The majority (61%) of current and soon to be homeowners don’t fully review their mortgage agreement before signing it, online mortgage broker Trussle has found.
And half (50%) claimed they only understand some of the language used in paperwork associated with the house buying process.
Dilpreet Bhagrath (pictured), mortgage expert at 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.
“At Trussle, we’re calling for a Mortgage Switch Guarantee to make mortgages more transparent across the board. We hope that this will increase transparency so mortgage borrowers are treated fairly and have the tools they need to make the right financial decisions.”
Almost two thirds (66%) of current and soon to be homeowners admitted they don’t understand all of the terminology used in their mortgage agreement.
Remortgaging, the process of switching a mortgage deal before the end of the initial period, is the phrase that most homeowners or those in the process of buying a home don’t understand, with only one in four (24%) admitting they know the definition.
This was followed by APRC (64%), completion (40%), mortgage term (37%) and base rate (27%).
This finding suggests that current/soon to be homeowners don’t understand the importance of remortgaging.
If they don’t remortgage and slip onto their lender’s high-interest Standard Variable Rate (SVR), they risk losing an average of £4,500 a year.
The terms homeowners and soon to be homeowners have a clear understanding of include overpayments (81%), credit report (80%), SVR (76%), arrears (75%) and buy-to-let (74%).
Homeowners face a number of fees during the buying process.
While the majority knew they were expected to pay for things such as early repayments (55%), an arrangement fee (54%) and building insurance arrangement (32%), nearly a third (31%) were not aware they had to pay a solicitor’s fee which can typically set homeowners back between £850 and £1,000.
Over half (58%) of those Trussle spoke to didn’t know they’d be charged for missing a payment on their mortgage.