GLOSSARY
We’ve included this for your information but don’t worry, your broker will take all the jargon out for you and make things easy to understand !
Advance
The mortgage loan
Affordability
This is an in depth assessment of how much you can comfortably spend on your mortgage and protection and takes into account all of your income and outgoings. Your broker will carry out a breakdown with you.
APR
Annual Percentage Rate. A calculated rate of interest, including all associated costs, which is intended to allow direct comparison with different lenders, normally presented as %APR
Arrangement Fee
A fee charged by lenders for arranging your loan. This is often added to your loan if you do not want to pay it up front and should be discussed with your broker.
ASU
Accident, Sickness or Unemployment. An insurance policy designed to provide a regular income for a specified period in the event of accident, sickness or unemployment.
Bank of England Base Rate
The benchmark interest rate set by the Bank of England. In the past, mortgage lenders interest rates have closely followed any change in this rate, but the recent (and ongoing) credit crunch has resulted in the two becoming somewhat divorced. Recently, the Bank of England reduced rates, whilst, in response, the lenders increased theirs.
Booking Fee
Non-refundable booking fee that may be charged even if you are unable to complete your purchase. This fee “books” your product or your interest rate.
Capital and Interest
With a repayment mortgage your monthly repayments consist of both interest on the loan, plus a portion of the capital itself.
Capped Rate
A form of mortgage where your lender agrees that, for a specified time, the interest rate you pay will not exceed a specified % rate.
Cash-back
A feature where you receive a cash lump-sum when you start your mortgage - watch out for claw-backs. Our broker will be able to advise you.
CCJ
County Court Judgement. Generally given for the non-payment of debts, this is registered on your credit file and will adversely affect your ability to receive favourable mortgage terms.
Completion
The day you actually become the owner of your new house and can move - pack the kettle on top, you will need it!.
Contracts
Legal documentation detailing terms and extent of sale.
Conveyancing
Legal means by which property is transferred from seller to buyer.
Credit search
Your lender will carry out a credit search to ensure that you represent an acceptable risk.
Credit scoring
Having carried out a search, many lenders then score the results to determine your credit risk.
Critical Illness Cover
An insurance policy designed to pay put a lump sum in the event of you being diagnosed with a specified illness, normally intended to cover the amount of your mortgage loan.
Debt consolidation
This is where you decide to put all your borrowing in one basket and pay off your loans and cards by increasing your mortgage borrowing. This does mean that the extra borrowing is secured against your property but may have benefits in terms of interest rates. Your broker will discuss this fully with you so that you understand clearly before making any decision.
Decision in principle
This is a mortgage that’s been agreed in principle, basically a lender has agreed to lend you a certain amount as long as nothing changes in between the application for the decision in principle and the actual purchase. These normally last up to 3 months but can last longer.
Deposit
Money you put down towards the purchase of the property.
Disbursements
Costs, other than solicitors fees, that you will have to pay as part of the purchase process, e.g. land registry, search fees etc.
Discount Rate
Discount off standard variable rate that lender agrees to, for an agreed, limited time period. Generally, the longer the period, the bigger the discount.
Early Repayment Charge
Repay your mortgage early and this is the charge you may need to pay; particularly applicable to fixed, discounted, tracker, capped and cash-back mortgages.
Endowment
Extremely popular in the 80's, now largely discredited following miss-selling scandal, endowment policies are saving plans incorporating built-in life assurance. These plans were intended to repay 'interest-only' mortgages upon maturity.
Exchange of contracts
The point in time at which seller and buyer formally agree, through their solicitors, the transfer of the property from one to the other. The purchase is then legally binding. Note that you, the buyer, are now responsible for your future home's property insurance.
Extended tie-ins
The lender, if offering particularly attractive scheme, may require you to keep your mortgage with them, for a further period, even after the scheme has ended.
Exit fee
A fee payable to your mortgage lender whenever your relationship with them ends, such as when you remortgage away from them or pay your mortgage off. Also known as “sealing fee”.
Fact Find
A full discussion with your broker during which he or she will record all relevant details so that a tailormade recommendation can be made for you.
Fast Track
This kind of mortgage application is somewhere in between a “self-certified” mortgage and a “full status” mortgage. It is only available to those with a larger deposit and very clean credit record and means that although the lender reserves the right to see all evidence of income, it will not necessarily do so at any point during the application.
Fees
See Arrangement Fees above
Fixed rate
The interest rate is fixed for an agreed period of time.
Flexible mortgages
A relatively new type of mortgage type that allows some flexibility of repayments. Options may include the ability to overpay, underpay or take payment holidays. As some lenders calculate interest on a daily basis any overpayments have an immediate effect on the outstanding mortgage balance.
Freehold
The standard way of owning a property where the purchaser is buying the land and the building on it. When purchasing a flat you will be purchasing the lease on it and may or may not be buying a share of the freehold building as well.
Footprint
If a lender carries out a credit check on you, this leaves a footprint on your credit file which will show to anyone else who then carries out a credit check. You will want to ensure that there are not too many footprints as this may flag up to your lender.
Full status mortgage
As standard, a mortgage lender will want to see evidence of your income such as 3 months’ worth of payslips, so that it takes into account your “full status”.
Full Structural Survey
A detailed inspection and report of the property, identifying areas of concern; expensive but particularly recommended for older or unusual properties. Not performing a full structural survey is often a false economy as a surveyor will be responsible if something crops up later on that he did not spot on the survey.
