10 Terms Of Remortgage Jargon You Should Know When Remortgaging

A remortgage is when you change your mortgage to a new mortgage deal, either with you existing lender or with a new one. There is some jargon involved, and here we explain what it all means.

Valuation: A valuation is simply when a surveyor checks your property and confirms that its value is. This is important as the lender needs to ensure that the property is sufficient security for the loan.

Arrangement Fee: An arrangement fee is a fee that is added when you apply for the mortgage, mainly for the administration costs of processing your mortgage.

Equity: It is the difference between the house's value and the amount remaining to be paid on the mortgage. Another way of putting it is that it is the money you have paid already (not including the mortgage interest) which under a remortgage you may be allowed to access/release to pay down unsecured debt or make home improvements etc.

Loan to Value: The loan to value is the amount in percentage form of your property that the mortgage will be. So for instance if your property is worth £250,000 and you are only borrowing £125,000, the loan to value is 50%.

Tracker Rate: A tracker rate remortgage deal will generally be linked to the Bank of England base rate. The rate will rise and fall in line with the Base rate and so your mortgage repayments will change as interest rates change.

Agreement in Principle: Obtaining an agreement in principle should be one of the first things you do when opening the remortgage process. The agreement in principle is not a binding contract, but is a very good indicator as the whether the lender will approve of your mortgage. Before a lender agrees to the 'principle' it will analyse the basic information, deposit, needs, credit check etc and see if the remortgage is on sound footing.

Early Repayment Charges: 'Early repayment charges' are fees that you may have to pay to your current lender for repaying your mortgage with them. They generally only apply if you want to come out of a fixed or discounted rate early. And, any new remortgage deal that you take may also have early repayment charges for a set period.

Higher Lending Charge: If you want to borrow above a lenders Loan to Value limit (110% LTV for example), expect a 'Higher Lending Charge' to be included. This helps reassure and cover the bank or building society should the worse happen and they repossess the property, as they would then have to sell said property at a loss.

Fixed rate: If you want to guarantee your payments for a specified period of time, a fixed rate remortgage may be the answer. A fixed rate ensures that your mortgage repayments will not change for a certain period irrespective of what happens to interest rates.

Credit Reference Agency: When you apply for a remortgage, the lenders you approach will all do a credit check with a credit reference agency. In the UK, this will probably be one or all of the main agencies, Callcredit, Equifax or Experian. All the agencies will hold a maximum of 6 years credit history which will show any missed payments on bills or credit cards, CCJ's, defaults, loans etc, the less of these you have, the higher your credit score will be, meaning a better interest rate on your mortgage.


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Timothy Frodsham writes for JustRemortgages.com one of the UK's
top sites for the latest remortgage rates and best remortgage deals.