Mar 1, 2012
A lack of knowledge about mortgages could end up costing borrowers money and certainly adds to the challenges of buying a first home, Nationwide has said.
Over 40% of people who have looked into buying a house say that jargon confuses them. First-time buyers are the most likely to be left baffled due to their lack of knowledge.
Around a third (31%) of those surveyed knew that LTV means loan to value and refers to the ratio between the size of the loan they wish to borrow and the value of the house they want to buy. One in ten (9%) did not know that APR stands for annual percentage rate.
14% of people did not know that negative equity means when the value of the mortgage, which is outstanding on the property, is more than the market value of the property.
A quarter (25%) of people did not know that they become the owner of the property once the sale is completed, with some believing it was when the offer is accepted, or when they had exchanged contracts. Almost half (47%) of those surveyed knew that it’s obligatory to survey the house they are looking to buy if they need a mortgage.
Nationwide is committed to helping people decipher the jargon used when buying a property. A video podcast featuring money experts Alvin Hall and Michelle Slade discussing whether jargon makes it difficult for people to buy their first home is also available. Journalists are free to embed this onto their websites. The Society also has a range of independent impartial guides available at www.nationwideeducation.co.uk/, including the First-Time Buyer Guide Video, which can help homebuyers understand the main terminology.
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 first time.
“Nationwide continues to find innovative ways to support borrowers through the process of buying a property whether it be improved education or the launch of competitive products like Save To Buy savings account”