Jargon Buster

ByYour Mortgage | 15 Oct 2012 | Be the first to comment

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A

ability to pay A way of working out how creditworthy a borrower is, by estimating how much they will have left to make payments on a mortgage after other deductions have been made from gross income.

acceleration clause Allows the lender to collect the balance of a loan if a borrower misses one or more payments. acceptance A positive response to an offer. Acceptances may be 'conditional', 'express', 'implied' or 'qualified', depending on the circumstances of the deal and whether there are any further mitigations, conditions or requirements.

Accident, Sickness and Unemployment Insurance Insurance cover arranged by the borrower to protect against inability to meet mortgage payments. Unemployment cover is restricted to cover certain events only. Exclusions to this insurance include dismissal due to professional misconduct or taking voluntary redundancy. The accident and sickness cover does not cover any act of self-injury or any injury related to the use of alcohol or drugs.

Additional Principal Payment An extra payment each month to help reduce a debt.

Additional Security When a mortgage exceeds a certain loan-to-value, lenders may require additional security, such as cash or shares.

Administration Charge Some lenders will reserve a proportion of thefee charged for the valuation to cover their own costs. If an application does not proceed, this part of the valuation fee may not be refunded, even if the valuation has not taken place. See valuation fee.

Advance The amount of your mortgage/loan. See also Cash Advance.

Agreement In Principle This means you have been accepted for a mortgage or other financial product, but it will depend on issues such as a valuation report and confirmation of employment.

Annual Bonus A bonus paid annually on an endowment mortgage which is dependent on the performance of the investment fund being used to repay your mortgage.

Annualised Percentage Rate (A.P.R) An explanation to identify the true cost of borrowing and a standard in order to provide a method of comparing costs of different loans. It is a legal requirement that a true APR figure be provided with any loan.

Application The process of applying for credit, or other products. The vast majority of credit applications need to be made in writing, although it may be possible for some services, such as an overdraft extension, to be arranged over the phone. Even internet based credit applications will usually require you to sign documents before the application is finalised.

Application Fee Any charges made for an application.

Applied or Nominal Interest Rate Rate used to calculate interest due.

APR See Annualised Percentage Rate .

Arrangement Fees The same as reservation, booking and product fees. A fee charged by a lender for setting up the loan. Normally payable upon completion but may sometimes be added to the loan. Learn more about arrangement fees on our mortgage fees page.

Arrears A late payment, or a payment after the event, for example most salaries are paid "monthly in arrears" - i.e. the first payment is one month after commencement of work.

Arrears Fee Charges for any late payments. See late payment fee.

Asking Price This is the initial starting price for which the property owner is looking to sell their property.

Association of Mortgage Intermediaries (AMI) This is the trade body for UK mortgage brokers. It is a not-for-profit organisation funded by its members and industry supporters. AMI presents the collective view of its membership to regulator the Financial Services Authority. AMI is aligned to the Association of Independent Financial Advisers (AIFA), which offers the same services for those brokers whose remits extend beyond mortgages alone. Websites: www.a-m-i.org.uk, www.aifa.net

Association of Residential Letting Agents (ARLA) As the professional and regulatory body for UK residential letting agents, ARLA has 1,800 offices around the country. Members must demonstrate a thorough knowledge of their profession and good business practices and comply with a code of practice laid out by ARLA. They must also have professional indemnity insurance to cover themselves in the event of a complaint by a consumer. Website: http://www.arla.co.uk

ASU Income protection cover for loss of earnings caused by accident, sickness, or unemployment. See Accident, Sickness and Unemployment Insurance for more.

Audited Figures These are a set of business accounts that have been ratified by an accountant. Self employed people may need to provide 3 years worth of figures checked by an auditor to be able to get a mortgage.

 

B

Bankruptcy The process of declaring an individual bankrupt. Bankruptcy can be discharged within 12 months, but remains on your credit rating for seven years and limits a person's ability to borrow.

Bank Rate The basic interest rate set by the Monetary Policy Committee of the Bank of England.

Base Rate (BBR) Also known at the Bank of England Base Rate. The Bank of England Base Rate is the main interest rate for the UK. It is set by the Monetary Policy Committee (MPC) of the Bank of England every month. The MPC consists of a group of independent experts appointed by the Bank of England who meet at the beginning of every month to assess the current economic situation and decide if the Base Rate should go up, come down or remain the same. The rate tends to be changed by a quarter of a percentage point at a time. Website: www.bankofengland.co.uk

Basis Point A basis point is 1/100th of 1%. For example the difference between a loan at 9.00% and a mortgage at 9.12% is 12 basis points.

