Jargon Buster


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Accident, Sickness and Unemployment Insurance (ASU)

An insurance policy designed to help you in the event of accident, sickness or unemployment. It will typically pay a percentage of your normal monthly mortgage payment for a specified period. This type of cover does not apply to voluntary redundancy or dismissal due to misconduct, or if your injuries are self-inflicted. You will need to look at terms and conditions of each policy to compare on a fair analysis.

Actuary

A Actuary is a professional that deals with calculations and percentages. In relation to your mortgage, an actuary will calculate the amounts payable for life assurance and other insurance policies you may need.

Added to Loan

Mortgages have a number of costs relating to setting up and arranging your mortgage. Some of these fees include administration fees or indemnity fees, solicitors fees, valuation fess . When these are added to the amount that you borrow it is known as (added to loan).

Adjustment Date

This is the date on which the interest rate changes.

Administration Fee

This is a charge levied by the lender to cover the costs of processing your mortgage application. If you do not complete your application, the fee may not be refunded. The administration fee is also sometimes known as an application fee.

Adverse Credit

This term is used to apply to a borrower that has past problems with credit, for instance late payment, bankruptcy or County Court Judgement (CCJ). This is often related to the sub prime market.

Agreement in Principle

A lender agrees to lend mortgage monies conditional upon the verification of a borrower s details. An agreement in principal is therefore obtained before formal underwriting commences.

Amortisation

The reduction in the amount of your mortgage during its term as you make regular payments to cover the principal and interest.

Amortisation Term

The amount of time, in months, required to pay off your mortgage loan.

Annual Percentage Rate (APR)

The APR is a compound interest rate figure used to compare different mortgages. Defined by law, it includes repayments on the loan plus any mortgage related fees such as booking, arrangement or basic valuation fees. The APR shows the true cost of borrowing over the entire term and should appear on all mortgage illustrations.

Annualised Payment Scheme

Under some variable rate mortgages, to make it easier for the borrower to budget when repayments will vary with any rate change, the lender may fix the mortgage payment for 12 months. At the end of the year, the borrower's payments will be reviewed to see if they have under or over-paid, and a new mortgage payment is set for the next 12 months. This is sometimes known as a budget plan .

Applicant

The person - or party - applying for a mortgage.

Application

The process of applying for a mortgage, including the provision of the personal and financial details of the applicant.

Appraised Value

This is the value of a property as estimated by a surveyor.

Appreciation

The increase in the value of a property as a result of changes in market conditions.

Arbitration

Refers to the involvement of an independent third party to resolve a dispute between two other parties (rather than resort to legal action).

Arrangement Fee

This is a charge levied by the lender to cover the costs of administering and reserving the funds for certain types of mortgage. May be paid separately or added to the loan amount.

Arrears

The amount, usually in either months or pounds, that your mortgage payments have fallen behind schedule.

Asset

Any form of property owned by a person, including currency, stocks, and enforceable claims against others.

Assignment

The transfer of an asset, or a mortgage, from one owner to another.

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Balance Sheet

A statement of financial accounts for a certain date, including, for instance, assets, liabilities and equity.

Bankrupt

An individual person, company, corporation whose assets are administered by a court-appointed trustee for the purposes of redistribution to the debtor's creditors.

Bankruptcy

The legal process by which a debtor who owes more than their assets has these assets transferred to a court-appointed administrator.

Base Rate

The rate of interest set by the Bank of England.

Basic Earned Income

Your basic salary, without any bonuses, overtime, or shift allowances before tax.

Beneficiary

A person entitled to benefit, example, under the terms of a trust or a will.

Bond

A fixed length agreement to pay interest on a debt, for instance a Treasury Bond.

Booking Fee

A charge levied for the arrangement of a mortgage and which usually guarantees funds or guarantees a rate for fixed or capped rate mortgages, and/or processing an application on your behalf

Breach

A violation of any legal obligation, for instance breach of warranty or breach of trust.

Bridge Loan

A short-term loan commonly used to cover - or 'bridge' - the overlap between the purchase of a new property and the sale of an old one.

Broker

An individual or company which brings borrowers and lenders together for the purpose of loan.

Broker's Fee

A fee charged by a broker.

Building regulations

 Rules of a legal or statutory nature by which local councils control the manner and quality of buildings. They are designed to ensure public safety, health and minimum acceptable standards of construction.

Building Society

Institutions operating in a similar fashion to banks. That is, they take deposits and provide loans. Customers are ‘members’.

