If you’re a first-time buyer, you’re probably coming across unfamiliar terms and phrases in the course of your property search and mortgage application. Our list of common mortgage terms explained will help you feel more confident when completing paperwork and making those big decisions.
When you increase your mortgage to get extra funds.
Annual Percentage Rate of Charge (APRC)
This shows the annual cost of a mortgage, including costs and fees. You can use it to compare mortgages.
The conveyancer or solicitor will check if the seller or buyer is, or has previously been made, bankrupt.
The base rate is set by the Bank of England and determines the interest rates UK banks charge on savings and borrowing money.
A fee charged on some mortgages to secure a particular mortgage deal.
‘Capital’ is the money you’ve borrowed, so a capital repayment is the amount you pay to your mortgage lender every month. This includes some of what you've borrowed and some of the interest on the loan.
This is when the sale and purchase of a property is completed and the buyer’s solicitor or conveyancer pays the balance purchase amount to the seller’s solicitor or conveyancer. Once completion has taken place the buyer may collect the keys to the property.
This fee covers the cost of electronically transferring your mortgage funds to you.
A written agreement by the seller and buyer for the sale and purchase of a property. The contract details the terms and conditions of the sale and purchase, and is not legally binding until the exchange of contracts.
A conveyancer is a person or company licenced to represent you when purchasing a property. They will handle legal documentation, including liaising with the appropriate land registry and transferring legal ownership of the property.
Decision in Principle
A Decision in Principle, also known as an Agreement in Principle, is a document from a mortgage lender that gives you an idea of how much you could borrow. It’s based on security checks and a soft credit check, and shows estate agents that you’re in a good position to buy a property.
The amount of money you pay towards your property. The deposit will be a percentage of the cost of the property.
Early Repayment Charge
You may have to pay this if you repay all or part of your mortgage early. This includes moving to a different HSBC product or a different lender within a certain period.
Estimated property value
The purchase price or the conservative market value of the property you want to buy.
Exchange of contracts
The contracts are exchanged between the seller’s and the buyer’s conveyancer or solicitor, usually over the phone. The sale and purchase of the property only becomes legally binding once the contracts have been exchanged.
You may have to pay this when you fully repay your mortgage. HSBC doesn’t charge exit fees.
With HSBC’s Fee Saver there’s no booking fee and no completion fee when you remortgage. We’ll also cover the cost of standard valuation where we require it as part of your mortgage application. You may have to pay other fees and charges to other parties.
Fixed rate mortgage
This is a type of mortgage where repayments are set at an agreed amount, for a set period of time, and aren’t affected by fluctuations in interest rates.
The date on which a fixed rate mortgage ends.
HM Land Registry
The register holds details about the property, such as the date the current owner was registered as the owner, the property address, whether the property is freehold or leasehold and other information relating to the property title. The Land Registry is a government department that holds records of property titles registered in England and Wales.
Interest calculated daily
The interest charged on your outstanding mortgage balance is calculated every day rather than at the end of each week, month or year.
You will only pay the interest on what you’ve borrowed with this type of mortgage. At the end of the mortgage term you’ll be responsible for repaying the original amount borrowed.
Interest rate type
The interest you pay on your mortgage may be variable or fixed at a set rate for a set period of time.
In this deed the property owner mortgages the property to the lender to secure the mortgage loan repayment. The deed also sets out the mortgage terms relating to the property and the loan, as well as the lender’s rights and remedies if the borrower does not comply, including if the mortgage payments are not met.
This shows you all the rates and fees for a mortgage. Lenders will set this out in the same format for all their mortgages so it’s easy to compare.
This is the length of time on your mortgage – in other words, the period of time that your mortgage lender gives you to repay the money you’ve borrowed. A typical mortgage term is 25 years.
Loan to Value (LTV)
Loan to value represents the percentage of the value of the property that you want to borrow. For example, a £100,000 property with an £80,000 mortgage = an 80% LTV.
The maximum LTV we will lend depends on your individual situation, the property, the loan you choose and the amount you borrow.
Lump sum payment
A one-off payment to reduce the outstanding balance on your mortgage.
A new-build property is defined as:
- a building that has been built in the last 24 months. This includes property bought directly from a builder or developer
- a property that has yet to be occupied for the first time and/or
- a property that is yet to be occupied in its current form, for example following a renovation or conversion.
To be eligible for an HSBC mortgage, the property being purchased must have an HSBC recognised satisfactory Structural Defects Warranty.
We may lend up to a maximum of 85% Loan to Value (LTV) on new-build properties. Customers with an LTV of more than 75% are required to have a minimum deposit of £25,000.
The amount owed under an existing mortgage.
When you make a bigger monthly repayment on your mortgage than the one set by your lender.
You port your mortgage when you transfer your it from one property to another. You can port your HSBC mortgage subject to terms and conditions.
When buying a property there will be a ‘property chain’, including you (the buyer), the seller, their buyer, and so on. Being a first-time buyer shortens the property chain as you have no onward chain.
You remortgage when you switch your existing mortgage to a new deal with the same lender or a different lender.
This simply means a mortgage on a residential property, rather than one for business.
Searches are enquiries made by your solicitor or conveyancer to the local authority. They check on things such as property deeds, access rights, planning permission and drainage.
Lenders charge this fee when they request details from your current mortgage lender.
Soft credit check
A soft credit check is a type of background check that can be run without your permission. Unlike a ‘hard’ credit check, it doesn’t affect your credit score or any credit applications you might make in the future.
Like a conveyancer, a solicitor manages the legal aspects of purchasing a property, including the contracts, searches, transferring funds and providing legal advice.
A standard valuation is a survey of a property to confirm its value. It doesn’t advise on any structural problems or repairs that may add to your costs, but it does help ensure you’re not paying more than the property is worth.
When you move to a new mortgage with the same lender, eg the fixed rate period ends and you move to a tracker rate mortgage.
This is a legal document, which finalises the sale of a property and transfers legal ownership of a property from the seller to the buyer.
Stamp Duty Land Tax
Stamp Duty Land Tax (SDLT) is a tax payable by the buyer on the purchase of a property over a certain price. SDLT applies in England and Northern Ireland. The amount payable depends on other matters too, including whether the property is to be a main home and whether it is freehold or leasehold.
In Wales, buyers of property over a certain price are charged a Land Transaction Tax (LTT) and in Scotland buyers of property over a certain price are charged Land and Buildings Transaction Tax (LBTT).
The amount of SDLT, LTT and LBTT applies to properties over a certain value. The amount you pay depends on when you bought the property and how much you paid for it. For further information, please visit:
Standard variable rate (SVR)
If you don’t switch to a new deal when your current mortgage ends, you’ll be moved to the lender’s standard variable rate. This varies over the term of the loan and is set internally. It doesn’t track the Bank of England base rate.
This is a type of mortgage where the repayments vary according to the Bank of England base rate, so they can go up and down.
Think carefully before securing other debts against your home.
Your home may be repossessed if you do not keep up repayments on your mortgage.