Remortgages UK - phrasebook

If you've ever found yourself scratching your head blankly trying to fathom out what-on-earth your mortgage provider is talking about, don't worry; you're not alone. To the average man on the street the jargon-cluttered world of financial services is about as understandable as the hieroglyphics. If you haven't got a flair for new languages, the following 'translations' should prove invaluable:

Application Fee : when applying for a remortgage the borrower must pay the lender a fee to cover administration costs, etc.

Equity : Equity is simply the difference between the value of the property and your outstanding mortgage balance. Hence if your property has a current market value of £175,000 and your remaining mortgage balance is £50,000, then your equity is £125,000. As a rule of thumb you can expect to be loaned up to two thirds of your equity if you remortgage your property.

Mortgage Broker : In theory mortgage brokers should be independent operators who scour the market in order to find you the best deal. However, it's not unheard of for unscrupulous 'brokers' push policies from affiliated business partners. Don't be afraid to ask your broker if they are independent. If they are they could save you a lot of time and a lot of money.

Mortgage Redemption Statement : The first thing to do if you're thinking of remortgaging your property is to ask your current provider for a mortgage redemption statement, which outlines: mortgage balance, remaining term and any applicable redemption penalties.

Redemption Penalties : several mortgages have clauses intended to penalise borrowers if they redeem their mortgage before the agreed term. Redemption penalties are commonly associated with discounted, cash-back and capped loans. It's imperative that anyone considering remortgaging calculates whether it makes financial sense to pay these penalties, or to stick with their existing loan.

Redemption Penalty Overhang : redemption charges typically expire after a fixed period of time, after which the homeowner can switch loans without having to pay any penalties. However, some mortgages have extended clause which unfairly straightjacket the borrower. If you think that you've been hard done by; consider getting in touch with the Financial Ombudsman Service.

Term : The agreed length of time in which the mortgage is to be paid back. The most common term is 25 years.

Valuation Report : In order to remortgage a property you must have it independently assessed to establish its current market value. This is so the mortgage provider can asses the risk of any potential investment.

 

 

 

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