Buildings Insurance

An insurance policy which pays the cost of repair or rebuilding in the event your property is damaged or destroyed. Most mortgage lenders will require you to take out buildings insurance as a condition of their loan.

Buy to Let

A particular type of mortgage designed for borrowers who are purchasing a property as an investment intend to let the property out.

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Cap

The condition in a capped rate mortgage that sets a maximum interest rate for a specified period.

Cap and Collar

A cap is a maximum rate of interest that can be charged for a specified period, while a collar is a minimum rate of interest that can be charged for a specified period.

Capital

The amount of money either put into buying a property or the deposit placed on a property. Also known as equity.

Capital gains

The monetary (financial) gain obtained when you sell an asset for more than you paid for it.

Capital gain tax

A federal tax on the monetary gain made on the sale of an asset (excluding your own residence) bought and sold after September 1985.

Capital Improvement

Any improvement, such as new structures or components, that permanently increases the value of the property.

Capped Rate

A capped rate mortgage sets a maximum rate of interest that the lender can charge, but only for a specified period.

Cash Back

An amount of money paid to the borrower by the lender at the end of a mortgage. A 'Cash Back mortgage' is one in which an amount of money is paid by the lender to the borrower at the start of the mortgage, typically to help with the costs of moving home.

Cash Back Remortgage

A remortgage that is structured so that the borrower receives a sum of money at the start of the new term.

Clear Title

 

A legal term that refers to the clear ownership of a property.

Collateral

An asset, such as a car or a home, which is used to guarantee the repayment of a loan. Should the borrower fail to repay the loan under the terms of the original contract, the asset may be seized by the lender.

Commission

A payment received by an intermediary from a lender or insurer for introducing business to them.

Commitments

Charges, such as car loan payments, family maintenance and mortgage payments, which a person has contracted to pay.

Common Areas

Sections of land or buildings, such as gardens, hallways, recreational facilities and parking areas, where more than one resident shares access.

Comparative Search

A search that looks at the actual sale values of similar properties in the same area as your property. This search is normally carried out by a surveyor, and should give an indicative sale price for a property.

Completion

The completion date is the date on which your solicitor forwards the money from your lender to the solicitor of the vendor. It is the date that you become the legal owner of your new property.

Compound Interest

An interest payment on both capital and on previously accrued inte£rest. For example, £100 borrowed for 5 years at 5% p.a. would become £105 after 1 year, £110.25 after 2 years, £?115.76 after 3 years, and so on.

Compounding

The process of adding interest to both the capital borrowed and any previously accrued interest.

Compulsory Insurance

Insurance that is required by a lender as a precondition of issuing a mortgage. The insurance will typically cover the building and contents, and some mortgage providers may insist that the insurance policy also be taken out with them. Also known as Conditional Insurance

Concrete Construction

A property that has been built using conventional materials and practices. Some lenders may refuse to lend, or charge higher rates of interest, on properties built using unconventional materials or techniques.

Conditional Insurance

See Compulsory Insurance

Contents Insurance

Insurance that covers the contents of your home, including electrical goods, carpets, furniture and curtains.

 

Contract

A legally binding agreement, either oral or written, to do or not do something.

 

Converted Flat

A flat or apartment that has been created by the subdivision of a larger property.

 

Conveyancing

The legal procedure surrounding the transfer of ownership of a property between buyer and seller, typically carried out by a solicitor or licenced conveyancer.

 

Conveyancing Fee

The charge made by a solicitor or conveyancer for undertaking the legal procedures necessary for the transfer of ownership of a property.

 

Corporate Relocation

The process by which a company relocates an employee to another district as part of the employer's normal course of business.

 

County Court Judgment (CCJ)

A ruling for bad debt issued by a County Court or higher court. The judgment will be recorded and the record will show up during any credit checks and may count against you in your mortgage application.

 

Covenant

A clause in a mortgage contract or in a contract for the sale of a property that obligates or otherwise restricts one of the parties (buyer/lender, or buyer/seller). The contract should detail any penalties, including repossession, which will be incurred if the covenant is broken.

 

Cover note

A guarantee of temporary property insurance before the implementation of a formal policy.

 

Credit

Borrowed money or other finance (eg. Hire purchase) to be paid back under an arrangement with a lender.

 

Credit Check

The procedure by which a check is made on the credit history of a mortgage applicant, usually conducted by one of the large dedicated credit check agencies on behalf of the prospective lender. The check will include items such as credit card repayments, outstanding debts, arrears, and County Court Judgments.

 

Credit History

A history of an individual's open and fully repaid debts. Checking a credit history helps a lender to assess the likelihood that a prospective borrower will maintain their mortgage repayments.