Benefit Period Time frame in which the interest rate of a mortgage is discounted. (See fixed or capped). Booking Fees The same as arrangement, reservation and product fees. A fee charged by a lender to secure mortgage funds, payable at the time the loan application is submitted and normally applies only to special offer loans, such as fixed or capped rates. Learn more about booking fees on our mortgage fees page.

Breach Of Contract Failure to fulfil the term and conditions of a contract.

Breach Of Covenant Failure to obey a legal agreement. Bridging Loan Short-term loan used as coverage when buying a new property before selling an existing one.

Broker A third party individual who attempts to find the best available financial or other package. Brokers could be affiliated with a larger network in finance, or they may be independent.

Broker Fee A fee charged by an intermediary to the applicant for negotiating a loan. If a loan has not completed within six months of the date of introduction to a lender, the maximum fee that a broker may retain is £300, under the Consumer Credit Act.

Building Societies Association (BSA) This organisation is the trade body for all UK building societies. There are 59 building societies in the UK. Building societies differ from banks in that they are mutual organisations, which means that most of their customers (borrowers, savings and current account holders, etc) are members and have rights to receive information, vote on important decisions and attend society meetings. On the other hand, most banks are listed companies with external shareholders that are paid a dividend out of the bank's profits. Website: http://www.bsa.org.uk/

Building Society Building societies are mutual organisations owned by their members and regulated by the Buildings Societies Act.

Buildings Insurance An essential insurance policy which covers the structure of the building. Where the property is leasehold the buildings insurance will normally be arranged by the freeholder and the cost charged on to the leaseholder within the service charges payable. Read about buildings insurance in our insurance section.

Buy to Let Mortgage A mortgage for a property which the owner intends to rent out privately to tenants. 

 

C

Cap and Collar See capped rate.

Capital Raising The act of remortgaging a property based on a higher value compared to the original purchase price. The capital raised is the amount left over after repayment of the original loan is deducted from the new loan. Some lenders will also take into account home improvement projects as part of the remortgage, if they are likely to significantly raise the value of the property.

Capped Rate Mortgages The mortgage interest rate will not exceed a certain value during a certain period of time, although it may fluctuate above and below the agreed level. Some capped products will have a ceiling and a floor between which the rate payable may move; such loans may be known as cap and collar mortgages. Read more about capped rate mortgages in our mortgage basics section.

Cash Back Mortgages Cash back mortgages provide you with a single lump sum of cash immediately on completion. The amount of cash is usually calculated as a percentage of the overall loan amount, though it can be a set figure. The percentage of the loan that is given as cash back can be as high as 5%, though amounts in the region of 1 to 3% are more common.

Cash Buyer Person or persons who do not need a mortgage in order to buy a property and who do not have a property to sell.

CCJ If payments on a financial agreement are not made, a magistrate may issue a county court judgement (CCJ) in the name of the individual. This greatly affects your credit rating. See County Court judgements for more.

Certificate Of Deposit Certificates from a financial organisation declaring you have the funds available to pay the deposit.

Code Of Practice A group of principles and procedures individual employees of an organisation are expected to follow. This will cover such issues as client confidentiality, fairness and courtesy towards customers.

Collection Steps taken by a lender to bring a person's payments back up to date.

Commercial Mortgage Where the loan is granted for commercial purposes, and is usually secured against commercial property, though residential property may be used. With a commercial mortgage there is a higher rate of interest, as it is a higher degree of risk for the lender.

Commission A percentage of the overall sale price that is received by the selling party when acting on someone else's behalf.

Comparison Table A table giving comparisons between leading financial or other products to demonstrate which are the best performers under certain criteria. Remember that many such tables are a "one size fits all" covering a range of scenarios, and that the best way to evaluate your own options may be to draw up your own comparison table.

Completion The moment at which all the legal formalities of the purchase or mortgage are finalised and the funds are drawn down from the lender, usually into the solicitors account.

Completion Date The official date for completion of a sale of a house, when keys are actually transferred.

Compound Interest Interest on the interest.

Conclusion Of Missives A Scottish term for exchanging contracts.

Contents Insurance This is the insurance of property within your home i.e. furniture, clothing, personal possessions etc.

Contents cover is a separate type of insurance to buildings insurance, which covers the structure of your property. Read about contents insurance in our insurance section.

Contract Work Many employers offer employment under fixed-term contracts as they have a greater control over staffing costs and are able to limit their redundancy payment liabilities.

