Mortgage Rate Scotland
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Glossary of Mortgage Loan Terms

Agreement In Principle - Often referred to as an AIP, this is a promise by a mortgage lender to give you a certain amount of money in future, once you have found the right place to buy.

APR - Annual Percentage Rate of credit charges - this has to be quoted by each mortgage lender so you can clearly see what interest rates apply to different mortgage loans. The figure is calculated taking into account the total interest payable on your mortgage together with additional charges which may include, amongst others, arrangement fees, mortgage indemnity fees, legal or valuation fees incurred by the lender.

Arrangement Fee - The full cost charged by the mortgage lender for setting up the mortgage.

Base Rate - Can refer to mortgage rates, but generally means the interest rate set by the Bank of England, which bank mortgage rates tend to follow.

Capped Rate - A mortgage loan that has a variable interest rate, but a rate that can only rise or fall so far. Capped mortgage rates are quite handy in volatile markets, but are less common these days.

Current Account Mortgage - A comparatively new way of combining your current account, loans and mortgage into a single account, with a fluid overdraft level.

Discounted Mortgage - A mortgage loan where a lower rate of interest is charged for a certain period of time, as an incentive to the borrower. Often also called "introductory rates".

Endowment - An investment made over the life cycle of a mortgage, to attempt to pay off the original lump sum you borrowed at the end of the cycle. Used in conjunction with interest-only mortgages.

Equity - Calculated by subtracting the amount of money you owe on a property from its market value (see also Negative Equity).

Fixed Rate Mortgage - A mortgage loan that has a set monthly repayment for a predetermined period of time.

Interest-Only Mortgage - Pays off the interest your mortgage loan accrues, but not the lump sum originally borrowed - that has to be paid off separately at the end of the mortgage term.

Joint Income - Usually referring to the amount of money you can borrow - for instance, it may be 2.5 times you and your partner's combined income.

Loan-To-Value - What percentage of the property's value you are attempting to borrow.

Mortgage Protection - Additional insurance against a raft of potential circumstances leaving you unable to pay your monthly mortgage rate - the insurance will cover it for you.

Mortgagor - Usually refers to you - i.e. the person taking out the mortgage. Confusingly, the institution lending you the money will be called the mortgagee.

Negative Equity - when the sum of money owing on a property is greater than the property's value - in other words, even selling the property can't clear off the mortgage.

Outstanding Amount - The amount still owing on the lump sum you borrowed - separate to the interest that accrues on that amount.

Early Repayment Charge - A charge for moving your mortgage elsewhere. Quite often, a mortgage will have a period (say the first five years) during which you will be charged for taking your business to another mortgage lender.

Remortgage - The process of cancelling your current mortgage and taking out a new mortgage on the same property, either for a better mortgage rate, to release equity, or both.

Repayment Mortgage - Involves paying back both the lump sum you borrowed to purchase a property with, and also the interest that accrues.

Repossession - Occurs when the owner of a property cannot make the mortgage repayments, and the mortgage lender legally reclaims the property to clear the outstanding debt.

Self-Certification - Special type of mortgage - usually relating to self-employed applicants who don't have P60 forms or payslips

Tie-Ins - Special conditions attached to a mortgage loan that impose penalty charges if you change mortgage lender or repay the loan within a certain period (see also Early Repayment Charge).

Valuation - A basic statement of how much a property is likely to fetch for sale, used to obtain mortgage approval.

Variable Rate - Traditionally, the interest rate on your mortgage will rise and fall in response to changes in the Bank of England's interest rates. A big hike in the latter means substantial increases in your mortgage rate, but if the rate falls your mortgage rate will fall with it.

Your home may be repossessed if you do not keep up repayments on your mortgage

Mortgage Loan Scotland
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Mortgage Lender Scotland
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