 

Credit Rating

An assessment of a person's likelihood of keeping up - or otherwise - on the repayments on their loan. A credit rating is usually based on a person's credit history.

 

Credit Reference Agency

A company that collects and stores financial and public records dealing with the payment history of a prospective borrower. Most lenders will employ a Credit Reference Agency to check your payment records as part of their assessment of your application.

 

Credit Report

A report prepared by a Credit Reference Agency and which details the credit history of an individual. The credit report will be used by a lender to help assess the applications of prospective borrowers.

 

Credit Scoring

The procedure by which lenders assess the likely ability of an applicant to meet and maintain their mortgage repayments.

 

Critical Illness Insurance

Also know as Critical Illness Cover  (CIC). An insurance policy, often combined with life insurance, which will pay out a lump sum following confirmed diagnosis of a critical illness as specified under the policy, such as cancer or heart attack. The number of critical illness definitions varies depending upon the insurer.

 

Current Account Mortgage

A mortgage that also offers the same facilities, for instance a cheque book, as a bank current account. Combined with a fully flexible mortgage, this type of mortgage allows over- and under-payments as well as payment holidays.

 

Customer Specific Illustration (CSI)

An illustration for general insurance that when combined with a key features document (KFD) constitutes a key facts illustration (KFI). Please see entries under KFD and KFI.

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Daily Interest Mortgages

A mortgage in which interest is calculated daily, as opposed to monthly or annually.

 

Debt

An amount owed by one person or party to another.

 

Debt Consolidation

A procedure by which a number of loans, each with individual interest rates, are collected together in a single debt and at the lowest of the individual interest rates. For instance, if you had a ?2000 hire purchase debt at an interest rate of 10%, and a ?10000 loan at an interest rate of 5%, consolidating the debt would leave you with a total debt of ?12000 at an interest rate of 5%.

 

Deed

The legal document that sets out your ownership or title to a property.

 

Deeds Release Fee

A fee charged by a lender, usually at the end of a mortgage term, to cover the administration involved in returning the deeds (property ownership documents) to your solicitor. Also known as discharge fee .

 

Default

Failure to abide by the terms of a mortgage or loan agreement. A failure to make loan payments (defaulting on the loan) may result in the mortgage holder taking legal action to repossess the mortgaged property.

 

Deferred Interest Mortgage

A mortgage in which some or all of the interest is not paid for a specified period, usually at the start of the term.

 

Deflation

A situation in which prices are falling. (The opposite situation to inflation)

 

Deposit

In relation to property, deposit usually refers to the amount of money paid by the borrower as part of the purchase. Typically this will be about 10%, with the rest of the purchase funded by a mortgage.

 

Depreciation

The decline or reduction in the value of a property caused by changes in market conditions. (The opposite of appreciation)

 

Direct debit

Regular electronic debiting of funds from a customer’s nominated bank/building society cheque or savings statement account (or some credit union accounts).

 

Disbursements

Miscellaneous fees and charges incurred during the conveyancing process, including search fees and charges paid to Government authorities.

 

Discharge Fee

The fee charged by lenders at the end of a mortgage term to cover the administrative costs of transferring the property ownership documents to the borrower. Also know as deeds release fee.

 

Discharged Bankrupt

A bankrupt can be relieved of the status by a court of residual liability, usually after a certain number of years. The former bankrupt assumes the status of 'discharged bankrupt' and is able to apply for credit again.

 

Discounted Period

With a discounted rate mortgage, the discounted period refers to the length of time that the discounted rate is levied. Typically this will be three years.

 

Discounted Rate

A lower level interest rate, usually levied for a specified period, than the standard variable rate. The discounted rate typically applies at the start of the term of a discounted rate mortgage.

 

Draw Down Facility

To access available loan funds, usually referring to a staged loan for property constructions, or lines of credit where the limit is set and the borrower can use the funds as required.

 

Duty (or Stamp Duty)

A State Government tax on financial transactions. For the purchase of real estate, it is calculated according to the property value. It also applies to the amount of the mortgage

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Early Repayment Charge (ERC)

A charge levied by the lender as a penalty if a mortgage is paid off within a specified period.

 

Easement

A Right of Way that allows persons other than the owner to access a property.

 

Encumbrance

Anything that has a limiting or detrimental affect on the ownership of a property, including, for instance, mortgages, leases, rights of way and easements.

 

Endowment

A financial investment product or vehicle that a borrower pays into during the course of a mortgage and the proceeds of which are used to pay off the mortgage loan at the end of its term.

