Glossary

APR: Annual Percentage Rate. An easy way of comparing credit terms. It takes into account most of the up-front and on-going costs involved in taking out a mortgage.

 

Arrangement Fee: A fee charged by the lender in return for a mortgage deal.

Buildings Insurance: This covers the cost of rebuilding/repairing the structure of the property. Lenders insist you have enough buildings insurance before they give you a mortgage.

 

Buildings and Contents Insurance: This is combined insurance which covers the cost of building or replacing the structure of the property and also the cost of replacing the damaged contents. This may be cheaper than taking out two separate policies.

Capital and Interest Mortgage: See Repayment Mortgage

 

Capped Rate Mortgage: An interest rate charged for a set period of time which can go up or down with the variable rate, but cannot go above a certain rate.

 

Cashback Mortgage: A mortgage that gives you money back, usually upon completion. The amount may be a fixed sum or a percentage of the amount borrowed.

 

Completion: When the sale and purchase of the property are finalised and you become the legal owner of the property.

 

Contracts: Legal documents between the purchaser and the vendor, agreeing to buy and sell the property.

 

Credit Search: A check made by the lender, using a specialist agency, to find out whether you have repaid previous loans, credit card bills etc, and whether you have any County Court Judgements against you.

 

Deposit: The amount of money you put towards buying a property at the outset.

 

Disbursements: Fees incurred by solicitors, such as stamp duty, land registry fees and local authority searches.

 

Discount Term: The time that a discounted rate applies to a variable-rate mortgage. This term may be for a set period of time, or until a fixed date.

Early Redemption Penalties: A fee charged by the lender if you pay off all your mortgage before an agreed date, or if you move the loan to another lender.

 

Endowment: A life assurance policy designed to produce a lump sum, usually at the end of your mortgage term.

 

Exchange of Contracts: When the vendor and purchase swap identical contracts that confirm the price and the completion date, plus which fixtures and fittings will be left behind. At this point the deal becomes legally binding and if either party pulls out they may have to pay compensation.

Fixed Rate: The interest charged on the mortgage is for a set amount for an agreed period of time.

 

Flexible Mortgage: A type of mortgage where you can make extra payments and even under-payments, without paying a charge or penalty.

 

Further Advance: An additional amount borrowed, with the mortgaged property as security.

 

Gazumping: This is when the vendor accepts an offer on a property and then accepts a higher offer from another purchaser.

 

Gazundering: This is when the vendor accepts an offer, and just before contracts are exchanged the purchaser puts in a lower offer.

HM Land Registry: The official organisation that keeps records of properties in England and Wales. Transfer of ownership or interest in the property needs to be registered.

 

Homebuyers Report: This is when a professional surveyor checks the structural condition of a property. It is more detailed than a valuation but less than a structural survey. It will identify possible problem areas, which may give the purchaser a chance to negotiate a lower price.

Income Multipliers: The amount of money that lenders will offer is usually calculated by multiplying your annual income by a set figure. A single applicant can usually borrow 3 x annual income; for two applicants the multipliers can be 3 x main income plus 1 x second income, or 2.5 x joint income.

 

Income References: Confirmation from your employer that you earn the amount you claim in your application. Accountants may also give confirmation of income if you are self-employed.

 

Interest-Only Mortgage: This mortgage does not pay off any of the capital borrowed, just the interest. The outstanding mortgage is paid off using the proceeds of a separate investment plan – endowment, pension, PEP, ISA etc.

 

Loan to Value: The size of the mortgage as a percentage of the value of the property.

Mortgage: A loan to buy a home.

Mortgage Indemnity Guarantee/Maximum Advance Fee: This is a guarantee that covers that lender in case your property is repossessed and the lender cannot get their money back.

Negative Equity: This is where the money you owe on your mortgage is greater than the value of the property.

 

Non-Status Mortgage: This means the lender does not need employment or income references from you. This type is usually offered to self-employed people.

 

Percentage Advance: Size of the mortgage worked out as a percentage of the price you are paying for the property, or valuation.

Remittance Fee: A charge made by the lender for sending the mortgage funds to your solicitor when the purchase is just about to complete.

 

Remortgage: A replacement mortgage on a property you already own.

 

Repayment Mortgage: Your monthly go partly towards paying the outstanding mortgage sum, and partly towards paying the interest on the sum. Also known as a capital and interest mortgage.

Sealing Fee: A charge made by lenders to seal and release the mortgage deed when you repay the mortgage.

 

Searches: Checks carried out during conveyancing, using Local Authorities and other local organisations. These searches check for planning proposals or other matters that could affect the value of the property.

 

Self-Certified: You confirm how much you earn and the lender does not need any references.

 

Stamp Duty: A 1% tax you pay on properties which cost between £59,999 and £249,998. For properties between £249,999 and £499,998 the tax rises to 2.5%. Over £499,999 and the tax is 3.5%.

 

Structural Survey: This is the most in depth property check. Carried out by a professional surveyor, it should detect most hidden faults, and provides the greatest protection for the potential buyer.

 

SVR: Standard variable rate. This is the interest rate charged by the lender, which can go up or down.

 

Term: A period of years, usually 20-25, over which you spread your mortgage repayments.

 

Tie-in Period: As a condition of a special mortgage offer (fixed/capped/ cashback etc) you may have to agree to stay with the lender at their standard variable rate for a further period. If you move elsewhere during this time, you may be liable for an early redemption charge.

Valuation: A simple check of the property in order to find out how much it is worth and whether it is suitable to secure a loan on.

 

Authorised and Regulated by the Financial Services Authority