When calculating how much they will offer as a mortgage, lenders multiply an applicant’s income by a set figure, which depends on the person’s salary, circumstances and ability to keep up payments. As a rule, lenders will accept 3 times the gross salary of a sole applicant plus or 2.5 times on a joint salary.
Lenders often ask employers to confirm the amount mortgage applicants claim they earn. For self-employed applicants, lenders may ask for confirmation from an accountant.
Individual Savings Account (ISA) Mortgage
An interest-only mortgage that relies on the performance of a tax-efficient Individual Savings Account to pay off the loan at the end of the mortgage term. An ISA can invest in numerous asset classes, including shares, (Government) bonds and cash.
Interest is what lenders charge people for borrowing money. Exactly how much interest is charged depends upon many factors, including the time period of as loan and the deemed credit risk. However, in a deposit account, for instance, interest can also be the return upon a capital sum invested.
With interest-only mortgages, borrowers only have to pay off the interest on the mortgage and not the capital. However, the onus is upon the borrower to ensure ¬ via a savings vehicle such as an endowment – that sufficient funds will be in place at the end of the mortgage term to pay off the mortgage in full.
A ‘middleman’, or ‘broker’ who searches the market for the most appropriate mortgage for a borrower.
A form of property ownership between two people, whereby if one of the owners dies, their share of the property will be automatically transferred to the other party.
Land Registry Fee
The fee paid to the Land Registry to register the ownership of a specific area of land.
A common type of home ownership whereby you purchase a house or flat for an agreed number of years but where the actual land it is on remains the property of the freeholder. When the leasehold period ends, the freeholder reclaims ownership of the property, although leases can often be extended.
A person specializing in the transfer of the legal ownership of a property. Often used in place of a solicitor.
Life assurance policies pay out either a lump sum or a series of payments when a person dies during the life, or ‘term’ of a policy, usually to his/her dependants. In most instances, these payments – known as the ‘sum assured’ – are tax-free.
A building of special historic, or architectural interest, which cannot be altered by an owner without official (usually Local Government) consent.
Local Authority Search
Carried out by the buyer’s solicitor, and carrying a fee, a local authority search checks, for example, that there are no proposed developments close to a property that could make it less attractive. The last thing a new homeowner wants is a motorway being built at the end of their garden just after they have bought their dream property. The search also highlights the various planning permissions for the property and whether any enforcement notices have been served upon it.
LTV (loan to value)
A mortgage term describing the amount of money a bank or building society will lend you as a percentage of your property’s value. 95% is a common LTV although in some cases they will lend the full value of the property, or 100% LTV.