Advance
The mortgage loan.
APR
Annual Percentage Rate. This is designed to be a way of comparing the cost of credit. It takes into account up-front and ongoing costs associated with taking out a mortgage. Different lenders work in different ways.
Arrangement fee
This is normally charged by the lenders for arranging a fixed, discounted, capped or cash-back mortgage.
Arrears
Missed payments on a mortgage accouint that are 30 days overdue. Sometimes an arrear can be registered against you if the missed payment goes into the next calander month.
ASU
Accident, Sickness and Unemployment (also referred to as MPI - Mortgage Payment Insurance). This is an insurance policy designed to provide a regular income to pay the mortgage, should the borrower become unemployed or be unable to work due to an accident or sickness. Usually only designed to pay out for 12 or 24 months.
Bank of England base rate
The rate at which the Bank of England lends money. If this is altered in an attempt to control the overall economy, then the lenders will normally follow its movement and alter their own Standard Variable Rate.
Booking Fee
A fee paid for the arrangement of a mortgage.
Brokers Fee
A fee charged by an intermediary or adviser for locating the most appropriate mortgage for the borrower.
BSA
The Building Societies Association. This is the trade organisation of the Building Societies.
Buy-to-Let
This is a mortgage designed for people who wish to purchase a property to rent to others. The ability to repay this type of mortgage is often based on the projected rental income from the property as opposed to the personal income of the borrowers. These types of mortgages are not regulated by the Financial Services Authority.
Capital and interest
Your monthly payments to your lender are partly to pay the interest you owe, and partly to pay back some of the outstanding mortgage debt. Also known as a repayment mortgage.
Capital Growth
Increase in the value of an investment.
Capped rate
An interest rate that is set for a period of months or years, and is applied only if the standard variable rate exceeds it.
Cash-back
A lump sum of money given by the lender when you take out their mortgage. It varies depending on the individual scheme, can be quoted as a set figure or as a percentage of the overall mortgage, and can, in some cases, be used to fund the deposit.
County Court Judgement - CCJ
County Court Judgement. A decision made in the County Court, usually for the non-payment of a debt and is registered on your credit file. Once the debt is paid ("satisfied"), and a satisfaction certificate obtained, it is also noted on your credit file.
Completion Date
This is the date that ownership of the property passes from the seller to the buyer.The seller and buyer should discuss dates between them and then notify their respective solicitors who will try to fit in with the suggested date. If there are unforeseen delays, for example, if the buyer does not receive a search or the correct mortgage offer in time, or the 'cash buyer' turns out to have a related sale then the completion date may have to be revised. For this reason you should not make any firm commitments such as giving notice on a job, arranging removals or making holiday bookings without first ensuring that you are fully advised of the situation for all parties.Only when contracts are exchanged and a completion date is fixed can you be virtually guaranteed that the completion date will be met. It is notr essential for you to be present on the completion date but if you are going to be away, then you should ensure that somebody, either a member of your family or your solicitor can act for you through a Power of Attorney.
Contracts
This is the agreement between the buyer and the seller. It sets out the main terms of what has been agreed such as the property, the price and the names of the parties. It also deals with the process if something goes wrong. rather than making the buyer and the seller meet to sign the same contract, the seller's solicitor draws up two copies of the same contract, and each party signs their own copy. When both parties are ready to legally commit, the two contarcts are exchanged.
Conveyancing
The process of transferring ownership of the property.
Credit Search
This is a search your lender will carry out to determine your credit history - whether you have any County Court Judgements, defaults or outstanding credit bills.
Credit scoring
A process used by some, but not all, lenders to determine whether you are a good risk to offer a mortgage too.
Critical illness policy
An insurance policy taken out by a borrower designed to pay them a lump sum of money, at least equal to the mortgage amount, should they be unfortunate enough to be diagnosed as suffering from any one of a number of certain medical conditions after the mortgage is in place. Unlike life assurance, it pays out on survival of the illness. It means the mortgage can be cleared so that there is no fear of repossession.
Debt consolidation
This is a means to repay high interest debts (such as credit cards and personal loans) by incorporating them into a new mortgage to benefit from lower interest rates and lower monthly payments.
