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For a first time buyer in particular, applying for a mortgage can be a daunting process. It’s not just about the amount of paperwork that you need to fill out but the terminology you may hear from your mortgage lender or financial adviser. What does it all mean?

Mortgages: what you need to know when securing the paperwork

Here at Countryside really do understand that buying a property is not just the most expensive thing you will ever buy, but is one purchase that can be confusing. So we have pulled together a list of key terms you may hear to help you understand what mortgages are all about.

Here’s our top terms:

# Agreement in Principle (AIP) – The document your mortgage lender will give to you to confirm that you will be able to borrow a certain amount of money. You will then use this document to prove to the seller that you can buy their home.

# Arrangement fee – The fee to set-up your mortgage that can include booking and application fees. It is important to know what your lender will charge as these can be extremely costly. Often lenders offer deals, so see where you can save by shopping around.

# Base Rate – This refers to the rate of interest set by the Bank of England, often used to base some mortgage deals on, such as tracker mortgages, which rise and fall as the rate changes.

# Capital – This is the actual mortgage amount that you borrow to buy your property.

# Conveyancing – This is the term for the legal process you go through when buying a property. The process can be carried out by a solicitor or a licensed conveyancer.

# Equity – The amount of the property value minus the sum you owe on your mortgage i.e. what you have tied up in the property. It can be the deposit you put down or more especially as the value of your home goes up.

# Fixed rate mortgage – A mortgage deal that is set over a period of years, often between two and five, that offers a fixed interest rate for the security of regular monthly repayments.

# Freehold – When you buy a property and own the home and the land it stands on.

# Interest-only Mortgage – A deal that enables the borrower to only pay the interest on the capital sum. This means the mortgage balance does not reduce and you must pay back the full mortgage amount at the end of the mortgage term. The availability of this type of mortgage is increasingly limited.

# Leasehold – when you buy a property where you own the building but not the land it sits on, and only for a certain period (anything up to 999 years). This is normally the case when you are buying an apartment. If there are fewer than 70 years left on the lease, then you may find it hard to get a mortgage for the property. This should not be a problem for a new build.

# Loan to Value (LTV) – This is the proportion of the price you borrow when you first take out a mortgage. For example, if you borrow £200,000 on a property worth £400,000 you have a LTV of 50%.

# Mortgage term – The length of time you agree to pay off the mortgage in.

# Repayment mortgage – This is a mortgage where you pay the interest as well as a portion of the capital debt so by the end of the term you no longer owe the lender anything.

# Stamp Duty – This is land tax payable when you buy a property for more than £125,000.

# Tracker mortgage - a type of variable rate mortgage. What makes them different from other variable rate mortgages is that they follow – track – movements of another rate which is most commonly the Bank of England Base Rate.

# Valuation Survey – Lenders will carry out a valuation survey to check the property is worth the amount you are paying for. Costs vary on the value and size of the property, however sometimes lenders offer mortgages with free valuation surveys.

We have a helpful team of Sales Consultants who will help you throughout the buying process and we can recommend mortgage brokers who regularly deal with brand new homes. Our recommended brokers are able to look at the entire mortgage market for you and suggest the best possible package. They’re used to dealing with mortgages for new homes and work with us regularly, so you’ll be in safe hands.

Come and visit us at one of our developments across London, the South East and North West to find out how you can buy a new home that’s designed for modern living.

You can find more advice for first time buyers here including Help to Buy.


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Andrew Loveday,
Sales Director

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About this blog

Here you’ll find property related blog articles from the team at Countryside as well as independent experts. Expect regular tips and advice on topics such as buying a new home, interior and landscape design, setting up home, mortgages and finance, plus articles on architecture, the property market, regeneration and more.

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