Glossary
A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z |
A
The amount you borrow from the lender.
Annual Percentage Rate (APR)
The total charge for the loan including fees and interest expressed as a percentage.
Applied or Nominal Interest Rate
The rate used to calculate the interest due.
Arrears
Mortgage payments which have not been paid as requested and have become overdue
B
Balance
The amount you owe, after taking payments (credits) and any debits into account.
Bank of England base rate
The Bank of England 'repurchase' rate which is the main factor influencing interest rates charges by lenders.
Buildings insurance
Covers the house you are buying against damage - take it out from the day you exchange contracts.
Buy to Let
The practice of buying a house or flat for investment purposes. Income is provided by the tenants' rent, and capital growth (if any) by the property's increasing resale value.
C
Capital
The balance of your mortgage loan excluding costs and interest outstanding.
Cashback
A mortgage that provides a borrower with an immediate lump sum pay out on top of the sum borrowed to buy the property. This has to be paid for one way or the other, so cashback mortgages will typically be at a higher rate than other mortgages and will usually have early repayment charges.
CAT standard
Stands for Charges, Access, and Terms - which have to be low, easy and fair respectively. These standards were introduced by the Government for mortgages to help borrowers, especially first-time buyers.
Closing administration charge
A charge made by the lender to cover administration costs when a mortgage is repaid.
Collateral
The property. The lender can take possession and sell it if the borrower does not keep up the mortgage payments.
Completion
1. The final legal transfer of ownership of the property - when the property becomes yours.
2. The start of the mortgage. This is also known as 'drawdown'.
Contents insurance
Cover for the contents of your home - including furniture, appliances and personal items - against damage and theft.
Contract
The written agreement between the seller and the buyer of a property to transfer ownership.
Contract race
Where the seller has received two or more offers on the property and will sell to the buyer who is ready to exchange contracts first.
Conveyancer
Solicitor or licensed conveyancer who deals with the legal aspects of buying or selling land or property.
Conveyancing
The legal work involved in the sale and purchase of land or property.
D
Interest is calculated on the balance outstanding each day. So, when you make a payment, interest is calculated on the new balance straightaway. This is usually better than annual interest.
Defective title policy
Is an insurance policy taken out where a defect in the title to the property has been discovered.
Deposit
Two deposits may be payable by the buyer:
1. A reservation charge. The buyer pays this as a sign of commitment when they initially agree to buy the property.
2. The deposit. A percentage of the price of the property, paid when contracts are exchanged.
Drawdown date
Drawdown is the date when the mortgage starts.
Drawdown deadline
Some mortgage funds are available for a limited period only and usually these mortgages must start by a certain date - the drawdown deadline.
E
A charge payable on certain types of loan if it is repaid or partly repaid within a certain period eg during a fixed-rate period or while a discount applies.
Endowment mortgage
Sometimes used to describe an interest only mortgage supported by an endowment policy.
Endowment policy
A combined life assurance and investment policy often taken out at the start of a mortgage to run for the same term. Premiums are paid by the borrower to a life assurance company, usually monthly. The company invests the premiums and the investment should provide a lump sum at the end of the policy term (which can be used to repay all or part of the mortgage) or earlier if the borrower should die.
Equity
The difference between the value of the property and the amount of any loan secured against it.
Essential repairs
Work required on the property before the mortgage loan can be issued.
Exchange of contracts
In England and Wales (not Scotland), the point when both buyer and seller are legally bound to the transaction and at which point the buyer should take out buildings insurance on the property.
F
A letter requesting payment and sent to a customer who is in arrears before legal proceedings start.
First mortgage payment
This is higher than the normal monthly payments, because the lender doesn’t collect it until after the loan starts. So, as well as the normal monthly amount, the first payment will include an interest payment for the rest of the month in which the loan began.
Freehold
Outright ownership of the property and the land on which it stands.
Further advance
An additional loan by the lender to the borrower, which may be for any purpose and secured by the existing mortgage deed.
G
When the seller, having already accepted an offer but before contracts are exchanged, accepts another, higher offer from someone else.