Deed
This is the legal document detailing title ownership of the property.
Default
A missed payment on a credit agreement
Deposit
This causes a lot of confusion. When most people talk about the deposit they mean the part of the purchase price that the buyer is putting down him/herself (i.e usually the difference between the amount of the mortgage and the purchase price). When Solicitors talk about the deposit they are talking about the money that is handed over to the seller's solicitor upon exchange of contracts. This might be the same amount, but it might not.On exchange of contracts the seller can insist on receiving from the buyer a 10% deposit of the purchase price. However as many people are not contributing as much as 10% as a cash amount to the purchase, reduced deposits are often agreed. You should be aware, however, that if you are a buyer and you pay a reduced deposit then fail to complete the purchase through no fault of the seller, you will, under the terms of the contract, be required to make the deposit up to the full 10%. You may also have to pay compensation to the seller if the seller loses out through your failure to complete.
Disbursements
The solicitor's expenses, which you have to pay on top of the fee, for such things as, land registry, searches, faxes, etc.
Discount Rate
A percentage off the lender's Standard Variable Rate and set for a specific amount of time, i.e. 1% off for three years.
Early repayment charges
A financial penalty for repaying part or all of the mortgage before an agreed date. It is often applied to mortgage schemes that are either fixed, capped or cash-back types. Quite simply, the lender agrees to offer what it believes is an exceptional package of benefits, providing the borrower agrees to keep the mortgage with them for an agreed length of time. Some lenders, and some scheme types, have no early redemption penalties at all. These are definitely worth looking into.
Endowment
A savings plan with built-in life assurance that can be used as the repayment vehicle on an "interest-only" mortgage. Some policy holders have received notification that their policy may not mature with sufficient value, and as a result either switch to a repayment mortgage, or part endowment and part repayment. Some policy holders also cash their policy in early, unaware that they can get more for it by selling the policy to a third party who then continue to pay the premiums. The life offices do not appear to be notifying their policy holders of this option.
Equity
The amount of value in property over and above the amount of borrowing.
Exchange of contracts
This is the point at which the respective solicitors swap contracts agreeing the price, fixtures and fittings, and completion date for the move. Everything is now legally binding. The buyer is now responsible for the new properties buildings insurance, and, if either the buyer or seller withdraws, compensation will have to be paid.
Extended tie-Ins
This is where the early redemption penalties apply even after the scheme date has finished. It means, in effect, that the lender, in exchange for what it believes is an exceptional scheme, requires the borrower to keep the mortgage with them after the scheme has ended, for a set period of time, i.e. "fixed rate for two years with an early redemption period of five years." Extended tie-ins are to be avoided if at all possible.
Fixed rate
The interest rate is set for an agreed period of time.
Flexible mortgages
A relatively new breed of mortgage types that will allow flexibility of repayments. Typically, a borrower will be allowed to overpay, underpay, take payment holidays, and in some cases link their current, savings and deposit accounts to the mortgage account, so that the positive balances offset the negative balances. Some lenders will also include daily interest calculations so that any overpayments have an immediate effect on the interest charged.
Freehold
This is where you own the property and the land that it is on.
Gazumping
This is where the seller accepts an offer and agrees the sale only to accept a bigger offer before exchange of contracts has taken place.
Guarantor
This is the person liable for the repayment of a mortgage if a borrower fails to maintain their mortgage payments. This is usually a parent or close family relative.
Homebuyers report
A Homebuyers Report, or a homebuyers survey, is a surveyors assessment of the state of repair and condition of the property. It includes all parts that are readily accessible, including the roof space, if possible, but excludes underfloor areas. The concise report will summarise the findings and make recommendations for further investigations or remedial work if required. Because the surveyor is in direct contact with you, you can discuss any issues or concerns directly.
Income multipliers
Determines, in most cases but not always, how much you can borrow. The industry average is three times the gross salary of the first applicant plus one times the second, or two-and-a-half times the joint salaries, if this produces more.
Income reference
The lenders will usually write for an income statement from your employer.