 

Endowment Mortgage

A mortgage in which the borrower only repays the interest on the loan for the term of the mortgage, then repays the loan amount at the end of the term. The borrower pays into an endowment product during the course of the mortgage and then uses the proceeds to pay off the original loan at the end of the term. IT IS STRONGLY ADVISED THAT YOU TAKE INDEPENDENT FINANCIAL ADVICE BEFORE TAKING OUT ANY ENDOWMENT POLICY.

 

Equity

A home owner’s financial interest in a property. Equity is the difference between the price for which a home could be sold and the amount still owed on its mortgage. Equity usually increases as the outstanding principal of the mortgage is reduced through regular payments. Market values and improvements to the property also affect equity.

 

Equity Release

A mortgage taken out on a home that is already fully owned, typically in order to make use of the capital tied up in it.

 

Estate

A legal term referring to the sum total of all the property and personal assets owned by an individual at the time of their death.

 

Eviction

The legal expulsion of an occupant from a property.

 

Examination of Title

The report that details the title of a property, usually taken from the public records or an abstract of the title.

 

Excess Payments

Mortgage repayments that are over and above the standard monthly rate. Some mortgage products impose charges for excess payment, and/or set limits to the size and frequency of such payments.

 

Exchange of Contracts (excludes Scotland)

The stage in the purchase process at which the buyer and seller confirm legally binding commitments to the sale, and agree on the terms and conditions of that sale.

 

Existing Liabilities

Your financial outgoings, such as loan repayments, regular fees, or child maintenance, before taking out a mortgage. Borrowers are obliged to disclose all such outgoings as part of the mortgage application process.

 

Expatriate

A person working in a country that is neither their country of birth nor nationality.

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Fair Market Value

The amount paid for a property in a transaction in which neither the buyer nor the seller is being forced into the contract. Typically this value will be set by looking at the sale prices of similar properties in the same area.

 

Fee Simple (Scotland only)

A term used in Scotland to refer to property where the owner has the right to decide who inherits the property.

 

Fees Free

A term typically used in connection with a remortgage where the new lender pays for the cost of a mortgage valuation and legal costs.

 

Feuhold

A term used in Scotland to refer to the ownership of both a property and the land on which it is built. The closest equivalent in England and Wales is Freehold.

 

Financial Ombudsman Service (FOS)

An organisation established by law to help settle individual disputes between consumers and financial firms.

 

Financial Services Authority (FSA)

The regulator of the UK s financial services industry. The FSA s jurisdiction now covers mortgages (except for some buy-to-let mortgages) and general insurance.

 

First Charge

A legal right under which the holder (of First Charge) has first call on the property in the event that the borrower defaults on repayments.

 

First Mortgage

A mortgage that is the primary lien or first claim against a property.

 

First Time Buyer (FTB)

A purchaser who is buying a property for the first time. Typically a lender will offer more attractive deals for first time buyers. Also known as First Time Purchaser (FTP).

 

Fittings

Items not intended to be removed from a property on sale (eg. fixed carpets, lights, curtains, stoves).

 

Fixed Rate Mortgage

A mortgage under which the rate of interest has been fixed for a specified period of time.

 

Flat over Shop

A flat or apartment that is located above a retail property. Lenders may view such a property as a higher risk category and adjust their mortgage offer accordingly.

 

Flexible Drawdown

A facility written into a mortgage that allows a borrower to access additional funds.

 

Flexible Mortgage

A mortgage that allows the borrower to make over- or under payments, or take a payment holiday.

 

Foreign Currency Mortgage

A mortgage that is taken out in a currency other than sterling. Typically used by people who are paid in foreign currency, this type of mortgage carries a higher risk for the lender (due to foreign currency fluctuations) and the rates may be adjusted accordingly. The borrower also carries a higher risk, as currency fluctuations could result a reduction in equity.

 

Freehold (England & Wales only)

A situation whereby the owner owns both the property and the land on which the property is built. See also Feuhold (Scotland)

 

Full Status

The stage in a mortgage application at which the prospective borrower has provided credit check and other financial information.

 

Further Advance

A situation whereby the lender makes available another loan and under which both loans are included within first charge on the property. This is normally used to consolidate debt or pay for improvements to the property.

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General Conditions

The standard conditions that apply to a mortgage, as set by the lender.

 

Geographical Restrictions

Lenders may not offer mortgages for the purchase of property in certain districts or areas, typically those geographical areas that are regarded as high risk. Some smaller lenders may not offer loans for properties that are outside their local area.

 

Glossary

Plain English definitions of home loan jargon

 

Gross Annual Income

Total income received per year, before taxes are deducted.