Conveyancing The legal documentation relating to the transfer of ownership of a property.

Conveyancing Fee A fee charge by a solicitor or licensed conveyancer for arranging the necessary legal work in transferring the ownership of a property. The total cost of the legal work also includes profit cost, stamp duty, land registry fees and disbursements.

Co-Ownership Shared ownership is a method of purchasing property in partnership with a housing association, where the borrower purchases part of the property and rents the rest from the housing association.

Council of Mortgage Lenders (CML) The CML represents the mortgage lending industry and its members account for around 98% of residential mortgage lending in the UK. Membership comprises banks, building societies and mortgage lenders. The organisation provides statistics and research on mortgage related topics and maintains data on the top mortgage lenders in the UK market. Website: http://www.cml.org.uk/cml/home

Council Tax An annual fee paid to a local authority to cover essential services such as road maintenance, rubbish collection and leisure centres. Council tax is based on the value of the property according to set bands.

County Court Fee Fee for when a lender provides information to solicitors regarding county court rules when payments are in arrears.

County Court judgement (CCJ) A county court judgement is a judgement for debt in the county court. This debt does not appear in the credit register if this debt is settled within 30 days of the date of the judgement. Very few lenders are willing to offer loans to anyone with an outstanding or unsettled judgement, and even if the judgement has been settled many lenders are likely to refuse a mortgage or other credit application.

Credit Check Where an enquiry is made on the credit history of an applicant, normally by reference to one of the major credit agencies such as Equifax or Experian.

Credit Checking Agency A service used by lenders to establish a level of risk involved in lending money.

Credit File A record held by a credit reference agency on an individual or a company. You can inspect your own credit file by writing to the agencies. Credit History The history of a borrowers financial record. Credit Rating Rating used to establish risk involved in lending money. This is used in conjunction with credit history and financial status.

Credit Reference Agency Companies that hold credit information one file.

Credit Scoring A generalised way of assessing the credit application, carried out by scoring the answers given on an application. It is important that there are no missing answers on an application otherwise the result for the question becomes a negative.

Credit Worthy A description of someone who is deemed by a lending institution to be a low risk to lend to (colloquial term). As with blacklisting, there is no such thing as a "perfect credit score", or someone who is "completely credit worthy", as there is always some element of risk involved when loans are made, and different institutions use different criteria when evaluating such risk.

Creditor Person or company to whom a debt is owed.

Critical Illness Insurance Insurance cover for major illness, diseases and other potentially fatal medical conditions. Read about critical illness insurance in our insurance section.

 

D

Daily Interest Where interest is applied on a daily basis instead of the traditional monthly time frame.

Data Protection Act (1988) Regulations introduced to protect the transfer of personal data within and between different organisations. Remember that every time you apply for a store loyalty card, credit facility or magazine subscription, you are handing over substantial amounts of personal data for organisations to trade in. Whilst this data may enable them to make special offers which "may be of use to you", it also means more opportunity to sell you products or services you would not otherwise have bought. If you are not the kind of person to say no easily, make sure you always tick the "no marketing material" box.

Debt Funds owed to lender.

Debt Consolidation Replacing a number of existing loans with a single loan from a new lender which may reduce your monthly payments by spreading out a larger loan over a longer period of time, and reducing the interest rate being paid.

Debt-To-Income Ratio A method used by lenders to establish if a person is qualified to receive a mortgage or loan.

Deed The document that proves you own the property. It will also show any land boundaries.

Deed Of Covenant The document expressing the terms of a covenant (a binding agreement), which may typically be imposed by a lender to restrict certain activities, such as use of a house for commercial purposes, or sub-letting.

Deed Of Proxy A document enabling one person to manage the financial and legal affairs of another individual.

Deeds Release Fee This fee is charged by the lender for releasing the deeds of the mortgaged property and returning them to the owner or his solicitor, usually when the mortgage has been repaid.

Default When a payment or a series of payments are missed.

Default Notice A letter served by a creditor to the borrower to say that a credit agreement has been breached, and that action must be taken by the individual to prevent the creditor seeking repayment via a County Court Judgement.

Deferral Period A time period on a loan during which no repayments need to be made. This is particularly popular with student and graduate loans, to enable young people to finish their studies, or to travel, before having to start making repayments. "Buy now, nothing to pay until next year" type offers in furniture and other stores also operate with deferral periods.

Deferred Interest A type of loan where some or all of the interest owed by the borrower is added to the amount outstanding which therefore causes the borrower to owe much more than originally borrowed.

Dependant An individual who depends financially on another person.

