How mortgage savvy are you?
Only a third (34%) of homeowners or those buying a home are confident they understand the terminology used in their mortgage agreement, according to Trussle.
The online mortgage broker found that 61% of current and soon to be homeowners didn’t fully review their mortgage agreement before signing, despite it being one of the biggest contractual agreements most ever commit to.
Worryingly, half of them claimed not to understand some of the languauge in their mortgage paperwork.
Three-quarters are unable to correctly define remortgaging, according to the research, while almost two-thirds don’t know what the APR (annual percentage rate) is.
Remortgaging, the process of switching a mortgage deal before the end of the initial period, could save borrowers money. In fact, if they don’t remortgage and then slip onto their lender’s high-interest Standard Variable Rate (SVR), they risk losing an average of £4,500 a year, said Trussle.
The research also highlighted some key mortgage terms that homeowners do have a clear understanding of, including overpayments (81%), credit report (80%) and arrears (75%).
Dilpreet Bhagrath, spokesperson for Trussle, said: “Mortgage terminology can be tricky to understand, and it’s clear that there’s still a lot of jargon in the industry that’s misunderstood.
“Buying a home is one of the biggest emotional and financial commitments someone will make in their lifetime. Yet, borrowers are being put at a huge disadvantage by not truly understanding the terminology used in their mortgage agreement.
“It’s worrying that so many homeowners still don’t understand remortgaging, particularly as they risk falling onto an expensive Standard Variable Rate and could waste an average of £4,500 a year on high-interest rates. Across the industry, we need to educate borrowers so they understand what they’re getting into and how they can keep their mortgage on track.”