Mortgage jargon buster
EML Financial Services Limited is owned by four of the partners in Emsleys Solicitors. EML Financial Services is regulated by the Financial Services Authority.
If you’re new to the world of mortgages it might feel that people are talking in a different language. To help you understand what some of the most commonly used terms mean we’ve put together this useful mortgage jargon buster.
- Arrears
- This is the term used to describe the amount that you have fallen behind in your schedule of mortgage repayments.
- Buildings insurance
- A buildings insurance policy covers you for the cost of repairing or rebuilding your property if it’s damaged or destroyed. In most cases, lenders will insist that you take out buildings insurance as a condition of the mortgage.
- Buy-To-Let
- This is a type of mortgage which is used to buy property that is then renting out to a third party.
- Capped rate mortgage
- This type of mortgage sets a maximum rate of interest that is charged by the lender, but this rate only applies for a set period of time.
- Equity
- This is also known as capital and is the amount of money either put into buying a property or the deposit placed on a property.
- Fixed rate mortgage
- Taking out a fixed rate mortgage means that no matter what happens to interest rates, the rate you pay on your mortgage will stay the same for an agreed period. Once that fixed period is up your mortgage will then change to a different interest rate, which can be more or less than what you paid under fixed rate terms.
- Flexible mortgage
- This type of mortgage gives you greater freedom by allowing you to pay more or less each repayment, or even take a payment holiday if needed.
- Guarantor
- This is the name given to the person who guarantees that mortgage repayments are made if the borrower cannot make them. Guarantors are most commonly parents or other relatives of the borrower.
- Household insurance
- This is an insurance policy that protects your property in the event of fire, some natural causes, and acts of vandalism.
- Interest Only mortgage
- This type of mortgage allows the borrower to pay only the interest on the loan for a set period of time. At the end of that mortgage period they will then have to repay the full loan amount.
- Mortgage
- This is a loan made against the security of a property.
- Mortgagee
- This is the person lending in a mortgage arrangement.
- Mortgagor
- This is the person borrowing in a mortgage arrangement.
- Negative equity
- This describes the situation where a mortgage is for a greater amount than the value of the property.
- Re-mortgaging
- This term refers to the moving of a mortgage from one lender to another, without actually moving house.