Direct Debit A method of making automatic payments electronically from a current account.Direct debits may be at fixed intervals - e.g. for a monthly credit card or quarterly fuel bill, and they may be fixed (e.g. a monthly membership fee), or variable, such as for a mobile phone bill.Direct Debits can also be for irregular payments, such as buying shares.

Direct Lenders Lenders who operate on lower overheads, through use of call centres, mailing houses, or internet based operations, instead of an expensive branch-based network. Can also refer to lenders who do not sell their products via regulated mortgage intermediaries.

Disbursements Search fees, land registration, stamp duties are all examples of disbursement.

Discharged Bankrupt Person whose period of bankruptcy has ended.

Discharged CCJ A county court judgement that has been paid. Discount Mortgages Such products allow for a certain discount to the lender's Standard Variable Rate (SVR) typically for a set period of time. For example, if your lender's SVR is 6.75% and you have a three-year discount mortgage with a rate of 4.99%, you will receive a discount of 1.76% for three years and then pay the SVR of 6.75%. Read about discount mortgages in our mortgage basics section.

Discount Period Time period in which reduced payments are offered.

Discount Purchase Price The price of a property which has been reduced below the open-market value, such as in the case of a right-to-buy purchase or a builder's discount. Under right to buy legislation, properties are not offered at the open market value, but at a discount, and if the property is resold within a three-year period, some or all of the discount will have to be repaid.

Discount Rate The mortgage interest rate is lower than the current normal standard variable rate, but only for a certain period of time. Usually shown as a fixed percentage reduction to the lender's normal variable rate e.g. 2.00% discount for 2 years.

Discount Tracker Mortgages Read about discount tracker mortgages in our mortgage basics section. 

 

E

Early Repayment Charges (ERC) A fee charged if you choose to move or pay off your mortgage before the end of an agreed term. Learn more about Early Repayment Charges on our mortgage fees page.

Easement A right of way giving individuals other than the owner permission to use a property for a specific purpose.

Endowment mortgage A mortgage with an interest payment and a separate payment into an endowment investment product designed to repay the mortgage at the end of the term.

Equity Release scheme A way older homeowners (typically 55%) can free up some of the value of their homes in exchange for a cash lump sum or income.

Estate agent A person whose business is the sale or lease of buildings or land on behalf of others. Currently unregulated. 

 

F

Fee The amount charged by a lender, broker or other middleman for arranging a mortgage or property purchase.

Financial Adviser A person who helps individuals with their financial situation.

Financial Ombudsman Service (FOS) This body provides consumers with an avenue for resolving disputes involving financial services firms. Set up by the Government, it gives independent advice on complaints in areas including banking, mortgages, pensions, insurance and investments. Consumers must try and resolve their dispute with the relevant organisation before referring to the FOS for advice, however. Decisions made by FOS regarding disputes are not legally binding unless agreed by both parties. Website: www.financial-ombudsman.org.uk

Financial Services Authority (FSA). This independent, non-governmental organisation regulates the UK's financial services industry, including mortgage lenders and brokers. Any organisation regulated by the FSA is legally bound to adhere to its rules. The FSA can conduct investigations and has powers to enforce rules upon the organisations it regulates and punish those that fail to adhere. The three main aims of the FSA are to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve business capability and effectiveness. The FSA also has a website for consumers offering information and advice, as well as a number of tools to help with financial decision making. Website: http://www.moneymadeclear.fsa.gov.uk/

Financial Services Compensation Scheme (FSCS) This is the fund of last resort for customers of authorised financial services companies. The FSCS can pay if a firm is unable to pay the compensation for claims made against it. It is a free, independent service, set up under the Financial Services and Markets Act 2000. It protects deposits, insurance policies, investments, insurance broking (for business on or after 14 January 2005) and mortgage advice and arranging (for business on or after 31 October 2004). The FSCS is funded by levies on authorised firms. Website: www.fscs.org.uk

First Charge A legal charge used to secure the main mortgage. A lender with a first legal charge over a property has a first call on any funds available from the sale of the property. See also: second charge.

First Time Buyer A person that is purchasing a property for the first time. Some lenders offer preferential lending terms to first time buyers. A borrower who has owned a property before but has sold this prior to buying again may be offered first time buyer terms by some lenders but this is dependent on the lender.

Fixed Rate Mortgages A loan where the initial payments, for a certain period of time, are based on a specific interest rate. The rate payable will not change during that period regardless of changes in the lender's standard variable rate. Read more about fixed rate mortgages in our mortgage basics section.

