Mortgage Glossary
There is a lot of ‘jargon’ used in the mortgage industry.
We have tried to provide you with a comprehensive explanation of all the terminology that you may come across during the mortgage process
Exchange of Contracts
This is the stage in England, Wales and Northern Ireland when both the buyer and seller have legally committed themselves to the sale and purchase of a property and are legally bound to complete the transfer.
Equity
This is the positive difference between the value of your property and the amount of any outstanding loans secured against it.
For example if your home was worth £300,000 and the mortgage on your property was £100,000 your equity would be £200,000.
Endowment Mortgage
An endowment mortgage is a type of interest only mortgage designed to repay the mortgage, subject to investment returns. They usually have two elements, the first is a monthly interest payment to the mortgage lender and the second, a monthly payment into an endowment policy that is mainly invested in stocks and shares.
What this means is that you are only paying off the interest on the loan during the term on the mortgage so the balance of your mortgage never changes. The mortgage is designed to be repaid at the end of the term with the proceeds of the endowment policy, subject to investment returns.
Early Redemption Charge
If you pay off your mortgage in full or make overpayments in excess of the amount agreed by your lender at the outset you may be asked to pay an early repayment charge by your lender.
This charge is raised in order to recover any losses or costs incurred by your lender as a result of your early payment.