ISA
A savings plan designed to grow tax-free and can be used to repay an "interest only" mortgage.
Leasehold
This is where you own the property for a number of years and then it reverts to the freeholder.
Licensed conveyancer
An alternative to using a solicitor. They specialise in property ownership transfer.
Life assurance
An insurance policy taken out by most borrowers to, at least, clear the outstanding mortgage debt should they die. It means their dependants/relatives/partner/ spouse can now inherit the property with no mortgage on it. Click here for a quote.
LTV
Loan To Value. This refers to the size of the mortgage in relation to the value of the property. For instance a mortgage of £75,000 on a property of £100,000 value is said to be 75% LTV.
MIG
Mortgage Indemnity Guarantee. This insurance covers the lender if your property gets repossessed and the lender does not get all its money back. It protects the lender, not you. You would still be responsible for reimbursing the insurance company if they have to pay out to the lender. It is usually you who has to pay the one-off premium as part of the lender's conditions, but most lenders allow it to be added to the overall mortgage debt, and is collected when the mortgage is redeemed in the future. Recently the threshold for triggering a MIG premium has been raised from 75% LTV to 90% LTV. This means that anyone with at least a 10% deposit will probably escape it.
Negative equity
Where the property has a value which is lower than all the loans secured against it.
Non status
A mortgage arranged under Non Status terms means that the lender is relaxing the requirement for proof of income, or is accepting adverse financial circumstances i.e. CCJ's. This usually translates into higher applied interest rates.
PEP Personal Equity Plan
A savings plan designed to build up tax-free savings which can be used to repay an "interest-only" mortgage.
Personal pension
This is a structured savings and investment plan designed to provide you with an income in retirement. Because you can take some of the plan as cash it could be used to repay an interest-only mortgage. Beware, unless you can somehow compensate for the reduced pension fund that this action will obviously result in, you will have less income in retirement.
Remortgage
A new mortgage with a different lender even though you are not moving home. It can be of the same size, bigger or smaller.ANYONE ON A STANDARD VARIABLE RATE MORTGAGE SHOULD, AT LEAST, INVESTIGATE THIS. IT CAN SAVE YOU A SIGNIFICANT AMOUNT OF MONEY.
Repayment mortgage
See Capital and Interest.
Sealing fee / Deed release fee
A fee paid to your "old" lender when the mortgage account is closed.
Searches
These are checks carried out during the Conveyancing process to determine any planning proposals or other matters which might affect the future saleability of the property. Another search is carried out after exchange of contracts to check that the borrower is not bankrupt.
Self certification
This is a special arrangement whereby the lender relies on the borrower to certify their own income, and does not seek to confirm this by reference to the employer, (or the accounts, in the case of a self-employed person).
Standard variable rate
The interest rate applied to the mortgage account when no other overriding scheme is in force. It fluctuates and follows the Bank of England base rate, but staying a margin above. SEE "REMORTGAGE" ABOVE.
Structural survey
This is based on a detailed inspection of the property and is a comprehensive report on the general condition and state of repair. It is particularly advisable for older or unusual properties, or where you want to assess the possibility of making building alterations at a later date. The scope of the report is discussed and agreed with the surveyor before the inspection, and you can discuss any issues afterwards.
Term
The period of years over which you take the mortgage.
Title deeds
Documents that show proof of ownership.
Tracker mortgage
This where a lender offers a mortgage at an interest rate that is tied into, but a percentage above, the Bank of England base rate, as opposed to a percentage below their own individual standard variable rate. This means the change in interest rate is immediate if the Bank of England alters its rate. With a discount rate, some lenders have been criticised for delaying or not passing on any drop in the interest rate, but applying any increase immediately.
Transfer deed
The document that transfers the ownership.
Valuation report
Lenders require a standard valuation to be undertaken on the property before issuing the mortgage offer. This is to protect the lenders interest, not the borrowers. If the lenders valuation report reveals further reports or work to be undertaken, any further costs will be payable by the borrower, should the borrower choose to proceed. The lender will compare the valuation figure with the agreed buying price, and use whichever is lower when deciding on how much to lend.
Vendor
The seller.