 

Guarantee

A contract to pay someone else’s debt if they don’t pay it.

 

Guarantor

A person, other than the borrower, who guarantees the mortgage repayments in the event the borrower defaults. Typically the guarantor will be a parent or relative.

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Higher Lending Charge

A fee charged by lenders when the loan-to-value (LTV) ratio on a borrower's property is above a certain level, typically 90%.

 

Holiday Home

A second property that is used for holidays and weekends rather than as a main residence. Lenders will typically charge a higher rate, or demand a larger deposit, on mortgages for a holiday home.

 

Home Buyer's Report

A type of property survey that is more comprehensive than a mortgage valuation but less extensive than a full structural survey.

 

Home Buyer's Valuation Fee

The fee charged by a surveyor for producing a Home Buyer's Report.

 

Household Insurance

See "Buildings Insurance" and "Contents Insurance."

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Illustration

A quotation prepared for a potential borrower that shows the cost of a mortgage, usually on a monthly basis.

 

Impaired Credit

The credit rating of a person with a less than perfect record of credit usage, for instance due to arrears on other loans, past CCJs or a past bankruptcy.

 

Income

The amount of money a person earns.

 

Income Multiplier

The formula used by lenders to calculate how much a prospective borrower can borrow. Normally this amount will be three or 3.25 times the person's income, or for joint applicants it is typically 2.5 times joint income.

 

Income Protection

See Permanent Health Insurance  and Accident, Sickness and Unemployment Insurance.

 

Income Tax

A government tax that is levied on an individual's earned income.

 

Index

A published interest rate, such as the Bank of England base rate, or the London Inter Bank Offer Rate (LIBOR), which is used to base the interest rate on a variable rate mortgage.

 

Index Tracker

A type of mortgage in which the rate of interest charged follows exactly ('tracks') any changes in a published interest rate, for instance the Bank of England base rate.

 

Inflation

The general rise in prices over time.

 

Initial Fees

An estimate of the total fees payable for arranging a mortgage, including items such as solicitor's fees, survey costs and reservation charges.

 

Initial Interest

As well as being the first interest payment on a mortgage, the Initial Interest is also usually higher than subsequent payments as it covers the period between the date of completion and the date when the first payment is due.

 

Initial Rate

The interest rate that applies between the start and end of any discount period on a mortgage.

 

Instalment

The regular periodic payment that a borrower agrees to make to the lender.

 

Interest Only Mortgage

A type of mortgage in which the borrower only repays the interest on the loan for the duration of its term, and repays the full loan amount at the end of the mortgage period.

 

Interest Rate Charge Structure

The procedure of offering different mortgage rates depending on factors such as LTV, your income history, and credit rating.

 

Intermediary

A company such as Alexander Hall Associates which matches borrowers with lenders, as well as undertaking a certain amount of application processing. Typically an intermediary will receive a fee directly from the lender for these services.

 

Introducer

A person who introduces potential borrowers to a lender, insurer or broker.

 

Investments

Savings that are designed to repay the principal on an interest only mortgage.

 

ISA (Individual Savings Account)

A tax-free investment product whereby individuals can place shares, cash or life insurance, or a combination of these, up to a specified value.

 

ISA Mortgage

An interest only mortgage that uses an ISA product to repay the loan.

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Joint Income

The total gross income of the two borrowers in a joint mortgage.

 

Key Facts Illustration (KFI)

Customer specific, illustrating the key information relating to a mortgage and any charges inherent to it and the application process. All KFIs for UK residential mortgages will be presented in the same format for easy comparison. When looking at protection policies, a KFI constitutes a customer specific illustration (CSI) and key features document together.

 

Key Features Document (KFD)

A document summarising the key features, terms and procedures pertaining to a protection policy, such as cover details, information on how to make a claim and contact details.

 

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Land Registration

The process of registering your title to an area of land with the Land Registry, typically handled by a solicitor.

 

Land Registry Fee

A charged levied by a solicitor to register ownership of an area of land with the Land Registry.

 

Landlord's Reference

A reference given by a previous landlord, which confirms an applicant's history of payment of rent and previous conduct as a tenant.

 

Leasehold (England & Wales only)

A type of ownership in which a person owns a property, but not the land on which it is built. Typically the land will be leased to the owner.

 

Legal Charge

A document held by the Land Registry detailing who had first claim on your property. Typically the owner will have first claim.

 

Legal Completion

See Completion

 

Legal Fee

Fee charged by a solicitor.

 

Lender

The party, typically a bank, building society or mortgage company, offering the loan.

