• Rachael Panteney

The A-Z of mortgages - A

Updated: Nov 26, 2020

Understanding all the jargon and terminology used to describe the various elements surrounding mortgages can be confusing. Over the coming weeks we are going to be bringing you the A-Z of mortgages.

Today we're starting with A!

AIP or Agreement in principle – A certificate given by a mortgage lender to say how much you can borrow. This means you can be sure you are looking at properties in the right price range. It also means estate agents will take you seriously. AIPs are given subject to full underwriting, so you will still need to apply for a mortgage and submit all your documents.

Arrangement fee – This is what you pay to the lender to set up your mortgage. The amount of fees can vary significantly. Quite often the lower the interest rate on offer is, the higher the fee; although more complex cases such as buy to let or adverse credit mortgages often have higher fees. These fees can be paid on application or added to the loan. If you do choose to add to the loan be aware that you will be charged interest on this amount over the term of the mortgage, making it more expensive.

Affordability – This is how lenders assess how much they are happy to lend to you. They take your income (salary or earnings from self-employment, plus other sources such as rental income, certain state benefits or other income sources like child maintenance) and also look at your committed outgoings (payments to debt, pension contributions, travel or childcare costs along with costs of living like utilities) to see what level of monthly payment is affordable to you – both now and in the future. This will determine the amount they are happy to lend to you.

Adverse Credit – Or “bad” credit. You would likely need an Adverse Credit Mortgage if you have any of the following; a CCJ, a Default, Missed Payments on a mortgage, credit card or loan, a Debt Management Plan, an IVA or have been previously bankrupt or repossessed. In this case you would need a specialist lender, as mainstream lenders often decline this kind of application. Interest rate and fees tend to be higher on these kinds of Mortgages.

Arrears – The financial and legal term that refers to the status of payments in relation to their due dates. If one or more payments have been missed, the account is “in arrears”. This is recorded on your credit file and, if you do not make up these payments, you are at risk of the property being repossessed. In this instance it is imperative you speak to either your lender, or a recognised debt charity such as StepChange for assistance.

ASU – Accident Sickness and Unemployment insurance. A type of income protection that is designed to cover mortgage payments if you are unable to work for those reasons.

Stay tuned for B coming soon, or visit our online blog for the full A-Z glossary here...

https://www.willowtree-fs.co.uk/post/a-z-mortgage-glossary For more in depth information, please contact us or call Rachael on 01323 436680 and book a FREE initial consultation today.

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