Learn The Lingo! 10 Phrases Of Financial Jargon To Know When Remortgaging

When you move your home loan from one lender to another without moving home, you will have remortgaged. A remortgage allows you to save money on your repayments as well as to borrow additional cash secured against your property. Whilst the process is relatively straightforward, our guide explains ten terms that you are likely to encounter when you switch your home loan. Valuation: A valuation involves a qualified surveyor visiting your home to confirm the market value of your property. The surveyor will also check that there are no significant structural issues with your home that may affect the lender’s security.

Arrangement Fee: An arrangement fee is a fee that is added when you apply for the mortgage, mainly for the administration costs of processing your mortgage.

Equity: It is the difference between the house’s value and the amount remaining to be paid on the mortgage. Another way of putting it is that it is the money you have paid already (not including the mortgage interest) which under a remortgage you may be allowed to access/release to pay down unsecured debt or make home improvements etc.

Loan to Value: Loan to Value (LTV) is a term commonly seen during the remortgage process. Your loan to value relates to the size of your mortgage as a percentage of the value of your property and many remortgage lenders have a maximum loan to value on their deals. If you had a 150,000 mortgage on a property worth 200,000 your ‘loan to value’ would be 75%. Many of the best remortgage deals are available to borrowers with a low ‘loan to value’; typically below 60-70%.

Tracker Rate: A tracker rate remortgage deal will generally be linked to the Bank of England base rate. The rate will rise and fall in line with the Base rate and so your mortgage repayments will change as interest rates change.

Agreement in Principle: Obtaining an agreement in principle should be one of the first things you do when opening the remortgage process. The agreement in principle is not a binding contract, but is a very good indicator as the whether the lender will approve of your mortgage. Before a lender agrees to the ‘principle’ it will analyse the basic information, deposit, needs, credit check etc and see if the remortgage is on sound footing.

Early Repayment Charges: Early repayment charges usually apply to fixed rate mortgages. If you redeem the mortgage before the end of the fixed rate period then you may have to pay a fee to do so. This may apply to other types of mortgage products too such as discounted or capped mortgages.

Higher Lending Charge: Some lenders will levy a ‘higher lending charge’ if your remortgage it at a high loan to value. As lending is more risky if you borrow a large proportion of the value of your home, lenders can take out insurance against any losses they may make if you don’t keep up your repayments. The ‘higher lending charge’ covers the costs of this insurance.

Fixed rate: A fixed rate remortgage deal guarantees your monthly mortgage payments for a specified period. Irrespective of changes to interest rates a fixed rate ensures that you know exactly what your home loan payments will be for a set term.

Credit Reference Agency: When you apply for a remortgage, the lenders you approach will all do a credit check with a credit reference agency. In the UK, this will probably be one or all of the main agencies, Callcredit, Equifax or Experian. All the agencies will hold a maximum of 6 years credit history which will show any missed payments on bills or credit cards, CCJ’s, defaults, loans etc, the less of these you have, the higher your credit score will be, meaning a better interest rate on your mortgage.

James writes for Just Remortgages one of the UK’s top sites for the latest remortgage rates and remortgage deals