Glossary of mortgage terms - R
Not sure what a MIG is or what fixed-rate and leasehold all means? We can help you through the maze of jargon with our easy-to-use mortgage glossary. Find the words you want using the buttons below.
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Redemption
This has a strict legal definition and is the right of the mortgagor to recover mortgaged property on repayment of the loan and any interest due. What this means is that once you as the borrower have finished repaying the loan you took out (the mortgage), the property is yours and the lender has no further claim on it. If you want to pay the mortgage off ahead of schedule, for example, to save yourself future interest payments you may face a penalty charge, known as a early repayment charge. The lender may make this if the mortgage is paid off early to compensate them for the loss of interest they would otherwise have earned.
Registered Title
The right of ownership (or title) of a property that has been registered at the Land Registry. Once title has been registered, ownership and the rights that go with it are guaranteed by the government.
Remortgage
This is simply the replacement of an existing mortgage with a new one. You may do this to save money. This might be possible by switching to another mortgage product with the same lender or by switching your business to a competitor. Remember, if you switch lenders, the saving you make on the interest rate you pay may be partially or wholly eaten up by the transaction charges associated with moving your loan. There may be redemption fees and reservation fees demanded by your old and new lenders. The old lender may charge you a penalty while the new one an arrangement fee. The new lender will want to value the property just as your old lender once did. So there"ll be surveyors fees, not to mention some conveyancing. And that means solicitors are likely to get in on the act once again. So, if you"re considering a re-mortgage, do your sums carefully. You may find yourself facing the equivalent of several months mortgage payments, wiping out the benefits of remortgaging.
Rent-a-Room Scheme
If you own your own home or if you"re a tenant for that matter, you are permitted to let furnished rooms in your home and receive income which will not be taxed. It"s called the "Rent a Room" scheme. Since the 1997/98 tax year you have been able to earn up to £4250 rental income per annum tax-free, or £2125 per person if the room is let jointly by a married couple. Rent includes payments for meals, cleaning and laundry as well as the accommodation itself. Amounts you charge to cover council tax, telephone and heat & light are not necessarily allowable for tax relief. To qualify under the scheme, you must live in the property with the tenant for at least part of the time, and it must be your principle place of residence - in other words your main home. If the gross rent received is greater than the annual allowance, you may choose to pay tax either on the excess or on the gross rent less expenses such as management costs and maintenance (but not home improvements). Where the gross rent is not much over the allowance, the first option is usually cheaper. Further information on the Rent-a-room Scheme can be found in the Inland Revenue"s leaflet IR87 Letting & Your Home and on the Tax Help sheet IR223.
Repayment Mortgages
A mortgage where the capital is repaid gradually over the term of the mortgage. Each Monthly payment is made up of interest due on the outstanding debt (the cost of "servicing" the loan), and an additional sum applied to reducing the capital balance. In the early years most of each month"s payment is comprised of interest. In later years, more capital is repaid with the result that the balance outstanding reduces. Repayment mortgages have their pros & cons: Advantages of Repayment Mortgages: The mortgage will be repaid eventually, providing full monthly payments are maintained throughout the mortgage term (usually 25 years). The loan will be repaid whatever happens to the stockmarket or any other investment market. Disadvantages of Repayment Mortgages: In the early years of the loan, most of the monthly repayment goes to pay off interest - the capital outstanding on the mortgage is hardly reduced. There is no possibility of achieving any additional investment return or surplus at the end of the mortgage term. A separate mortgage protection (term assurance) policy ought to be taken out. People who take out these straightforward mortgages, are usually urged to arrange a separate mortgage protection or term assurance policy, so that should the mortgage payer die, the debt can be immediately paid off by his/her heirs.
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Avocado Mortgages can help power charge your finances, releasing equity tied up in your property.
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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT
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