 

Lender's Fee

A charge levied by a lender to cover the costs of arranging a mortgage.

 

Level Term Assurance

A life insurance policy that pays out a lump sum should the borrower die during the term of a mortgage. Level term refers to the fact that this sum will remain constant throughout the term of the mortgage.

 

LIBOR linked mortgage

A tracker mortgage that tracks LIBOR.

 

Life Insurance

An insurance policy that pays a lump sum in the event of the death of the policyholder.

 

Loan Consolidation

See Debt Consolidation

 

Loan to Value Ratio (LTV)

The proportion of the value of the property that the lender is prepared to loan. This can be up to 100%

 

Local Authority Search

A check carried out by a purchaser's solicitor to ensure that the prospective property is not subject to any local authority issues such as road or town planning or any enforcement notices.

 

Local Authority Search Fee

The fee payable to the Local Authority for conducting a Local Authority Search.

 

London Inter Bank Offered Rate (LIBOR)

The interest rate at which banks in London buy and sell money between each other.

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Main Residence

The property in which a person resides for the majority of the time. Also known as the 'principal private residence', it can often be important for tax purposes.

 

Maintenance

Legally enforceable payments made to contribute to the costs of bringing up a dependent, usually following a divorce.

 

Maisonette

A flat or apartment with more than one floor.

 

Margin

The number of percentage points that a lender adds to the index value in order to calculate the variable interest rate payable on a mortgage.

 

Maturity

The date at which a debt must be paid in full.

Maximum loan amount

The maximum amount that can be borrowed based on an applicants’ disposable income, deposit, and the purchase price of the property.

 

Median

The median is the value which divides the sequence in half, when a set of values are arranged in ascending order. eg. if the numbers were 1,1,2,3,4,5,6,7,7,7,7 the median would be 5, whereas the average is 4.54

 

Minimum loan amount

The minimum amount that can be borrowed.

 

Minimum repayment required

The amount you are contractually obliged to repay each month, in order to repay your loan within the agreed term.

 

Minor

A person under the age of 18.

 

MIRAS

Acronym standing for Mortgage Interest Relief At Source, a tax relief scheme that expired on 5th April 2000.

 

Mortgage

A legal document that pledges a property to the lender as security on a loan.

 

Mortgage Broker

A company such as Alexander Hall Associates which matches borrowers with lenders, as well as undertaking a certain amount of application processing. Typically a mortgage broker will receive a fee directly from the lender for these services.

 

Mortgage Deed

The legal document that confers ownership or title to a property.

 

Mortgage Disability Insurance

An insurance policy under which monthly mortgage payments will be maintained for a specified period in the event that the policyholder suffers a covered disability.

 

Mortgage Subsidy

Payment made by some employers to employees to help cover the cost of mortgage repayments.

 

Mortgage Term

The period of time over which a mortgage loan must be repaid.

 

Mortgage Types

The type of mortgage. May be fixed, variable, capped, discount, tracker, stepped or other type of mortgage.

 

Mortgage Valuation

A survey to assess the value of a property. Usually conducted by a professional surveyor, this is the cheapest and simplest type of property survey and is usually the minimum survey required by a lender.

 

Mortgagee

The lender in a mortgage.

 

Mortgagor

The borrower in a mortgage.

 

Multiplier (Income)

See Income Multiplier

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Negative Equity

A situation in which the value of a property has fallen to below the level of the loan secured on it.

 

Net Profit

Relating to a self-employed person, net profit is income after running expenses and taxes have been deducted.

 

New Build

A newly built property.

 

No Capital Raising

Term used to describe a remortgage, which is exactly the same size as the mortgage it replaces.

 

No Income Verification

Situation in which a mortgage is taken out without the need for the borrower to prove income. See also Stated Income.

 

No/Low Fee Mortgages

A mortgage in which the usual fees - arrangement charges, booking fees and valuation fees - are either reimbursed to the borrower or paid by the lender. See also "Fees Free."

 

Non Contributory Pension

A pension scheme normally funded by an employer and into which an employee does not have to pay.

 

Non Status Mortgage

A mortgage that is offered without the need for the borrower to prove their income.

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Occupational Pension

A pension scheme run by trustees which and which may be either fully or partially funded by an employer.

 

Ombudsman

See "Financial Ombudsman Service."

 

Open Market Value

See "Fair Market Value."

 

Other Income

Income that is in addition to basic salary.

 

Outgoings

See "Liabilities."

 

Outstanding

The amount of money remaining to be paid.

