Mortgage Types Jargon Busting
Get in touch for a free, no-obligation chat about how we might be able to help you.
Get in Touch
Mortgage Types Jargon Busting
Sally Bates breaks down the most common mortgage jargon.
What does Fixed-rate mean?
Fixed-rate is where you know exactly what you’re paying per month and the interest rate could be fixed from anywhere from two, three or five years, but it allows people to budget.
What is a Variable Rate?
Every lender has a Variable Rate, and they can basically set it when they want to, it doesn’t have to link to the Bank of England base rate. You don’t have the ability to budget on a monthly basis, as payments can increase or decrease.
If, at the end of your Fixed-rate period, you do nothing at all, you will automatically revert onto the lender’s Variable Rate. We, as a company, want to avoid this by helping you for the life of your mortgage.
What is a Tracker Rate?
A Tracker Rate is a variable rate which follows the Bank of England Base Rate and usually is a margin above the base rate, which can go up or down, depending on the decisions made by the Bank of England.
For example :
If the Base Rate is 5.25%, a mortgage lender offers you 0.5% above this rate than the payable rate is 5.75%, if then the Bank of England increase the base rate to 5.5%, then your payable rate increases to 6% and this will be 0.5% above the base rate
What is a Discounted Rate?
A Discounted Rate is purely a discount off the lender’s Standard Variable Rate. If the lender moves their Variable Rate, your payment will go up, but you’ll get an element of discount for a period of maybe two, three or five years. After that you will fall onto the lender’s Standard Variable Rate again, unless you do something about it.
What is an Offset Rate?
An Offset Rate is a mortgage in a savings account, and the two run alongside each other, with any savings balance off-setting the mortgage interest, therefore reducing your payments.
What’s the difference between Capital Repayment and Interest-only?
A Capital Repayment mortgage works like a personal loan, so each repayment is part capital, part interest. With this type of mortgage you’re guaranteed to have repaid everything that you owe at the end of your mortgage term, assuming that you pay your lender on time each month
As the name suggests, with Interest-only, you just pay in the interest each month. At the end of the mortgage term your lender will want the mortgage balance to be repaid. You would need a plan in place, such as an ISA or pension to repay the capital. Years gone by people used to pay into an endowment policy.
For savings, investments and pensions we act as introducers only.
What is a Flexible Mortgage?
Some lenders will offer you incentives to take their mortgages, and they may be an element of cash back that helps people with their initial setup fees, such as solicitors and things like that.
Some flexible mortgages offer an overpayment facility, which is typically 10% of your outstanding mortgage balance. Depending on the lender, you may be able to overpay without fees.
Another flexible mortgage feature is payment breaks. Typically during Covid, people were allowed to take payment holidays that wouldn’t affect your credit file, which you can’t do anymore. But some lenders have payment holidays in the mortgage agreement, which allows you to temporarily stop or reduce your mortgage payments.
Speak To An Expert
The Mortgage Company was established over 30 years ago and have a strong reputation for being local mortgage experts.
What is Porting?
If you move into a new house, and after six months you decide that actually you don’t like it, you can, with the majority of lenders, take your mortgage to another property, rather than paying an early repayment charge and going to another lender. If you need extra money to be able to buy a new house, then you top that up with the same lender.
What is a Joint Borrower Sole Proprietor (JBSP) mortgage?
This type of mortgage allows a family member to help with your mortgage, without actually being a co-owner on the property or being on the mortgage deeds.
What is Shared Ownership?
Shared Ownership is when you part buy and part rent a property, so you pay your mortgage and pay rent to a landlord, who owns the remaining share. It does really help people who are trying to get on the property ladder but don’t have a large deposit or have lower earnings.
What are the Right to Buy Scheme and Right to Acquire Scheme?
The Right to Buy scheme is a government scheme that lets you buy your home at a discount if you’re a council tenant. The longer you’ve been a tenant, the more discounts you get.
The Right to Acquire Scheme is similar, but the discount is slightly less, and it’s intended exclusively for housing association tenants.
Does it cost for an initial consultation with The Mortgage Company?
No, it doesn’t, our initial consultation is absolutely free of charge.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE