40% of house hunters confused by jargon

Danny Lawson/PA Wire

Over 40 per cent of people who have looked into buying a house say they are confused by the jargon, according to research from Nationwide Building Society.

Borrowers are left flummoxed by key property and mortgage terms, which could end up costing them dearly, the building society said.
It is first-time buyers who are the most likely to be left baffled due to their lack of knowledge, but home buyer more generally were also left confused by many of the terms.

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."

Only around 31 per cent 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 did not know that APR stands for annual percentage rate.

Meanwhile, 14 per cent 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 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. Only 47 per cent of those surveyed knew that it is obligatory to survey the house they are looking to buy if they need a mortgage.

Mr Dyson said that customers "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.

As you'll see from the results, some of the factors confusing buyers were just pure jargon, but regulatory issues - like knowing whether or not a survey was legally required - highlight the real extent of the problem.

The top five things confusing home buyers

1. LTV - loan to value - 69 per cent were unsure of the meaning
2. Requirement to have a survey - over half didn't know this was obligatory
3. Becoming the owner once the sale is completed - a quarter didn't know it was at this point
4. Negative equity - 14 per cent were unsure of the meaning
5. APR - 9 per cent were unaware of the meaning

Read Full Story