Glossary
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Added to the Loan
The cost related to arranging your loan can sometimes be added to the loan amount.
Administration Fee / Application fee
Lenders fee for covering the costs associated to processing your mortgage.
Applicant
Person, people or organisation applying for the mortgage.
Appreciation
Value of property increasing due to changes in the housing market.
Approval / Decision in Principle (AIP / DIP)
A certificate that lenders give you showing the amount they will probably be able to lend you. This is not a guarantee, but it can be helpful when dealing with estate agents. This involves a credit search.
APR
Annual Percentage Rate – this shows the overall cost of the loan, taking into account the term, interest rate and other costs.
Arrangement fee
Lender’s fee for covering the costs associated to reserving funds for mortgages.
Balance Sheet
A statement containing assets, liabilities and equity.
Base Rate (BoEBR)
The interest rate set by the Bank of England.
Basic Income
Your income before tax, commission and overtime.
Bridging Loan
A short term loan, taken to “bridge” the gap between the purchase of a property, and sale of a property.
Buy to Let Mortgage
A loan you take out to buy a property that you intend to rent to tenants.
Capital
The amount you borrow to help buy your home.
Capped Mortgage
A mortgage with a maximum limit on the interest rate you will pay during the period of the deal.
Commitments
Contractual financial commitments such as child maintenance, mortgage, loan and hire purchase agreements. The same as liabilities and outgoings.
Completion.
Stage where you are the legal owner of the property. Money would be transferred from the lender to your solicitor, and then the vendors solicitor.
Conveyance
This is usually carried out by your solicitor or a licensed conveyancer. They carry out the process associated to transferring ownership of the property from the seller to the buyer.
Credit Check
A check done either via Experian or Equifax credit reference agencies. This check allows the lender to check the applicant’s previous financial management and history.
Daily Interest
Interest on a mortgage is calculated daily rather than monthly or annually.
Deed
The document stating your ownership of the property.
Deed Release Fee
This fee is usually charged at the end of your mortgage by your lender. This covers the costs for the administration for sending the deeds (ownership documents) to your solicitor. (This is also known as Discharge fee)
Deferred Interest Mortgage
A mortgage which allows you not to pay any or some interest for a specified period.
Deposit
The amount of money you put into buying a home (not including the mortgage money you are borrowing)
Depreciation
A reduction in the value of a property due to the conditions in the housing market.
Discount Mortgage
This has a lower rate payable than the lenders usual standard variable rate. The discount only applies to the period of the deal.
Discount Rate
A lower level of interest is charged for a specified period. This period is usually at the start of the mortgage term.
Discharge Fee
The fee charged by the lender at the end of the mortgage for the administrative costs associated with the documentation of the transfer of ownership.
Drawdown Facility
This allows borrowers to increase their loan by up to a specified limit.
Early Repayment Charge (ERC)
A charge you may have to pay (usually a percentage of the loan amount) if you were to pay back a mortgage early.
Easement
A “right of way” that allows people who are not owners of the property, to have access to the property.
Encumbrance
A Circumstance that may have an effect on the ownership of a property, such as, mortgages, ‘right of way’, easements and leaseholds.
Endowment
This is an investment, the proceeds of which can be used to repay the mortgage at the end of the term.
Equity Release
A mortgage that is secured on a property that is already fully owned.
Estate
This is a legal term for the total sum of all the properties and assets owned at time of death.
Eviction
Legally ordering an occupant to vacate a property.
Excess Payments
Mortgage payments that are over the agreed specified amounts. Lenders usually specify limitations on the level of overpayments.
Exchange of Contracts (excluding
Legally biding commitments to the sale of the property when the terms and conditions of the sale are agreed.
Existing Liabilities
Financial commitments that must be declared as part of the mortgage application process. These include, loans, credit card debts and child maintenance.
Expatriate
A foreign national that is working in a county that is not their place of birth.
Fixed Rate
An interest rate that is fixed and not subject to change over the period of the deal.
Fair Market Value
The amount the property is sold for being similar to the value of comparable properties in the local area.
Fees Free
This is usually a special offer where the lender covers the cost for the valuation and the legal fees. This is mostly associated with remortgages.
Financial Ombudsman Service. (FOS)
An organisation that deals with settling disputes between financial institutions and consumers.
Financial Services Authority
The FSA regulate the financial services industry. The regulation covers banking, mortgages (with the exception of some forms of buy to let and commercial mortgages, secured and unsecured loans) and insurance.
First Time Buyer
A person/s who is buying a property for the first time also known as First Time Purchaser (FTP).
Flexible Mortgage.
