Mortgage jargon for first time buyers
If you are new to the mortgage game, you may be feeling anxious about the jargon that peppers any conversation you have or article you read. Here's a brief explanation of some of the basic terms.
Capital: this is the amount that you borrow.
Interest: this is the charge the lenders impose on you for borrowing their money. It is usually expressed as a percentage of the capital.
Mortgage term: the length in years of the loan.
Repayment mortgage: each month, you pay back some of the capital and interest. By the end of the mortgage term, you will have paid back the loan and the interest in full.
Interest-only mortgage: each month you pay back just the interest component of the loan and none of the capital. At the same time, you arrange to pay a sum into a separate savings or investment scheme so that at the end of the term, you will have saved enough to pay off the capital in full. It is up to you to make sure you will have funds to pay off the capital at the end of the term, otherwise the mortgage company might reposess your home.
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