Glossary

Adjustable Rate Mortgage (ARM)

A type of mortgage facility in which the interest rate applied to the outstanding balance varies throughout the life of the loan.

Affordability

A consumer’s capacity to afford a house. Affordability is the amount of money a mortgage borrower can make on a monthly basis towards a mortgage, based upon their income, expenses, and the proposed monthly payment. Mortgage affordability has a direct relationship with the maximum purchase price you can qualify for when buying a home.

Application fee

A fee that some lenders charge to accept an application. It may or may not cover other costs such as a property appraisal or credit report, and it may or may not be refundable if the lender declines the loan.

Approval

Acceptance of the borrower’s loan application. Approval means that the borrower meets the lender’s qualification requirements and also its underwriting requirements. In some cases, especially where approval is provided quickly as with automated underwriting systems, the approval may be conditional on further verification of information provided by the borrower.

Approval in principle

Following some basic financial checks, a lender will make a temporary offer of a mortgage loan so you know how much you can afford to borrow when looking at properties. This is subject to a successful, full application later on.

APR

So you can compare financial products like-for-like, an APR offers an annualised percentage that is standardised and shows you the true cost of borrowing.

Arrangement fee

A fee charged to the borrower by the lender for arranging your mortgage product.

Arrears

If a borrower fails to meet their contractual mortgage payment in full then the account will fall into arrears by the amount due that has not been paid.

Asking price

The price the vendor states when starting negotiations for the sale of their property.

Base/Bank rate

Lenders use this rate, set by the Bank of Ghana, as a basis for setting some tracker rates, usually by adding a few per cent on top. 

It is also common for the Treasury-bill rate(s) to be used.

Buy-to-let mortgage

A mortgage product for people who would like to invest in residential property to let out as a rental.

Cashback

You may be offered a lump sum as part of your mortgage product, providing you with ‘cash’ to cover additional costs, such as decorating. This is typically paid upon completion of your mortgage.

Conveyancing

When a solicitor/lawyer or licenced conveyancer handles a range of legal paperwork as part of your mortgage application, such as transfer of property deeds.

Credit rating

In order to get a clear picture of how you have managed your finances in the past, a lender will determine your credit rating by accessing information held at one or more Credit Reference Agencies. This is used, along with existing personal data held by the lender (for existing customers) and information from your application, to determine your credit rating against lender’s own, internal credit assessment systems and influences their decision to grant the mortgage.

Default

Failure to meet the legal obligations (or conditions) of a loan, usually from missed payments.

Early repayment charge (ERC)

Certain mortgage products have an initial period during which a lender will agree to fix or provide a discounted interest rate. Your lender will usually charge you an Early Repayment Charge if you decide to pay off your loan before that period has finished. This may also be charged if a lump sum over a pre-agreed percentage of the loan is paid off during the initial period.

Equity

The equity amount in your property is calculated as your home’s value, less the amount you owe your lender for your mortgage loan.

Fixed rate

Most lenders offer products which provide borrowers with a chance to fix their mortgage product rate for a set number of payments or until a certain date, so they can budget ahead.

Freehold

This describes where you own not only the building but the land upon which it stands.

Guarantor

Some lenders may be willing to offer a mortgage loan if someone, such as a parent, guarantees to cover payments if the borrower no longer can.

Leasehold

A scenario where you own the property but not the land it stands on. Instead, you purchase a leasehold, for a long period of time.

Loan to value (LTV)

Describes percentage rate to show the ratio between the value of a loan compared to the value of the property. Interest rates will typically vary by the LTV at the point of application.

Mortgage payment protection insurance

An insurance product designed to cover your mortgage payments should you be unable to pay due to unemployment, accident or illness.

Negative equity

When the value of your mortgage loan exceeds your property’s value.

Portability

A product which can be moved to a new property if you move is ‘portable’. If your new home is more valuable, you can make up the difference with a separate loan.

Rebuild cost

Your buildings insurer needs to know how much it would cost to rebuild your property from the ground up should the worst happen, so it can calculate your premium.

Remortgage

A new mortgage application for your existing property, with the same or a new lender.

Searches

As part of your mortgage application, your solicitor/lawyer will check with organisations such as local authorities for any information which impacts on your property - planning proposals are an example.

Stamp duty

A tax you must pay to the Government if you sell a property valued at more than a certain amount. The tax rate increases as the property value increases.

Term

The period during which you agree to pay back your mortgage.

Tracker mortgage

A mortgage product with a shifting interest rate that ‘moves’, typically in line with the Bank of Ghana’s base rate or the lender’s SVR, so it can go up as well as down.

Valuation

Your lender will commission a surveyor firm to produce this report to ensure the property has been correctly valued before offering you a mortgage. This is used to assess the correct LTV, required to provide the correct mortgage product(s) available and assist with the assessment of the mortgage application.

Variable rate mortgage

A mortgage product where the interest rate can be varied by the lender, either up or down.

Useful Info

 
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