 

Overpayment

Situation where repayments are increased so that the mortgage is repaid before the end of the agreed term. Some mortgages (flexible mortgages) allow for overpayment, but others may impose early redemption penalties for overpayment.

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Part Mortgages

Term used to refer to mortgages that combine different mortgage types. For instance, a combination of a part capital and interest mortgage with an ISA mortgage.

 

Payment Holiday

Under a flexible mortgage, borrowers are permitted to take a break from their mortgage repayments for a specified period.

 

Payment Method

The method by which an interest-only mortgage is to be repaid at the end of its term. Typically this will be either an endowment, an ISA, or some other investment product.

 

Payment Protection Insurance

A form of ASU which is linked specifically to a loan. See Accident, Sickness and Unemployment Insurance.

 

Payslip/P60

Documentary record of salary paid by an employer to an employee, including income tax, national insurance and other deductions. Payslips coincide with salary pay dates and are usually issued monthly, although some employers pay salary weekly or four-weekly. A P60 is provided following the tax year end (05 April each year) providing a summary of total salary and tax paid for the year.

 

Penalties

A specified charge that is levied by the lender under certain circumstances, usually for full or part repayment within a specific period linked to a discount, tracker, fixed or other prodcut type.

 

Pension Mortgage

An interest-only mortgage that uses a pension as a means of paying off the loan at the end of its term.

 

PEP (Personal Equity Plan)

A tax-free savings plan that has since been replaced with the ISA.

 

Permanent Health Insurance (PHI)

An insurance policy that pays a monthly income if the policyholder becomes ill and cannot work.

 

Personal Pension Plan

A pension plan that allows individuals not covered by a company pension plan to save for a pension.

 

Portable

In relation to a mortgage, this refers to a mortgage product that can be transferred between properties when the policyholder moves home.

 

Previous Lender's Reference

A document from a previous lender that confirms a person's previous repayment record.

 

Principal

The amount of debt outstanding (excluding interest). The face value of a note or mortgage.

 

Principal and Interest Mortgage

A loan in which both the principle and interest are repaid, during the agreed term of the loan. See "Repayment Mortgage."

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Rate

The annual rate, expressed as a percentage, of interest on a loan.

 

Rate Cap

A limit (cap) on the amount by which the interest rate payable on a mortgage can increase.

 

Redemption

The name given to the full payment of a mortgage, at the end of its term.

 

Redemption Charge

See deeds release fee.

 

Refinancing

The paying off of one mortgage with the proceeds from a new mortgage, using the original property as security.

 

Regional Lenders

Lenders that restrict the geographical area in which they will lend.

 

Remortgaging

The process whereby a new mortgage replaces an old one, and both use the same property as security. See also Refinancing

 

Repayment Method

The method by which a borrower repays their mortgage, for instance interest-only, or interest and capital.

 

Repayment Mortgage

A mortgage in which monthly charges are used to repay the interest and to reduce the outstanding capital.

 

Repayment Period

The term, or number of years, over which the borrower must repay the mortgage.

 

Repossession

The legal procedure by which a defaulting borrower is deprived of their interest in the mortgaged property, typically involving the forced sale of the property at a public auction.

 


Reserve price

Specified minimum price acceptable to a seller at auction.

 

Retention

The ability of a lender to hold back (retain) part of a mortgage until certain conditions are met.

 

Right to Buy

Many local authorities offer tenants the right to buy the public housing they occupy, usually at a discount and usually the scheme will depend on the length of the existing tenancy.

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Searches

Examinations or research tasks usually carried out by solicitors on the purchaser’s and lender’s behalf to confirm information about the property or the purchaser, prior to settlement.

 

Second Charge

A subsequent charge to the first charge. The holder of the second charge has a legal call on the property in the event of the borrower defaulting on repayments, but only after all liabilities to the holder of the first charge have been settled, e.g. a secured loan plus a mortgage. May also be known as a Subsequent Charge.

 

Security

Documentation held by the lender (or mortgagee) regarding property supporting the loan.

 

Self Build

A mortgage that is taken out on a property still under construction. Typically the lender will only pay out the loan in stages, corresponding to the completion of various stages in the construction.

 

Self Certification

A mortgage intended for borrowers who are unable to categorically prove their income by conventional means such as payslips and fully audited accounts, but can provide alternative evidence and thereby demonstrate the level borrowing is affordable. Typically the lender will charge higher rates of interest, or require a larger deposit.

 

Self Employed

A person who operates as a sole trader or in a partnership, such as small retailers or professionals such as accountants or dentists.