Gazumping
This generally only happens in a sellers’ market when the seller breaks an agreement with one buyer in order to accept a higher offer from another buyer. This can only happen before exchange of contracts after which everyone is tied in.
Gazundering
When the buyer demands a price drop at the last minute usually to compensate for declining house prices in the area or a survey which throws something up, this is called `gazundering'.
HIP (“Homebuyer’s Information Pack”)
Government required report concerning the condition of your property, summarising findings and recommendations for future action which the seller pays for and the prospective buyer will receive a copy.
Higher Lending Charge
An additional charge you will pay if your deposit is less than a percentage determined by your lender.
Homebuyer’s Report
A survey that you instruct that contains more information than the valuation survey but less than a full structural report. Often you can save money by asking the valuation surveyor to undertake this report for you at the same time but you should consider whether or not you want to keep them separate or if you should have a full survey. Your broker will be able to advise you here.
Income Multipliers
Often used to determine how much you can borrow. This really is a rule of thumb and your broker will be looking at “affordability” more closely.
Income Reference
The lender will usually request written confirmation of income from your employer.
Initial Disclosure Document
Every mortgage broker or advisor (including in your bank) must give you this document setting out the level of service offered, contact details and complaints procedure.
ISA
Individual Savings Accounts are investments in the stockmarket in a tax efficient way. Using an ISA to pay off your mortgage could make a lot of sense but you must remember that anything to do with the stockmarket involves risk. You should speak to an investments specialist if you are planning your investments.
Key Facts Illustration (“KFI”)
This is a personalised mortgage quote that shows you all the important details of the mortgage product including interest rate, charges, monthly payments and so on. It does not involve a credit check and is not a “decision in principle” or “mortgage promise”.
Key Worker Scheme
A mortgage scheme that helps government identified key workers such as nurses buy into shared ownership property. Our brokers can help you with this. Also see “shared ownership”.
Leasehold
A form of land tenure where a person has rights over a piece of land for a specific period. For instance, a person buying a flat will buy the right to occupy the flat rather than buying the whole building which will be owned by the “freeholder”.
Licensed Conveyancer
As an alternative to using a solicitor for conveyer your property it is possible to use a Licensed Conveyancer, a practitioner who specialises in property ownership transfer.
Life assurance/life insurance
A policy taken out by most borrowers to help repay the outstanding mortgage debt in the event of death.
LTV
Loan To Value. This refers to the size of the mortgage in relation to the value of the property and is expressed as a percentage. So if you have a 20% deposit you will be looking for an 80% mortgage.
MPI
Mortgage Payment Insurance. A plan which is designed to provide you with a monthly benefit to help pay your mortgage if, due to illness, accident or unemployment (if selected), you are unable to work resulting in a loss of earnings.
Negative equity
Where the property has a value which is lower than the loan(s) secured against it.
Non status
A mortgage arranged under Non Status terms where evidence of income is not necessarily a requirement.
Offset Mortgages
A form of mortgage where you can link your savings and/or current account , and, instead of earning interest on your savings, you use the equivalent to reduce your mortgage debt. This can reduce your monthly payment and significantly shorten the term of your mortgage
Personal Pension
This is a structured savings and investment plan designed to provide you with an income on retirement. As you can take some of the plan as cash it could be used to help repay an interest-only mortgage.
Quote
This could refer to either your mortgage quote or your protection quote or, more helpfully, a quote for your protected mortgage, so that you can see all the important details in one place. See “Key Facts Illustration”.
Remortgage
A new mortgage which might be with a different lender, or the same lender at the end of a particular period such as a fixed interest rate, even though you are not moving home. It can be of the same size, bigger or smaller.
Repayment mortgage
Sometimes called a Capital and Interest mortgage, with a repayment mortgage your monthly repayments consist of both interest on the loan plus a portion of the capital itself. At the end of a repayment mortgage you will owe nothing and own the home.
Sealing fee
See “Exit fee”
Searches
These are checks carried out during the Conveyancing process to determine any planning proposals or other matters which might affect the purchase or future sale of the property.
Self certification
Designed primarily for the self-employed, this is a special arrangement that allows the borrower to certify their own income. However, don’t think for one minute that just because you’re self-employed, you have to have a self-certified mortgage as they can be more expensive. Our brokers can discuss this with you.
Shared ownership –
these mortgages help when you can’t quite afford the property you want by letting you buy part of it and rent the other part.
Standard variable rate
The interest rate applied to the mortgage account when no other overriding scheme such as a fixed rate is in force. It fluctuates and used to follow the Bank of England base rate. In recent times the link between base rate and standard variable rate has loosened to the extent that variable rates have increased even when base rates have been lowered.
Term
The period of years over which you take the mortgage.
Title deeds
Documents that show proof of ownership, now recorded electronically at the Land Registry rather than in large paper documents.
Tracker mortgage
The mortgage interest rate is linked to the Bank of England base rate and will move up and down with it, whether below, exactly on or above it.
Transfer deed
The document that transfers ownership from the seller to the buyer.
Valuation Survey
All lenders will require a basic survey to be undertaken on the property before issuing the mortgage offer. The lender will want to know that the property is worth what you think it’s worth and is therefore adequate security for the amount of the mortgage. It’s purely for the lender’s benefit but you get to pay for it unless a particular product throws it in for you for free.
Vendor
The seller.