A mortgage with allows you to make, overpayments, underpayments and also take payment holidays.
Foreign Currency Mortgage
A mortgage that is taken out in a currency that is not sterling.
Freehold
The owner owns both the land and the property that is on it.
FSA Register
A list of firms that are regulated to sell financial services in the
Further Advance
Where the borrower (with the lenders permission) takes out another loan in addition to the mortgage. This remains under the first charge.
General Conditions
The conditions set by the lender for the mortgage.
Geographical Restrictions
Some lenders have restrictions on the geographical areas they can lend on. This either may be due to certain areas being deemed as being higher risk or the lender only lending within a certain local area.
Gross Annual Income
Total income received, before deductions such as taxes and national insurance contributions are made.
Guarantor
A person who is not the borrower but guarantees that the mortgage repayments will continue to be made if the borrower were to default.
Higher lending charge (HLC)
This is a fee charged by the lender when the value of the loan required exceeds a certain level when compared to the value of the property being purchased (LTV ratio). Usually a higher lending charge is applicable above 90% LTV.
Holiday Home
A second home that is not used as the main residence.
Home Buyers Report
A type of a valuation report that is more detailed than the basic valuation and less detailed than the full structural survey.
Home Information Packs (HIP)
The government requires sellers of 4 and 3 bedroom properties or larger to provide this pack. The pack must contain title deeds, local searches and an energy performance certificate for the property.
Illustration
This is a quote that is prepared for the borrower, which shows the cost of the mortgage in terms of monthly payments.
Income Multiples
The number by which the lender multiplies your earning to find out how much you can borrow.
Initial Fees
The costs associated with the buying process. This includes, solicitor’s fees, lender’s arrangement fees and survey fees.
Interest
The charge that lenders make when you borrow their money.
Interest only Mortgage
A mortgage in which you pay only the interest charges of the loan each month. You are not reducing the loan amount (capital), and you must make arrangements to repay this.
Interest rate
The figure that determines how much you pay in interest for borrowing money. Rates are usually linked to the Bank of England’s rates and can move up or down.
Intermediary
Truestone Private Finance is an example of an intermediary. They match borrowers with suitable lenders and deal with aspects of the processing of the mortgage.
ISA Mortgage
Whilst the mortgage is taken out on an interest only basis, the borrower invests and maintains an Individual Savings Account to repay the mortgage.
Joint Income
The total joint gross of income of the borrowers who will be party to the mortgage.
Key Facts Illustration (KFI)
All Key Facts Illustrations for residential mortgages are presented in the same format as it enables borrowers to make comparisons. The Key Facts Illustration contains information with regard to the overall cost of the mortgage, monthly costs and charges.
Land Registration
This process is usually handled by your solicitor. It is when the title is registered to the land.
Leasehold (
The leaseholder does not own the land, however he/she owns the property that is on it.
Legal Charge
Solicitor’s fees
LIBOR linked Mortgage
A mortgage that tracks the London Inter Bank Offered Rate.
Loan to Value (LTV)
The amount of money you want to borrow compared (as a percentage) to the value of the property.
Local Authority Search
This search is done in order to ensure that the property that a person is looking to buy is not affected by any local authority plans to building plans e.g. roads or houses. This search is conducted by the buyer’s solicitor.
The banks buy and sell money from and to each other and this interest rate.
Maintenance
Payments that persons are legally bound to make for the maintenance of dependents.
Maisonette
A flat or an apartment within a building that has more than one floor.
Minor
A person under the age of 18.
Mortgage
A loan secured on your property
Mortgage Broker
Truestone Private Finance is an example of a Mortgage broker. They match borrowers with suitable lenders and deal with aspects of the processing of the mortgage. (similar to Intermediary)
Mortgage Subsidy
Part payment of mortgage repayments by employers for their employees.
Mortgage Term
The length of the time the mortgage will be held.
Mortgage Valuation
This is a basic survey done to assess the value of the property. This is also sometimes referred to as the basic survey or basic valuation.
Mortgagee
The lender of the loan (mortgage).
Mortgagor
The borrower of the loan (mortgage)
Negative Equity
A situation that occurs when the value of a property has fallen below the amount of the loan that is secured against it.
Net profit
The Income of a self employed person after tax and expenses are deducted.
New Build
A property that has been newly built.
Non Status Mortgage
A mortgage where the borrower does not need to prove details of income.
Open Market Value
The amount the property is sold for is similar to the value of similar properties in the local area. Same as Fair Market Value.
Other Income
Any income that is in addition to the basic income.
Outgoings
Any financial commitments such loans, credit cards and mortgage payments.