 

Shared Equity

A scheme whereby a borrower purchases part of a property and the other part is purchased by a third party, such as a housing corporation. A shared equity scheme differs from shared ownership in that no ongoing rent is paid to the third party. However, any future increases to a property s value results in the third party s share of equity in the property increasing proportionately. In other words, a borrower does not fully benefit from future increases in a property s value.

 

Shared Ownership

A scheme similar to shared equity. However, the third party receives a monthly rental payment from the borrower in respect of their share in a property.

 

Sitting Tenant

A person currently renting and occupying a property, and who is legally protected against being removed.

 

Sole Occupancy

A property that is occupied (lived in) by only the mortgage applicant(s) and their direct family.

 

Special Conditions

Conditions attached to your mortgage offer that are specific to your application.

Stamp Duty

A government tax payable by the purchaser upon purchase of a property. Currently no stamp duty is applicable on purchases of up to ?125,000; 1% on purchases between ?125,001 and ?250,000, 3% on purchases between ?250,001 and ?500,000 and 4% on purchases exceeding ?500,000. Importantly the duty is levied on the whole value of a property. Some properties in designated disadvantaged areas may be exempted from stamp duty up to a threshold of ?150,000. Its full title is "Stamp Duty Land Tax" in order to differentiate between duty on land and stock market shares.

 

Standard Construction

A building that has been constructed using conventional techniques and materials, for instance bricks and stone with a tiled or slate roof.

 

Standard Variable Rates

The standard interest rate (SVR) set by lenders, and which is subject to increasing or decreasing at the discretion of the lender. The standard variable rate often applies at the end of any fixed, capped or discounted period.

 

Start-up Business

Any business that does not have accounts dating back three years.

 

Structural Survey

A survey of the condition of a property, undertaken by a qualified surveyor, and for which the surveyor is responsible. A structural survey is the most detailed - and most expensive - of the property reports available. Also known as a "Building Survey."

 

Studio Flat

A property that consists of one main room, with a separate bathroom and sometimes a separate kitchen.

 

Surrender

The encashment of an investment vehicle, such as a mortgage-linked endowment policy.

 

Survey Fee

The fee payable to a surveyor for surveying a property.

 

Surveyor

A professional person qualified to estimate the value of land and property.

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Tariff

A document detailing the costs and charges for a particular service or services.

 

Tenants in common

The equal or unequal holding of property by two or more persons. If one party dies, their share passes according to their Will or the law (not necessarily to the owner of the other share).

 

Term

The period of time between the start and finish of the mortgage loan or long term insurance policy.

 

Term Assurance

A life insurance policy that provides a lump sum in the event of the death of the policyholder during a specified period but has no encashment value at any time during or at the end of the term.

 

Timber Framed

A property whose major structural components are constructed from wood, rather than brick, stone or concrete. Typically an insurer will charge more for buildings insurance on a timber-framed property.

 

Title

The document that confirms the right of possession to an area of land.

 

Title Insurance

An insurance policy against any loss resulting from defects of title to a specifically described parcel of property.

 

Title Search

An investigation, carried out by a conveyancer or solicitor, into the history of ownership of a property. The search will check for liens, unpaid claims, restrictions or any other problems that may affect ownership.

 

Tracker

A type of mortgage whereby any changes in the rate of interest charged follow exactly ('track') another, specified, interest rate or index. Typically a tracker mortgage will track the Bank of England base rate.

 

Transfer

A document registered with the Titles Office that confirms the change of ownership as noted on the Title.

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Underpayment

Situation where repayments are reduced so that the mortgage is not repaid by the end of the agreed term. Some mortgages (flexible mortgages) allow for a specified level of underpayment.

 

Unencumbered

A property that has no loans or borrowings secured on it.

 

Unit Linked

A type of life insurance in which the value of the policy is backed by investment in shares, either through the life company or the life company's unit trust.

 

Unitised with Profits

A version of a With Profits investment vehicle that seeks to reduce the peaks and troughs of stock market fluctuations

 

Valuation

A simple survey carried out on a property for the benefit of the lender. Because the report is carried out for the lender, if the surveyor makes a mistake you have no legal claim against him.

 

Valuation Fee

A fee charged to cover the cost of a valuation, typically paid by the borrower.

 

Variable rate

A rate that goes up or down depending on money market interest rates.

 

Variation

A change to any part of a loan contract.

 

Value

The price of a property under normal conditions, ie. When the buyer is not forced to buy and the seller not forced to sell.

 

With Profits

A policy that is designed to offer a smoother return than other forms of stock market investments. Bonuses are declared at the end of the year, and are then guaranteed.

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