Flat Over Shop Residential habitation situated above retail premises. Some lenders will not lend on this type of security because it is seen as having limited appeal to prospective purchasers and therefore have a lower value compared to an otherwise similar property. Any property that is located above commercial property usually takes longer to sell than properties which do not have any commercial element. A flat above a take-away restaurant is more difficult to arrange a loan on than a flat above a book shop.

Flexible Mortgages Flexible mortgages are offered by some lenders and allow you to make overpayments in order to repay the mortgage early or save for a special event. Read more about flexible mortgages in our mortgage basics section.

Flexi An abbreviation for flexible. See flexible mortgages.

Forbearance An action a lender may take to delay repossession or legal issues with a delinquent borrower.

Foreign Currency Mortgage It is now possible to get a mortgage for your property in the UK in a mortgage denominated in a foreign currency. It sometimes gives you the opportunity to borrow money at a lower rate of interest than is possible in the UK.

Forfeiture When a delinquent borrower surrenders their property rights.

Freehold Land or property which is owned outright, as opposed to leasehold where the owner has the right to occupy the land or property for a given period of years only.

Full Status A loan where complete checks are made on the borrower's credit history and income.

Full Structural Survey It is essential to have this comprehensive survey carried out if you are thinking of buying an older property, as it will tell you if there is any problem or faults. 

Funding for Lending The Funding for Lending Scheme (FLS) was introduced by the Bank of England and the Treasury on 13 July 2012, aimed at boosting lending to households and businesses. It works by allowing banks and building societies to borrow from the Bank of England for up to 4 years. As security, lenders provide assets, such as business or mortgage loans, to the Bank of England.

Using the scheme, the more banks and building societies lend, the more they can borrow from the Bank of England. Those that increase their lending will pay the lowest fee on their borrowing while those that reduce their lending they will pay a higher fee. The scheme will run until January 2014.

 

G

Gazumping Where the seller accepts a higher bid after accepting your offer.

Gross Income Total income after tax.

Ground Rent When you are a leaseholder you will probably have to pay ground rent to the person that owns the land you property stands on.

Guaranteed Earned Income Is income that you receive along with your basic salary that is not part of your normal basic pay under the terms and conditions of your employment but which you are guaranteed to receive.

Guarantor Read all about guarantor mortgage in our first-time buyers section.

 

H

Higher Lending Charge (HLC) An insurance premium which insures the lender against any loss of money, e.g. If you default on your loan or get repossessed. This usually applies only if you borrow more than 75% of the price asked for the property you are buying. Even though you have to pay for the insurance premium, it does not mean that you are covered by the insurance, the lender is. Learn more about Higher Lending Charges (HLC's) on our mortgage fees page.

High Street Lenders Mortgage providers based on the high street. These are mainly banks and building societies.

Holiday Home A property that will not be your main address or place of residence.

Home Equity Loan A method releasing capital from people's homes. See Equity Release

Home Improvements Work carried out to improve your home.

Homebuyer's Report The homebuyer's report is a less stringent report than a full structural survey.

Homebuyer's Valuation Fee This is the fee paid for a simple survey of the property you are thinking of buying.

House Auction The process whereby something is bought at a price that arises from a process of bidding. If you bid for and win a home at an auction you will be legally bound to buy the house.

House or Flat Buyer's Report A more thorough survey than the simple valuation carried out on the property by the lender. If your lender does not offer this as an alternative to the basic valuation, you can negotiate with the surveyor carrying out the valuation for the fuller inspection and this may cost you less than a separate inspection. Household Insurance Insurance cover for your home. The two main types are building and contents insurance.

Housing Association A body of trustees or company that is established for the purposes of providing, building, improving or managing, or facilitating, or encouraging the construction or improvement of, housing accommodation. It does not trade for profit. Anyone wanting help with housing puts his or her name down on the housing association list which acts in the same manner as council house lists.

 

I

IFA Independent financial advisor is an advisor who has no affiliation with other financial companies. Illustration An illustration gives you an example of the monthly cost of a mortgage and other expenses associated with the loan such as set-up costs.

Impaired Credit If you have an impaired credit record you will usually need a sub-prime mortgage charged at a higher interest rate than standard.

Income Protection (Also known as Permanent Health Insurance (PHI) Income protection provides long-term protection for an agreed sum if you are unable to make payments on an outstanding agreement, such as a mortgage or other bills. Read about income protection in our insurance section.

Individual Saving Accounts (ISA) A tax-efficient plan launched in April 1999. Permits investment in stocks and shares or cash deposits. Inflation Increase in earnings or prices, which change in accordance with price inflation, and the national average earnings.