Outstanding
Money remaining to be paid on financial commitments.
Overpayments
Mortgage payments paid that are higher than the required and agreed amount. Some lenders have restrictions on the level on overpayments that can be made.
Part Mortgage
Where a combination of different repayment types is used within a mortgage. For example a mortgage that is 50% repayment, 50% interest only.
Payment
Lenders may allow borrowers to take a break in their mortgage payments for a specific period.
Payment Method
The method in which a borrower of an interest only mortgage intends to repay the loan (mortgage).
Payslip
Evidence of income and all deductions such as income tax, national insurance contributions, pension contributions and student loan deductions.
Penalty
A charge that is applicable if the borrower were to repay the mortgage in full before the end of a specified period. This is normally applied to fixed rate and tracker mortgages that offer money saving terms at the start of the loan term.
Pension Mortgage
The pension is used to pay the loan (mortgage) whilst the borrower maintains an interest only mortgage.
Portable
A mortgage that can be transferred to a different property in the event of the borrower moving.
Principal
The value of the debt that is currently outstanding.
Principal and Interest Mortgage
A mortgage in which you pay off both the loan (capital) and interest at the same time. Same as repayment mortgage.
Quotation
All quotations for residential mortgages are presented in the same format as it enables borrowers to make comparisons. The Key Facts Illustration contains information with regard to the overall cost of the mortgage, monthly costs and charges. This is the same as the Key Facts Illustration.
Rate
This refers to the interest rate and is expressed as a percentage. It is an annual rate.
Redemption
This involves the full repayment of the mortgage.
Redemption fee
Fee charged by a lender if a mortgage is paid off in full before the end of the term of the mortgage or the introductory period.
Regional Lenders
Lenders who focus on and are limited to lending within specific geographical areas.
Remortgaging
Changing your mortgage for a different one, without moving home.
Repayment Mortgage
A mortgage in which you pay off both the loan (capital) and interest at the same time.
Repossession
When a borrower defaults on their mortgage payments, the borrower is legally not permitted to enjoy rights and occupation to the property. Normally in such cases the lender will sell the property at auction.
Retention
A lender may retain a sum of money back on a mortgage until a condition of the mortgage is met. For example money may be retained until problems with dampness are eradicated.
Right To Buy
A local authority can give a local authority tenant permission to buy a council property at a discount.
Second Charge
A separate loan that is secured on the property, other than the mortgage. The holder of the second loan also has an interest in the property. This is also called a subsequent charge.
Secured
If you do not repay your loan, the lender can sell your home to get its money back.
Self Build Mortgage
A mortgage that is taken on to build a property, generally the mortgage is released in stages as the building is progressing.
Self Certification Mortgage
This type of mortgage is for those who cannot prove their income by means of payslips and P60’s. However they can prove their income by alternative means to show the mortgage would be affordable to them.
Shared Ownership Mortgage.
A mortgage that is taken out on a percentage of a property whilst the remaining percentage is rented from a Housing Association. The owner can also increase the amount they own. This process is called ‘stair casing’.
Sitting Tenant
A tenant who is currently renting and occupying a property whilst being protected from eviction by law.
Sole Occupancy
The owner and their immediate family being the only occupiers of a property.
Special Conditions
A lender may stipulate that the mortgage offer is valid subject to special conditions being met.
A government tax that home buyers must pay on properties above a set amount.
- 1% = properties between £150,000 – £250,000
- 3% = properties between £250,001 – £500,000
- 4% = properties £500,000 and above
Standard Variable Rate
A lender’s normal rate – without any discounts or deals.
Standard Construction
A property built with bricks and a tiled roof.
Start Up Business
A new business which has less than 36 months of accounts.
Structural Survey
A full survey that is conducted by a qualified surveyor, engineer or architect. This is the most detailed survey for a property purchase.
Studio Flat
A property with one main room, kitchen and bathroom.
Surrender
Where an investment vehicle has been terminated and the cash value is taken.
Survey
A report on the condition of the property you are planning to buy.
Tariff
Details of services and their charges.
Term
The length of your mortgage, normally expressed in years
Timber Framed Property
The structure of the property is made of wood.
Title
This document is confirmation of ownership of land / property.
Tracker Mortgage
A mortgage with an interest rate usually linked to the Bank of England or other base rate, moving up or down with it.
Underpayment
Where repayments on mortgage are reduced from the initial agreed monthly payments.
Unencumbered
This a property that does not have any loans or mortgages secured on it.
Valuation
A brief inspection of the home you hope to buy, so the lender can ensure it is suitable security for the mortgage.
Value
The price of the land or property according to market conditions in the area.
