10 Terms Of Remortgage Jargon You Should Know When Remortgaging

Remortgaging is no more or less complicated than a standard mortgage you acquire when moving house. However the terminology involved can be very different, so with that in mind we've compiled a list of the top ten terms you should familiarise yourself with.

Valuation: No matter what the mortgage, the lender you partner up with will want a new valuation as the first step of the remortgage. This sets the house price valuation where it should be and reassures the lender that it is adequate security for the mortgage.

Arrangement Fee: Arrangement fees are often payable for the best remortgage deals. They can range from a few hundred pounds to a percentage of the mortgage amount and are generally paid on completion or added to your mortgage. The amount of the fee will depend on the specific fixed or discounted rate deal.

Equity: Many remortgages will be based on the amount of equity that you have in your home. Your equity is the difference between the value of your home and your outstanding mortgage. So, if your home is worth £150,000 and you have a £100,000 mortgage, you have equity of £50,000.

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 is an agreed upon interest rate that you pay on your mortgage, it is usually a certain percentage above the Bank of England Base Rate. The tracker part of the rate is that your interest rate will only change when the Base Rate changes. For instance, the Base Rate at the time of writing id 0.5%, if your tracker rate is set at 3.75% above the Base Rate, your remortgage rate is 4.25%. If the Base Rate goes up 0.5% to 1% then your mortgage rate will be 4.75%, the 3.75% set by the mortgage lender never changes.

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: A fixed rate remortgage deal guarantees your monthly mortgage payments for a specified period. Irrespective of changes to interest rates a fixed rate ensures that you know exactly what your home loan payments will be for a set term.

Credit Reference Agency: The vast majority of lenders will access your credit file when deciding whether to agree your remortgage. There are three main credit reference agencies in the UK and different lenders use different agencies. Equifax, Callcredit and Experian are the main agencies and they hold information about how you have managed credit such as loans, credit cards and mortgages in the past. They also hold information on whether you have missed any payments or whether you have any adverse credit such as a County Court Judgment.