Inheritance Tax Tax payable on your estate when you die, charged at 40% on anything over £325,000 for individuals and £650,000 for married couples (2012/2013).

Insurance Penalties See Insurance Penalties on our mortgage fees page. Interest Only Mortgages Learn about interest only mortgages in our mortgage basics section.

Interest Rate Also known as the rate of interest, mortgage rate or product rate The rate of interest on your mortgage denotes the amount you are paying the lender to borrow funds. The rate is expressed as a percentage and calculated by the lender to ensure it receives the original loan amount back by the end of the term (or before if you repay early), plus a profit. Use our mortgage calculators to work out the repayments for any mortgage rates you are considering.

Intermediary Broker or person who attempts to sort and arrange financial packages for you.

Intermediary Mortgage Lenders Association (IMLA) This organisation represents mortgage lenders who channel their business through mortgage intermediaries, or brokers. Its membership includes banks, building societies and subsidiaries of overseas banks. IMLA is involved in a range of activities, including communicating its members' views to the Council of Mortgage Lenders and supporting new product development. Website: www.imla.org.uk

Introducer Person who introduces a loan to a lender.

IPT Insurance premium tax.

 

J

Joint Application A mortgage application that involves more than one person as the borrower.

Joint Liability Two people who are responsible for a loan or debt.

 

K

Key workers Individuals employed within the public sector who deliver an essential public service in areas such as health, education and community safety are classed as Key Workers by the Government. Depending on the area in question, specific examples can include: NHS staff (except doctors and dentists) teachers police community support officers fire-fighters prison officers probation service staff social workers psychologists and therapists employed by local authorities or the NHS Ministry of Defence staff (some, not all) Lawyers/solicitors (not all lenders will consider barristers) Pharmacists Accountants Optometrists Find out more about the professional mortgages and government housing schemes available to key workers. 

 

L

Land Registry A record of property, ownership and the mortgage is registered in a central register at HM land registry.

Land Registry Fees A fee payable to the land registry to change an entry in their records following a transaction involving registered land. This can be following a change of ownership or just a change of mortgage. Landlord's Reference This is a reference from the previous landlord regarding the general conduct of the tenant and whether rent has been paid promptly.

Late Charge A fee the lender imposes for receiving payments late. Late Payment A payment a lender receives after the due date has passed. Leasehold The land on which the property is built is not owned directly by the property purchaser and is held under a lease for a fixed period.

Legal Charge The means by which lenders enforce their rights to a property, and is recorded at the land registry. There are various different types of legal charge and the type used will vary from lender to lender. A primary mortgage will normally be secured by a first charge.

Legal Mortgage Fee The fee charged by the solicitors acting for the lender in creating their legal charge over the property. Lender An organisation which offers mortgage products.

Loan Authority Search Fee This is the fee payable for the local authority search.

Loan Consolidation A large loan is taken to help pay for smaller loans held elsewhere.

Loan Illustration An example of the monthly cost of a mortgage and other expenses associated with the loan such as set-up costs.

Loan To Value (LTV) The ratio of the loan amount to the property valuation expressed as a percentage. So if a borrower is seeking a loan of £100,000 to buy a property for £200,000 it has a 50% loan to value rate.

Local Authority Search A search of local authority records to confirm the status of the property.Local authority searches should reveal any proposed changes in the area, the details of the planning permission for the subject property and whether any enforcement notices have been served by the local authority.

Loyalty Bonus A concessionary bonus (usually by way of a temporary reduction in interest) payable for maintaining a satisfactory account with a lender for a period of years. Alternatively, loyalty bonuses may be offered to existing customers who return to the lender for a new mortgage. In which case the bonus may be dealt with by way of a reduction in the set-up costs of the new loan or a lump sum payable upon completion. 

 

M

Monthly Repayment This is the amount you pay our lender each month toward the cost of the credit they have given you.

Mortgage The name given to credit used to buy property or loan secured by land.

Mortgage Brokers See our award winning list of mortgage brokers, or speak to a mortgage broker in your area.

Mortgage Deed Legal document establishing a loan on property.

Mortgage Indemnity Guarantee See Higher Lending Charge.

Mortgage Term The length of time before the mortgage loan must be repaid.

Mortgage Payment Protection Insurance (MPPI) This is an insurance cover to protect your mortgage payments. Read about Mortgage Payment Protection Insurance (MPPI) in our insurance section. 