Ground rent
An annual charge payable by leaseholders to the freeholder.
Guarantor
A person who promises they will pay the borrower's debt, usually if the borrower fails to.
H
A payment to a lender for an insurance policy for the lender's benefit when they lend above a certain percentage of the property value. The policy covers the risk of selling a repossessed property at a loss.
Homebuyer's survey
A surveyor's report on a property which is less extensive than a building survey and is paid for by the purchaser.
I
Any payment due for the period from the day the mortgage began up to the first payment date.
Interest only mortgage
You only repay the interest each month. The original capital balance will remain outstanding at the end of your mortgage term.
Individual Savings Account (ISA)
The Government's tax-free saving scheme. You can make financial provisions for the future by putting money into any of three types of investment - cash savings, stocks and shares and life assurance.
J
K
L
Provides details of the property including a plan and, if the property is leasehold, a copy of the lease.
Land Registry fee
A fee paid to the Land Registry to register ownership of a property.
Leasehold
The right to possession, but not ownership, of a property for an agreed period of time. Ultimate ownership remains with the freeholder.
Lender
The bank/building society where you have your mortgage.
Lessee
The person to whom a lease is granted - the tenant.
Lessor
The person who grants a lease - the landlord.
Life assurance
An insurance policy that pays a lump sum on death. Often taken out with a mortgage to provide money for the loan to be repaid if the borrower dies during the term.
Loan to Value (LTV)
The size of a mortgage as a percentage of the value of the property or its purchase price.
Local authority search
Questions to the local authority regarding plans for new road building, planning permission for any building work previously carried out, connection to the mains sewer, etc.
M
Mortgage
Has a specific meaning in law but has come to mean a loan with property as security.
Mortgagee
The mortgagee is the lender who lends money in return for the mortgage granted by the borrower, who is the mortgagor.
Mortgage term
The term over which you agree to repay the loan.
Mortgage Indemnity Premium
A payment to a lender for an insurance policy for the lender's benefit when they lend above a certain percentage of the property value. The policy covers the risk of selling a repossessed property at a loss.
N
When the value of the property has fallen and is less than the loan secured on it.
NHBC guarantee
A 10-year guarantee, provided by the National House Building Council, that the builder will put right serious defects on a newly-built property. Zurich Municipal and Premier Guarantee all offer similar guarantees.
O
P
Payment Protection
Insurance which pays your monthly mortgage payments, usually for a specified period, if you lose your income through sickness, injury or unemployment.
Pension Mortgage
A mortgage whose capital repayment is funded by contributions to a personal pension. The generous tax breaks given to pension saving boost contributions by making them gross instead of net of tax. There is an option available to take a lump sum of up to 25% of the value of the accumulated pension fund. This lump sum aims to repay the loan's capital at the end of the term. The past performance is not necessarily a guide to future performance. It should be noted that using the lump sum payable under your pension as a mortgage repayment vehicle could reduce your potential retirement income.
Pension Plan
An investment plan which can provide a lump sum and an income after retirement. A pension plan is sometimes used as a way of providing a lump sum to repay the capital of an interest only mortgage.
Principal
The amount of the loan on which interest is calculated.
Q
R
When a mortgage is repaid. (Also called redemption.)
Remortgage
Repaying one mortgage by taking out another secured on the same property, possibly to take advantage of a particular mortgage product or better interest rate from a different lender.
Repayment mortgage
You pay interest and part of the capital each month, so your mortgage will be paid off completely at the end of the mortgage term.
S
Standard Variable Rate (SVR)This is normally a mortgage lender's main interest rate. Fixed-rate and discount loans usually switch to SVR when the special offer period expires.
T
The period of time you would need to remain on certain mortgage terms to avoid an early repayment charge.
Title deeds/title documents
The legal documents which provide proof of ownership of a property.
Transfer deed
A form which provides details of the transfer of ownership to be entered on the Land Registry register.
U
V
An inspection of the property to ascertain its acceptability to the lender as security against the mortgage loan, for which the borrower may have to pay.
Vendor
The person(s) you are buying your new home from.
W
'A few of the lenders I contact to get the best deal for you'
