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A
Adverse Credit
Term used for customers with a poor credit history, if you think this might be you then checking with a credit reference agency can help you understand issues that may exist and can help your broker place your mortgage with a lender who will take on this type of cases
Affordability
This is the latest way of working out how much you can borrow. This is now dependant on how much income is left after all your outgoings such as other credit, any dependants and household bills. The monthly mortgage repayment is now then allowed to be a certain percentage of your free income, this is set by each lender according to their own criteria and they then use this to work out how much you can afford and therefore borrow
APR
An interest rate reflecting the cost of a mortgage as a yearly rate. This rate is usually to be higher than the initial charging rate on the mortgage, because it takes into any other costs such as initial set up costs and the SVR rate charged after the initial offer period. The APR is intended to let mortgage seekers compare different types of mortgages based on the annual cost for each loan, however most customers move their loan before the full term so they are useful but not an absolute guide to a deals value to you.
Arrangement Fee
This is a fee you pay to your Lender in return for providing you with a mortgage. Increasingly these are used to balance the rate charged and contribute to the overall profitability of the deal, this can be both good and bad depending on what deal you are looking at, also on the increase are deals where the set up fee is a percentage of the amount borrowed.
ASU
This insurance is designed to cover the borrowers mortgage payments in case of accident, sickness or involuntary unemployment. It will cover for a period while you recover/find a new role, however usually has limits on how long it pays out e.g. 12 months.
Auction
Public sale of a property to the highest bidder. The purchaser must immediately sign a binding contract and should make sure they are in a position to do this, e.g. have the mortgage in place.
Bankers Draft
Payment drawn from a bank that is in effect a guaranteed payment and looks like a cheque.
Base Rate Tracker
The rate charged is linked to the base rate and follows this as it changes, sometimes from the first of the next month due to bank IT system restraints. This allows someone who wants a variable rate loan to know exactly what rate they will have from month to month.
Booking Fee
A lender usually has a set amount of funds available at a certain rate, a booking fee is charged to earmark a portion of that for you. The fee is often non-refundable and charged up front.
Bridging Loan
Short term loan to so you can purchase a property prior to the sale of your current one that will release the funds that are required for the purchase. Get advice before doing this as it can turn into a very expensive solution, however can make a deal happen that could have broken down otherwise.
Brokers Fee
A fee charged by an intermediary or advisor for locating the most appropriate mortgage for the borrower.
Building Society
Mutual organisation specialising in lending money to individuals to purchase or remortgage residential properties. Most of this money comes from individual saving members who are paid interest. A proportion of building society funds is also raised on the commercial money markets. Since the early eighties there has been a progressive relaxation of the rules governing the allowable sources of building society funds for lending to allow societies to compete more effectively with banks and there is now no restrictions as between the allowable proportions of ‘retail’ and ‘wholesale funding’. It is this and an increased reliance on the wholesale markets that has caused many societies issues as part of the credit crunch.
Buy-to-Let
This is a mortgage designed for people who wish to purchase a property to rent out to others. The ability to repay this type of mortgage is normally based on the projected rental income (which is what the valuation covers) from the property instead of the affordability of the borrowers.
Capital and Interest
Your monthly payments are partly to pay the interest on the amount you borrowed and partly to pay the outstanding mortgage and ongoing costs involved in a mortgage. This way at the term of the mortgage you have the peace of mind to know the mortgage is entirely cleared.
Capped Rate
An interest rate charged on a mortgage where there is a guarantee from the lender that the rate will not exceed a certain amount usually for a set period of of up to 5 years at the start of the mortgage but which will reduce if the standard variable rate falls below the capped rate.
Cashback
A payment you receive when you take out a mortgage from the lender as an incentive to make the deal more attractive.
CCJ (County Court Judgement)
A decision reached in the County Court which can be for not paying debts. If you pay off the debt, the CCJ is satisfied and a note is put on your records to say this. These have a major impact on your ability to get the best rates even once settled.
Charge
Any right or interest, especially a mortgage, to which a freehold or leasehold property may be held. This prevents you from selling the property and doing a runner with the cash not paying the loan back, not that you would do that!
Charge Certificate
The Land Registry issues this to the lender regarding a property with registered title. It has 3 parts, the charges register, the property register and the proprietorship register.
CML
Council of Mortgage Lenders
Completion
When you become the owner of your new house, you get the keys and start living in B&Q.