 

N

National Association of Estate Agents (NAEA) This is the UK's leading professional body for estate agents across the UK. It has a total of 10,000 members, who deal in all aspects of property both in the UK and abroad, including residential and commercial sales and letting, property management, business transfer, auctioneering and land. Founded in 1962, the NAEA provides assistance, guidance and representation for its members. All agents have to formally qualify to become members of the NAEA and must comply with its code of conduct. Website: www.naea.co.uk

National Landlords Association (NLA) An independent national organisation for private residential landlords. It represents over 13,000 fee-paying members throughout the UK, from full-time landlords with large property portfolios to those who own single-bedroom flats. It helps landlords understand the legal and regulatory environment in which they manage their lettings and makes them aware of their statutory rights and responsibilities. It also counts some of the largest buy-to-let lenders among its members and over 60 local authorities recognise the importance of membership. Website: www.landlords.org.uk

Negative Equity A situation that occurs when the amount loaned against a property is in excess of the market value of the property.

Net Profit The income of a company or self employed business after making full allowance for the expenses of running the business. This should be the amount available to the owners of the business for their own benefit. It is the figure that can be used to calculate their ability to service a mortgage.

New Build Refers to newly built properties. Can refer to a single property or whole estates. Non Status A loan granted without making enquiries as to the borrower's income or credit history.

Notice of Default A lender's initial contact when you have fallen behind on your credit repayments.

 

O

Offset Mortgages Read about offset mortgages in our mortgage basics section.

Open Market Value The value of a property on the basis of a willing buyer and willing seller in the open market allowing for a reasonable period for sale.

Outgoings This includes existing liabilities and debts, other than an existing mortgage, such as hire purchase, personal loans, school fees etc.

Outstanding Balance The amount that is outstanding on your mortgage.

Overpayments Flexible mortgages allow you to pay more than the standard monthly repayment, in order to pay off your mortgage more quickly and potentially save a lot of time and money.

 

P

Payment Default If you default on your credit repayments, the lender is entitled to repossess your house to recover the debt.

Payment Method A means by which the mortgage capital is eventually repaid. Payment Protection Insurance See ASU accident, sickness and unemployment insurance. See also unemployment insurance.

Payment Schedule A schedule of monthly payments under a loan.

Payment Shock If you have taken out a mortgage on a low rate, you may experience payment shock when the low rate ends, if your repayment then reverts to a much higher interest rate.

Pension Mortgage The pension mortgage is an interest-only mortgage where the capital will be repaid from the tax free cash sum that can be received from the pension fund at maturity. This option is only suitable for those anticipating very large pensions.

Portable Describes a mortgage that can be transferred from one property to another.

Previous Lender's Reference A reference from a lender who has previously lent money to a prospective borrower regarding the conduct of the loan account.

Prime Rate The best interest rate possible to the lender's most valuable customers. Principal The amount of credit still outstanding - the amount on which interest is calculated.

Product A mortgage deal offered by a lender.

Product Fees The same as arrangement, reservation and booking fees. A fee charged by a lender for setting up the loan. Normally payable upon completion but may sometimes be added to the loan. Learn more about product fees on our mortgage fees page.

Property fraud Fraudsters may attempt to acquire ownership of a property either by using a forged documentto transfer it into their own name, or by impersonating the registered owner. Once they have raised money by mortgaging the property without the owner’s knowledge, they disappear without making repayments leaving the owner to deal with the consequences. See how to protect your home from property fraud.

Purchase The acquisition of a property.

 

 

R

Redemption This is paying off the mortgage, either to move to another property or at the end of the mortgage term.

Redemption Charges These are any charge levied by the lender when the mortgage loan is repaid before the end of the full term. Known as Now known as Early Repayment Charges.

Refinancing This is where borrowings are rearranging with a different lender, usually to receive more attractive terms or to raise fresh capital.

Remortgage The arranging of a loan on a property in which the borrower already resides. Normally this involves redeeming an existing loan on the property. Read more about remortgages in our remortgage section.

Remortgaging Switching your mortgage and/or mortgage lender. Read more about remortgaging in our remortgage section.

Repayment This is payment made to cover interest or reduction in principal of a loan.

Repayment Mortgages Learn about repayment mortgages in our mortgage basics section.

Repayment Plan If you fall behind on your payments a lender may try to renegotiate your repayment plan.

Reservation Fees The same as arrangement, booking and product fees. A fee charged by a lender for setting up the loan. Normally payable upon completion but may sometimes be added to the loan. Learn more about reservation fees on our mortgage fees page.

