May 2, 2011
Undertstanding all the various mortgage terms can be quite confusing for the best of us. If you’re not sure what you’re agreeing to, it can lead to mistakes and make what should be an exciting time – stressful.
Here’s a breakdown of common mortgage words which every borrower should know the meaning to:
Adjustment period: refers to the amount of time your mortgage stays at a fixed interest rate.
Amortisation: repayments which pay both the principal and the interest on your mortgage.
Blanket mortgage: multiple properties attached to a single mortgage.
Bridging loan: money borrowed between the sale of one property and the purchase of another. Usually used by those who need/want to buy a new home before their current one has sold.
Caveat emptor: Latin for ‘let the buyer beware.’
Accelerated approval: fast tracked loan approval which usually comes at a steeper price.
Application fee: charged by lenders to pay for the cost of the mortgage approval process. If your lender does not charge an application fee, they may charge higher interest rates.
Capital growth: The amount of profit you make on the sale of your property compared to the price you originally paid.
Chattels: Moveable extra bits and pieces that may be included in the sale of a property such as furnishings.
Interest only loan: You repay only the interest for the life of the loan, and repay the principle at the end.
Portability: Simply refers to transferring your current home loan to your new property if you move.
Redraw: A provision for extra repayments on your loan that also allows you to re-borrow the money if you wish. Usually, this will lengthen the lifespan of the loan or increase your repayments.
If you’ve found these explanations to be helpful, we suggest you read Mortgage dictionary: part one. It should help with making the mortgage application process less stressful for you.
Related mortgage links