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Cut through the jargon with a short guide to mortgage terms

Banks seem to assume that just because you have expressed an interest in taking out a mortgage, you automatically understand the jargon. They airily bandy around acronyms and financial buzzwords as if they were everyday expressions. We tried to put a few common mortgage terms into layman's language.

  • APR means the annual percentage rate, and adds in the fees and interest. It expresses the interest cost over the full length of mortgage. It's a little redundant nowadays as most borrowers change deals several times over the length of a mortgage.
  • Capped rates are available on some tracker mortgages. They represent the upper limit of interest rates charged by the bank, regardless of how high the Bank of England base rate soars.
  • Equity is an important figure. It's the value of your property minus the amount you still owe on the mortgage. Negative equity is that dreaded state where you owe more than the house is worth.
  • A Guarantor is the generous soul who undertakes to cover your mortgage payments if you default. Occasionally required for first time buyers, or for 100% mortgages, they are usually a doting parent.
  • Loan to Value (LTV) is the amount of a mortgage relative to the value of the property, signifying the amount of deposit you will have to stump up. If you fancy a 70% LTV on a property worth £200,000, you would need to find a deposit of £60,000. Good luck with that.
  • The Standard Variable Rate (SVR) is your bank's default interest rate that comes into place when a deal has come to an end. It's one of the mortgage terms that signifies it's probably time to start shopping around for a new deal.

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