The way lenders used to work out how much you could borrow, was usually by multiplying your gross annual salary by say 3.25% or 2.5% joint income. Lenders now will look very closely at your guaranteed income and discount not only other financial obligations such as credit cards and loans but council tax and other existing plans such as life cover etc., They will also take into account how many in the household are dependent on that income and reduce the possible disposable income accordingly.
‘Annual Percentage Rate’ is calculated on the amount of interest you will pay, the length of the term of the mortgage, and certain other charges such as any arrangement fee.
Your interest rate won’t go above a certain level – the ‘cap’ – during the capped rate period. This means that you can enjoy any rate reductions, yet have the comfort of knowing that your rate won’t go above the cap.
Certain mortgage products offer cashback, which means you get a cash lump sum when you enter into the mortgage to spend on anything you want.
Lenders may use the information you provide to assess the suitability of your application using a technique known as credit scoring. You agree that when considering an application for credit, lenders may use the information supplied to offer additional products. A measure of credit risk calculated from a credit report using a standarised formula. Lenders may use a credit score to determine whether to provide a loan and what rate to charge. A Credit Reference may be used by some lenders, this means they simply check with the credit agencies to ensure you have paid any current credit in a timely manner.
Exchange of Contracts
The swapping of contracts between a buyer’s conveyancer and a seller’s conveyancer, know as signing of Missives in Scotland. Once you have exchanged contracts you are both legally bound to the transaction.
You have to pay this to some lenders for releasing their hold over a property once you’ve paid off your loan.
This means interest is charged at the variable base rate that applies to the mortgage, less a discount for a set period. This means the rate, and your monthly payment, will vary – up or down – whenever the variable base rate changes, but will remain below the variable base rate during the discounted rate period.
Exchange of Contracts
The swapping of contracts between a buyer’s conveyancer and a seller’s conveyancer. Once you have exchanged contracts you are both legally bound to the transaction.
Land Registry Fee
Your conveyancer pays this on your behalf to register your details in the land Registry records once you’ve bought a property or changed your mortgage lender.
This means you own a property for a set number of years. When the lease expires, the property returns to the freeholder. Flats are commonly sold as leasehold.
Loan to the value is the proportion of the value or price of the property (whichever is the lower), which you borrow on a mortgage. For example, a £160,000 mortgage on a house valued at £200,000 would mean a LTV of 80%.
You can stop making mortgage payments altogether for a limited period but only agreed with the lender.
A tracker is one where your interest rate is linked to the Bank of England base rate. ( at time of writing 0.5%pa) These are usually set for specific period of time but there are some lenders that will allow the tracker to run through the whole term of the mortgage. This is attractive when base rates are low- not so appealing when base rates rise. Currently these rates will be typically 2% or more above base but it will depend on your loan to value. The greater your stake in the property the lower the rate.
UK Government taxes you have to pay on the purchase price of a property worth normally £125,001 or more. This is 1% of the purchase price and increases to 3% when the purchase price is greater than £250,001. From £500,001 this lifts to 4%. The more expensive the home you are buying the more tax you will pay so you will need to consider the additional burden of this tax when calculating your total purchasing costs.
Variable Base Rate
The variable base rate is the basic rate of interest charged on a mortgage.
*The guidance and/or advice contained within this website is subject to the UK regulatory regime and is therefore primarily targeted at customers in the UK, or clients that hold UK regulated contracts.