Restructured Loan When a lender offers renegotiated terms. Right To Buy This is an option for council tenants to purchase the property in which they live in. The property price is often at a discount, proportional to the length of occupancy.

Royal Institute Of Chartered Surveyors (RICS) The professional body for surveyors which sets a code of practice for its members. 

 

S

Search Fee Before you buy your property you have to check with your local authority that there are no plans that will affect the value of your property.

Second Charge A second charge is a legal charge that ranks behind a first charge, possibly to secure a second mortgage, or a guarantee given to secure other borrowings.

Second Home An alternative to your main residence which is subject to capital gains tax! See also: holiday home. Second Mortgage A second mortgage is a further loan on a property which ranks after the first charge mortgage.

Secured Loan A secured loan one that is secured using your property.

Self Build A property, the construction of which is controlled by the borrower; not a finished unit. Loans on self build properties will normally be advanced in stage payments and are subject to strict limits on loan to value. A qualified architect will need to be involved.

Self Employed An individual who runs their own business or works for themselves such as a freelancer, contractor or sole trader. For mortgage purposes this will include partners in unlimited liability businesses and professional practices.

Semi Commercial A property that has at least part commercial use. A semi-commercial mortgage is a loan on security that is not entirely used for residential purposes, e.g. A shop.

Shared Ownership A method of property purchase in partnership with a housing association. The borrower purchases part of the property and rents the remainder from the housing association. Also known as co-ownership, this arrangement is designed for people who could not otherwise become homeowners. Under most arrangements, the minimum purchase amount is 25% of the property value with the remainder available to be purchased in blocks of 25%.

Simple Valuation This just tells you the value of the property, it does not tell you if it is structurally sound.

Sitting Tenant A person having a legal right of occupation, even if the property changes ownership, and who is able to apply to the local authority to set a fair rent. Properties with sitting tenants are generally worth at least 30% - 40% less than their open market value with vacant possession.

Sole Occupancy A property that is occupied by the borrower and his or her immediate family only. No paying tenants are in residence. Special Conditions Specific terms, usually outlined on the mortgage offer document, that apply to a particular loan offer.

Stamp Duty A tax payable on property purchase, charged at 1% on properties costing £125,000 to £249,999; 3% on properties from £250,000 to £499,999, 4% on properties over £500,000, 5% on properties costing over £1m and 7% on properties costing more than £2m.

Standard Variable Rate Mortgages (SVRs) Read about standard variable rate mortgages in our discount mortgages section.

Stepped discount mortgage Read about the stepped discount mortgage in our mortgage basics section.

Structural Survey The most comprehensive form of inspection that can be undertaken by a chartered surveyor. In the case of properties with movement, lenders may require a structural engineer's report. This is a different type of survey carried out by a chartered building engineer and should not be confused with a structural survey.

Survey An inspection carried out for the benefit of the mortgage lender to make sure that the property forms a good security for a loan. This inspection and should not be relied upon on when deciding whether to purchase a property or not. Purchasers should be advised to obtain either a house or flat buyer's report or a full structural survey before proceeding with a purchase.

 

T

Term The mortgage term is the length of time before the mortgage loan must be repaid.

Term Assurance This is the simplest form of life assurance. The insured person is covered against death within a fixed period depending up on the payment of the premiums. If an insured person dies within the policy term the sum assured is paid out. If the insured person survives the term the premium has been spent and the insurance ends with nothing being paid to the policyholders.

Terminal Bonus This bonus is paid at the end of an endowment mortgage and will depend on the performance of the investment fund you are using to repay your mortgage.

Tied Agents An adviser or agent who may be part of a particular financial organisation or estate agent, or tied to them. Therefore they are not fully independent and can only offer mortgages from their partner business.

Top Up Loan A form of second mortgage, used to provide an overall loan in excess of the loan to value ratio allowed by the primary lender. Top up loans will invariably be charged at a higher rate than the first mortgage.

Tracker Mortgages A tracker mortgage follows the Bank Base Rate set by the Bank of England and is charged at a defined margin to this rate, for example Base Rate plus 2%. Learn more about tracker mortgages in our mortgage basics section.

Tracking A process of following the progress of a loan application. This information should be fed back from the lender or packager to the broker.

 

U

 

V

Valuation A basic survey that is carried out by a valuer or surveyor to establish the value of your property.

Valuation Fees A fee usually paid by the borrower for the lender's inspection of the property. This is normally paid on application. Learn more about valuation fees on our mortgage fees page.

Variable Rate Mortgages Read about variable rate mortgages in our mortgage basics section.

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