When arranging a mortgage there’s a lot to consider and it’s very easy to get lost in what can seem like quite a log of jargon. Having a firm grasp on these terms is something that will help you make an informed decision as you progress.
Working with a broker is extremely helpful as you’re able to get support with any questions you may have (including complex terms) and we’re always happy to help too. Here are seven common terms to get you started along with what they mean.
- Initial Rate
The “Initial Rate” is the interest rate applied to your mortgage during a specific period at the beginning of your loan.
This initial rate is sometimes lower than the standard variable and can last from a few months to several years, depending on your mortgage product
- Initial Fixed Period
The “Initial Fixed Period” is the duration during which your mortgage interest rate remains fixed.
It can range from a few months to several years, providing you with stability and predictability in your monthly payments. After this period, your mortgage may transition to a variable or standard rate.
- Initial Monthly Payment
Your “Initial Monthly Payment” is the amount you’ll be required to pay each month during the initial rate and initial fixed period.
This payment can sometimes be lower than what you’ll pay when the mortgage transitions to the standard rate. It’s crucial to budget for this increase and be prepared for any adjustments.
- Product Fees
“Product Fees” are the charges associated with a specific mortgage product. These fees may include arrangement fees, valuation fees, or booking fees.
It’s essential to understand the product fees as they can significantly impact the overall cost of your mortgage. Always ask your mortgage broker for a breakdown of these fees to make an informed choice.
- Legal Fees
“Legal Fees” refer to the costs associated with the legal aspects of purchasing a property and obtaining a mortgage. These fees cover the solicitor’s or conveyancer’s services, title searches, and other legal processes. It’s essential to budget for these fees and choose a reputable legal professional to ensure a smooth and secure transaction.
- ERC (Early Repayment Charge)
The “Early Repayment Charge” is a penalty you might face if you repay your mortgage or a portion of it earlier than agreed.
This charge is often applied during the initial rate and initial fixed period or for a specific duration afterward.
Understanding ERC terms is crucial, especially if you plan to make overpayments or refinance your mortgage in the future.
- APRC (Annual Percentage Rate of Charge)
The “Annual Percentage Rate of Charge” (APRC) is a comprehensive measure of the total cost of your mortgage, including interest rates, product fees, and other charges.
It provides a more accurate representation of the mortgage’s actual cost than just the interest rate. When comparing mortgage offers, the APRC helps you make an apples-to-apples comparison to choose the most cost-effective option.
Whether purchasing your first property, moving house or arranging finance for an investment property, our team are always here to assist. There’s a lot to consider and we will be sure to guide you every step of the way.