Mortgage related terms

Also known as 'ERC' or 'Penalty' an early repayment charge is a clause within the product that means if you repay the mortgage in part or in full during the product period then you will have to pay a charge on the amount you have paid.

This penalty is usually calculated as a percentage of the overpayment amount, however, most products come with an overpayment allowance each calendar year whereby you can overpay without incurring any early repayment charges.

Yes.

There are some products available that do not have any early repayment charges at all which mean that you can pay as much as you want, whenever you want without any charges.

"Loan to Value" or "LTV" is the percentage of borrowing against the value of the house.

The mortgage interest rates offered by lenders are often dictated by the LTV, typically the lower the LTV, the lower the interest rate offered by the lender.

You can calculate your LTV using the following formula:

For example, if you mortgage amount is £150,000 and your property value is £200,000, then your LTV will be 75% (£150,000 / £200,000 x 100 = 75%).

You can also use our handy LTV Calculator to work out your loan to value.

The maximum LTV at present is 95%.

The LTV a lender will offer you is subject to your personal circumstances. An independent adviser will be able to assess your situation and advise you the maximum LTV limits for your circumstances.

"Help to Buy" is where the Government lends you up to 20% of the cost of a new build home and the Government will retain a 20% share of the property until you repay them.

You are required to fund a 5% deposit meaning you then have a mortgage for the remaining 75% of the value of the property.

You do not pay any interest on the 20% Government loan for 5 years. You can repay the 20% loan when you can afford to, the value of the 20% loan is based on the value of the property at the time you repay the loan, not the original purchase price.

If you are saving to buy your first home, a Help to Buy ISA is a savings account that the Government will also make a contribution to in order to boost your savings by 25%.

So, for every £200 you save, you will receive a Government bonus of £50. The maximum Government Bonus is £3000. You can save up to £200 per month. The minimum Government bonus is £400 meaning you will need to have saved at least £1600 into your Help to Buy ISA before you can claim your bonus.

Help to Buy ISA’s are available from a range of Banks, Building Societies and Credit Unions. This is not an area that we provide advice or a recommendation on.

Stamp Duty, also referred to as SDLT is a tax paid on purchasing a property.

The amount of stamp duty you need to pay will depend on what part of the UK the property is located in, the purchase price of the property and the whether the property is going to be the only property you own or not.

An Independent Adviser will be able to work out what the stamp duty will be on a proposed purchase for you.

Stamp Duty is payable within 30 days of completing the purchase of the property, however, your solicitors will usually request this from you when you exchange contracts on the purchase.

If you are late in paying the Stamp Duty then HMRC may charge you penalties and interest.

A deposit is money used to cover the difference between the purchase price of the property and the mortgage amount.

For example if you purchase for £150,000 and you have a mortgage for £125,000 you will need a deposit of £25,000 to cover the difference. You will need to show the lender where the deposit has come from.

The deposit can come from a variety of sources such as your own savings or as a cash or equity gift from a friend of family member.

This is when a family member or a friend gifts you some or all of the deposit to purchase a property.

The gift can come in the form of cash or equity if you are purchasing the property from them. Any gifted deposit will need to be disclosed to the lender at application and if the gift is coming in the form of cash, the person providing the gift will usually need to provide proof of ID and proof of the source of funds as part of the application process.

The person or people providing the gift will be required to write a letter confirming that the gift is non-repayable and that once the purchase has completed, they will not have any financial interest in the property.

A transfer of equity, or transfer of title, is when someone is either added or removed from the ownership of the property. When someone is added to the property ownership, the equity in the property is being transferred so it is split equally between all owners.

When a person is removed from the ownership of the property, the equity in the property is transferred to the remaining owner or owners.

In order to add or remove an owner to a property, consent is required by all parties and solicitors will usually need to be involved in the process to complete the necessary ‘TR1’ form and update the title with the Land Registry. There may also be a ‘consideration’ involved. A Consideration is a sum of money that is required to purchase the share of the equity to add or remove an owner.