Consolidation
This is a means to repay debts such as credit cards and personal loans by rolling these up into a new mortgage to benefit lower monthly payments although the total amount repaid may end up being more.
Contract
Legally binding agreement for sale. The buyer signs theirs, the seller theirs. You then exchange(qv) these and set a date for completion(qv) at this point you are committed to the transaction.
Conveyancing
The part done by your solicitor to get the legal parts involved in property purchases done.
Credit Score
Each lender does this differently but in the end it is a way in which they decide if you fit the profile of customers that they want to lend to.
Credit Search
A check the lender makes with a company such as Experian to find out whether you have any CCJs or a bad credit record.
Deposit
The amount of money you put towards buying your property.
Disbursements
A solicitors expenses e.g. land registry fees, searches.
Discount Rate
An interest rate which is set at a set margin below a variable rate, mostly the SVR(qv) usually. Used as an incentive to attract potential new borrowers.
Early Redemption Charges
This a fee charged by a lender if you pay off part or all of your mortgage before the agreed date, or you move your mortgage to another lender. Some lenders allow you to pay up to 10% of the mortgage amount each year without a penalty.
Equity
The difference between the value of your home and the mortgage value. See also negative equity and LTV.
Equity release
You take a larger mortgage to fund a project or purchase such as home improvements, cars, holidays and so on.
Exchange of Contracts
This is the point at which you and the person selling the property sign and swap identical contracts that show the price and which fixtures and fittings are being sold, as well as the date on which everything is to be completed. When contracts are signed, everything becomes legally binding and if you or the seller pull out before completion you or they will have to pay compensation.
Fixed Rate
The interest charged on a mortgage is set for an agreed period.
Fixtures
Any item that is attached to a property and so legally is part of the property.
Freehold
This is about the land that your home is on, if is included in the deeds then it is a freehold property.
Gazumping
This is when you are buying a property and then the seller accepts a higher bid from someone else dropping you at whatever stage you are at. The opposite of guzumping is gazundering where you force the price down because there is no competition.
Ground rent
An amount that a leaseholder (on leasehold properties) has to pay the freeholder every year.
Guarantor
This is the person liable for the mortgage if a borrower fails to maintain their mortgage payments.
Home Buyers Report
This is a property survey which lies between a mortgage valuation and a full survey. It is a multi-page report which gives the buyer some piece of mind about the property they are purchasing.
Income Multiples/Multipliers
A previous way of working out how much you could borrow. It was dependant on how many times your annual gross salary and could reach 3.5, 4 or even nearly 5 times you income. This has largely been replaced by affordability(qv).
Income reference
This is confirmation from your employer that you earn the amount you stated when you made your mortgage application. If you are self employed, the lender may require confirmation from your accountant.
Interest Only Mortgage
With this type of mortgage, the borrower is only required to pay interest on the amount borrowed during the mortgage term. It is the borrowers responsibility to ensure that enough funds will exist (either through an investment policy or other means) to repay the mortgage at the end of the term.
Intermediary
A mortgage broker or advisor who sources and recommends the most appropriate mortgage and arranges the mortgage for the borrowers.
Land Registry Fee
This is paid to the Land Registry to register ownership of an area of land.
Leasehold
If you buy a leasehold property, you own the property for a set number of years but not the land on which the property is built, although the leases are often available to be renewed.
Local Authority Search
A check carried out by the your solicitor to check that there are no proposed developments in the area of the property such as roads, railways or other buildings, also included are details of the planning permission for the property and whether there are any enforcement notices on the property.
LTV (Loan to Value)
This refers to the size of the mortgage as a percentage of the value of the property i.e. A £45,000 mortgage on a house valued at £50,000 would mean that the LTV would be 90%.
MIG (Mortgage Indemnity Guarantee)
This is insurance that covers the lender in case your property is repossessed and the lender cannot get back their money. Although this insurance protects the lender, you have to foot the bill. This is normally for loans of over 75% LTV and most companies only charge this for loans that are only charged from 90%.
Mortgage
A loan to buy a property with the property being the security.
Mortgagee
The Lender.
Mortgagor
The Borrower.
Negative Equity
This is where the money you owe on the mortgage is greater than the value of your property.
Non-Status
This is where a lender may not require income details from you or may accept some previous poor credit history i.e. CCJs or previous mortgage arrears.
