Mortgage indemnity guarantee premium (MIGP) - This is a single insurance premium that becomes payable by the borrower when borrowing normally in excess of 75% loan to value in respect of both a purchase or re-mortgage. It can be a significant cost and therefore it is important to establish the cost of MIGP when comparing mortgage lenders and before agreeing to proceed with a mortgage. The premium becomes payable as a one off lump sum on completion of the mortgage although some lenders will offer alternatives such as adding the MIGP to the loan or spreading the premium over the first 12 months of the mortgage. Borrowers should be aware that if the premium is added to the mortgage they are effectively borrowing more money and will therefore be paying interest on the premium for the term of the loan. Some lenders no longer charge MIGP, although others may charge from 70% loan to value, there is a growing trend towards many lenders not charging MIGP providing the loan to value is 90% or lower. As an example you may be considering two lenders who offer the same or similar interest rates and you have a 10% deposit i.e 90% loan to value. One lender may have an MIGP costing £1000 the second lender may not charge any MIGP. The premium itself protects the lender against the borrower defaulting on the mortgage and making a loss following repossession and resale of the property. The insurance offers no protection to the borrower.

Mortgage term - This is the period over which the loan is taken. Typically, many mortgages are established with a 25 year term however any term of loan may be selected subject to a borrowers individual circumstances and the consent of the lender. The shorter the term of the loan the higher the monthly payments although this also means that the total interest paid over the mortgage term will be lower.

Negative equity - This is the term used where the balance owed on the mortgage is greater that the value of the property. This could arise where the value of the property has reduced since it was purchased. Some lenders offer a special mortgage facility to borrowers who have negative equity to enable them to move by carrying the negative equity across to the new property.

Payment protection plan - see Accident Sickness and Unemployment (ASU).

Repayment Methods - There are a number of ways in which your mortgage may be repaid.

Repayment mortgage - Also referred to as a capital and interest mortgage is where the monthly mortgage payment represents some interest and some of the capital (the amount borrowed). In the early years of the mortgage the borrower pays off mainly interest but as the mortgage gradually reduces over the years more of the monthly payment goes towards the repayment of the capital.Although the capital is reducing, the monthly mortgage repayment does not reduce (subject to the interest rate remaining unaltered).

Disclaimer: Information is for guidance purposes only. If you are in any doubt as to the suitability of the contracts offered please consult an independent financial adviser. PIA do not regulate mortgage protection and not all forms of critical illness insurance and income protection products.