Tuesday, March 13, 2012
Some borrowers are still confused by key property and mortgage
terms, according to research by the Nationwide Building
A lack of knowledge about mortgages could end up costing
borrowers money and certainly adds to the challenges of buying a
Over 40% of people who have looked into buying a house said that
jargon confused them. First-time buyers were the most likely to be
left baffled due to their lack of knowledge.
Around one-third of those surveyed knew that LTV meant 'loan to
value' and referred to the ratio between the size of the loan they
wished to borrow and the value of the house they wanted to buy. One
in ten did not know that APR stood for 'annual percentage
Some 14% of people did not know that negative equity meant when
the value of the mortgage outstanding on the property was more than
the market value of the property.
A quarter did not know that they became the owner of the
property once the sale was completed, with some believing it was
when the offer was accepted, or when they had exchanged contracts.
Almost half of those surveyed knew that it was obligatory to survey
the house they were looking to buy if they needed a mortgage.
Martyn Dyson, Nationwide's Head of Mortgages, said: "Buying
a property is likely to be the biggest financial commitment most
people will make. A lack of understanding of the key terms used
during the mortgage process could mean that people end up spending
more money than is necessary.
"People shouldn't be afraid to ask a lender or an
independent mortgage broker to explain terminology that they don't
understand, especially if they are taking out a mortgage for the