Overpayment
This is where payments are greater than the normal monthly installments. This is where you can
Payment Holiday
A period during which the borrower makes no mortgage payments. Normally only available to borrowers with a flexible mortgage who have previously overpaid their monthly repayments.
PEP
Personal Equity Plan. This is a tax free way to own shares or unit trusts. You can also use PEPs as a way to repay an interest only mortgage with some lenders.
Personal Pension
This is a structured savings and investment plan to provide for your financial needs after you retire. You can use some or all of the proceed from a personal pension to pay of an interest only mortgage.
Portability
A term used to describe a mortgage that can be transferred between properties when you move house.
Redemption
The process of paying off your mortgage either when moving house, remortgaging or at the end of the mortgage term.
Redemption Penalties
Penalties levied by the lender when a borrower pays off the mortgage before the end of the agreed redemption period. These are often charged on fixed, capped or discounted rate mortgages.
Remittance Fee
A charge made by the lender for sending mortgage funds to your solicitor just before the purchase is completed.
Remortgage
The process of paying off one mortgage with the proceeds from a new mortgage using the same property as security.
Repayment
Your monthly payments are partly to repay the amount you borrowed and partly to pay the interest on the outstanding mortgage. This is also known as a capital and interest mortgage.
Repossession
The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.
Right to Buy
A tenant in a council owned property may purchase the property at a discount depending on length of their tenancy.
Sealing Fee
This is a charge made by lenders when you repay a mortgage.
Searches
These are checks carried out during the conveyancing process. These checks are made with local authorities and other official organisations to check planning proposals and other matters that may affect the value of the property and it’s saleability in the future before making a loan.
Self Certified
This style of mortgage no longer exists except for certain 2nd charges. Normally when a borrower applies for a mortgage he or she will be asked to provide pay slips or company accounts to prove their income. If it is difficult or extremely inconvenient for you to provide this documentation, you can choose to self-certify your income. This involves signing a declaration which states your income sources and amounts. Lenders will charge you higher rates than average and offer you a more limited range of mortgages if you choose to self-certify your income, so it’s not a good idea to self-certify just to avoid some paperwork.
Shared Equity
A scheme operated by a developer where the developer retains a percentage equity of around 10% in the property. Thus the developer holds a second charge over the property. The 10% owing may be interest free or may incur interest and be added to the total amount owing on the property.
Shared Ownership
A scheme operated by a housing association where a person owns part of the property and pays a mortgage on this, while the housing association owns the rest of the property and the person pays rent on this.
Stamp Duty
This is a tax payable on the purchase of a property by the purchaser. For properties with a purchase price of up to £125,000, no stamp duty is charged. For properties between £125,000 and £250,000, 1% stamp duty is payable on the purchase price. For properties between £250,000 and £500,000 it is 3% and for properties over £500,000 it is 4%.
Structural survey
This is the most wide ranging check of the outside and inside of a property. This is carried out by professional surveyor and it should pick up all but the most hidden faults.
SVR
Standard Variable Rate. This is the interest rate that the lender charges. The rate goes up and down and your repayments are adjusted accordingly.
Term
The period of years over which you take the mortgage and when you have to repay it.
Term Assurance
This is an insurance policy designed to repay the mortgage on the death of the insured person. Level Term Assurance covers a principal sum throughout the policy term and pays out the full amount on death. Reducing Term Assurance is designed to repay the balance outstanding on a repayment type mortgage upon death. Term Assurance may also pay out early on the diagnosis of a terminal illness.
Tie-in period
As a condition of a special mortgage deal, you may have to agree to stay with the lender for a period of months or years after the deal has ended. If you move your mortgage elsewhere during this period, you may have to pay an early redemption charge.
Title Deeds
Documents that show proof of who owns the freehold and leasehold property.
Transfer deed
This is a document that, once you sign it, transfers the ownership of a property to you.
Unencumbered
This is where the property is owned outright and no mortgages or loans are secured against it.
Valuation
A simple check of the property in order to find out how much it is worth and whether it is suitable to lend a mortgage on.
Valuation Fee
A fee paid by a borrower to cover the cost of the lender checking that the property is suitable security for the mortgage loan.
Variable Rate
The interest rate the lender charges. it goes up and down and your repayments change accordingly.
Vendor
The person selling the property.
