Struggling with jargon? Find the answers you need here.

Mortgage

A loan taken out (usually from a bank or building society) that is secured against a property.

Interest

Interest is how providers make money from mortgages. It is a percentage increase of the amount you are required to pay back.

Bank of England Base Rate

The interest rate that banks are charged when lending money from the Bank of England. This will impact your own interest payments if you have a variable rate mortgage. Currently, the Bank of England base rate is set at 0.75%

Fixed Rate Mortgage

This is a type of mortgage where the interest rate you pay is set for a period of 2, 3, 4, 5 or 10 years. These are seen as a gamble, as if the interest rate increases, you save money. However, if the interest rate falls, you will lose money.

Variable Rate Mortgage

A mortgage where the interest you pays varies based on your lenders standard variable rate.

Standard Variable Rate

The basic rate of interest for a particular lender. Each lender has different criteria as to when to increase or decrease the standard variable rate.

Mortgage Term

The amount of time you agree to pay back the mortgage to your lender. Usually this is 30 years.

Equity

This is the value of the share of the property that you actually own. Equity can increase or decrease based on value fluctuations of your property, and by paying off your mortgage.

Loan-to-Value (LTV)

This is the difference between the amount borrowed and the total value of the property (with the rest of the property being purchased with your deposit).

For example, if you are looking to purchase a property for £200,000, and you have a £20,000 deposit, you will need a mortgage of £180,000. This would give you an LTV of 90%.

London Interbank Offered Rate (LIBOR)

This is the average of the interest rate that banks charged to each other, and is a criteria in most lenders standard variable rate.

Early Repayment Charges

This is what your lender will charge you if you decide to pay off your mortgage before the mortgage term is up.

Valuation Fee

This is a fee your lender will charge you to provide a valuation of the property you are looking to buy.