracker mortgages follow changes in the base rate, with a constant differential being maintained between the base rate and the mortgage interest rate. A fall in the base rate will not always necessarily be followed by an equivalent fall in the standard variable rate. However, tracker mortgages are guaranteed to rise and fall with the base rate.

Variable Rate… The interest rate the lender charges goes up and down, usually in response to the current base rate. Interest payments change accordingly.