Mortgage jargon found to confuse home buyers
New research from Nationwide Building Society has shown that a large number of home buyers struggle with property and mortgage terms, making the property buying process more difficult for them. Over 40% of buyers admitted to finding mortgage jargon confusing and first time buyers were found to be the most confused.
Despite researching mortgages and property buying in advance being a growing trend amongst potential buyers, certain terms, such as LTV and APR continue to confuse and baffle people. Only 31% of people surveyed knew what LTV means and one in ten did not know that APR stands for annual percentage rate. LTV means Loan to Value, and describes the ratio between how much of the overall property price is paid for by the mortgage, and how much is paid for with the buyer’s deposit. This is an important thing to know as although many websites will describe how a high LTV can have higher rates and a low LTV may help you to pay off your mortgage quickly, not actually knowing what this means could land potential buyers in difficulty when it comes to taking out their mortgage.
14% of those surveyed had never heard of negative equity - one of the most dangerous situations for a home owner to find themselves in. Negative equity is when the value of a property drops during the mortgage repayment period, to the point that there is more left to pay on the mortgage than there is in the value of the house. This is dangerous because for the first few years most home owners will only be paying off the interest rather than any of the loan, meaning should the house price drop it is likely they will still have the full amount they paid for the property in debt. If they then struggle with the mortgage or want to move they will be unable to as even selling the property will leave them with a huge amount of debt. This is a situation that all potential home owners need to be aware of to protect themselves against it happening.
The best way for buyers to stay on top of these terms and make sure they know exactly what they are getting into is simply to ask their mortgage lender or even a financial adviser. If there is anything unclear in their mortgage it is worth finding out what it means as it affects their financial situation in a big way.
Article by: Rebecca Sidwell, Senior Mortgage Consultant at Contractor Mortgages Made Easy
Media Contact: Raman Kaur, Public Relations Manager.
Tel: 0844 44 88 800