Navigating the world of mortgages and protection can be daunting, especially with the myriad of terms and jargon used in the industry. At Roff Financial, we aim to simplify this process for you. Here’s an A-Z guide to help you understand the key terms you might encounter on your journey to financial security.
A
Affordability Assessment: An evaluation of your financial situation to determine how much you can borrow for a mortgage.
B
Buy-to-Let Mortgage: A mortgage specifically for properties purchased with the intention of renting them out.
C
Capital Repayment: The portion of your mortgage payment that goes towards paying off the loan principal, not just the interest.
Critical Illness Cover: Insurance that provides a lump sum payment if you’re diagnosed with a specified critical illness.
D
Deposit: The initial amount you pay upfront when purchasing a property, typically a percentage of the property’s value.
E
Equity: The difference between the market value of your property and the amount you still owe on your mortgage.
F
Fixed-Rate Mortgage: A mortgage with an interest rate that remains the same for a set period, providing payment stability.
G
Guarantor: A person who agrees to pay your mortgage if you’re unable to do so, often used by first-time buyers with limited credit history.
H
Home Insurance: Insurance that covers your home and its contents against risks like theft, fire, and natural disasters.
I
Interest-Only Mortgage: A mortgage where you only pay the interest for a set period, with the principal repaid at the end of the term.
Income Protection Insurance: Insurance that provides a monthly income if you’re unable to work due to illness or injury.
J
Joint Mortgage: A mortgage taken out by two or more people, typically partners, sharing the responsibility of the loan.
K
Key Facts Illustration (KFI): A document that provides detailed information about a mortgage product, including fees, interest rates, and terms.
L
Loan-to-Value (LTV): A ratio that compares the amount of your mortgage to the value of the property, expressed as a percentage.
M
Mortgage Agreement in Principle (AIP): A lender’s statement that they’re willing to lend you a certain amount based on an initial assessment.
N
Negative Equity: A situation where the value of your property is less than the amount you owe on your mortgage.
O
Offset Mortgage: A mortgage where your savings are linked to your mortgage account, reducing the interest you pay on your loan.
P
Private Mortgage Insurance (PMI): Insurance that protects the lender if you default on your mortgage, usually required if your deposit is less than 20%.
Premium: The amount you pay for insurance coverage, usually on a monthly or annual basis.
Q
Quotation: An estimate of the costs and terms associated with a mortgage or insurance product.
R
Remortgaging: The process of switching your existing mortgage to a new deal, either with your current lender or a new one, usually to get a better rate.
S
Stamp Duty: A tax paid on property purchases over a certain value, with rates varying based on the property price and type.
Sum Assured: The amount of money that will be paid out in the event of a claim on an insurance policy.
T
Term: The length of time over which your mortgage or insurance policy runs.
Tracker Mortgage: A mortgage with an interest rate that follows the Bank of England base rate, meaning payments can go up or down.
U
Underwriting: The process insurers use to assess the risk of insuring you and determine your premium.
V
Variable Rate Mortgage: A mortgage with an interest rate that can change, often linked to the lender’s standard variable rate (SVR).
W
Waiver of Premium: An insurance policy feature that allows you to stop paying premiums if you become seriously ill or disabled, while keeping your cover.
X
X-Linked Insurance: Refers to life or health insurance policies that include coverage for genetic disorders, sometimes denoted with "X" as a generic placeholder.
Y
Yield: The income return on an investment, such as rental income from a buy-to-let property, expressed as a percentage of the property's value.
Z
Zero Deposit Mortgage: A mortgage option where no deposit is required, often targeted at first-time buyers, though less common in the UK.
Understanding the terminology used in mortgages and protection insurance can make a significant difference in managing your finances effectively. At Roff Financial, we are dedicated to helping you navigate these complexities with ease. Whether you’re considering a new mortgage or looking to protect your future with insurance, we are here to provide clear, personalised advice.
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