jargon buster

A

Adverse Credit
This term is used if there have been past problems with credit, for instance late payment, bankruptcy or County Court Judgements.

Advice
A recommendation about the most suitable mortgage for you, made by an adviser regulated by the FSA.

Agreement in principle
A certificate which some lenders will give you that shows the amount they will probably be prepared to lend you. This is not a guarantee, but can be helpful when signing up with estate agents.

Annual Percentage Rate (APR) or Overall Cost for Comparison
The APR shows the true, total cost of borrowing and allows you to compare offers from different lenders. The APR takes into consideration all payments, such as interest payments, repayments of capital, all costs and any fees based on projections for the payments applicable during the term of a mortgage.

A cont.

Annual Statement
A statement from your mortgage lender, sent each year, detailing what you've paid and what you still owe, among other things.

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

Arrangement Fee
Some mortgage products have an Arrangement Fee; this is a fee payable on the product you’ve chosen to the lender, for arranging the mortgage. The fee can be added to the amount you want to borrow if you wish, although if it is added you will pay interest on this additional amount throughout the life of your mortgage.

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

B

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 mortgage used to buy property which is to be used solely for the purposes of renting out to tennats.

Bank of England Base Rate
The Bank of England Base Rate is the rate of interest set by the Bank of England.

C

Capped Mortgage
A capped mortgage has a maximum rate of interest that can be charged for a specified period.

Cashback Mortgage
A mortgage that comes with a cash sum (often a percentage of the amount being borrowed).

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.

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 (if purchasing a new property).

C cont.

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

Conveyancing
This is the legal process of transferring ownership of a property. It includes negotiating and agreeing the contract for buying and selling your home.

D

Decreasing Term Assurance
Mortgage life assurance is designed specifically to protect a repayment (capital and interest) mortgage. The cash lump sum payable is designed to help pay off the outstanding balance on your mortgage. If you have an interest only mortgage you can use level term life assurance to cover your mortgage amount.

You choose the amount of cover you need and the length of the plan. The premiums you pay remain the same throughout the plan term, however the cash lump sum payable decreases to reflect your decreasing mortgage loan. The plan has no cash-in value at any time.

Deposit
The amount of money that you're putting into buying a home (not including the mortgage money you're borrowing).

Discounted Rate Mortgage
This has a discounted variable rate of interest for a set period, after which the rate will increase.

E

Early Repayment Charge
A charge you may have to pay if you break off a mortgage deal - by paying it back early and/or moving to another lender.

Equity
The difference between what is owed on a mortgage and the property’s value on the market.

Exchange of Contracts
This is the stage in England and Wales at which buyer and seller have legally committed themselves to the purchase deal.

F

Fixed Rate Mortgage
An interest rate that is fixed (ie it doesn't move up or down) for a set period of time.

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

FSA
The Financial Services Authority - the UK's financial services regulator.

Freehold
A term which means that you own the property and the land it is situated on.

Further Advance
A situation whereby the lender makes available another loan and under which both loans are included within first charge on the property.

G

Gazumping
This is when another potential buyer puts in a higher offer for the property after your offer on the same property has been accepted.

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.

H

Higher Lending Charge (HLC)
A Higher Lending Charge is a charge which you may have to pay if you are borrowing a high percentage of a purchase price or property valuation. This charge may either be added to the loan or deducted from the advance on completion.

Homebuyer's Report or Homebuyer's Valuation
A more detailed home inspection than a basic valuation carried out by a surveyor. A report is given showing the condition of the house, its current market value and any urgent repairs that may need to be completed.

Homeowner Loan
A further loan secured on your existing property for any purpose.

Household Insurance
An insurance policy that protects against loss or damage to the property caused by fire, some natural causes and acts of vandalism.

I

Income Multiples
The factor by which your earnings are multiplied to find out how much you can afford to borrow.

Initial Disclosure Document
A document giving information about the scope and nature of the services offered by Bollington Moeny.

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.

Investment Vehicle
An investment vehicle is needed if taking out an interest only mortgage. This could be an endowment policy, personal pension or ISA.

K

KFI (Key Facts Illustration)
The KFI summarises all the important features of the mortgage and must be clear, fair and not misleading. It must be presented in a standard way, so you can check the cost and terms of the mortgage and compare it with other similar mortgages.

L

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

Level Term Assurance
This type of life assurance policy provides a guaranteed lump sump in the event of death that can be used to repay a mortgage over a fixed term. It is often used to protect an interest only mortgage.

Loan to Value (LTV)
This refers to the amount you are borrowing as a percentage of the property value.

M

Mortgage
A loan made against the security of a property.

Mortgagee
The lender in a mortgage.

Mortgagor
The borrower in a mortgage.

Mortgage Offer
Once your mortgage application has been assessed, the lender will send a Mortgage Offer which will show the amount being borrowed and on what terms. A copy of this document is also be sent to the solicitor.

N

Negative Equity
Where a mortgage is greater than the value of the property.

O

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 charges for overpayment.

P

Payment Holiday
A payment holiday is an agreed period of time when you can take a break from making payments. You can take a payment holiday up to the extent of any previously accured overpayment (when not used to reduce the mortgage term). Payment holidays ususally require notice and the approval of your lender.

R

Re-mortgaging
Moving mortgage from one lender to another without moving house.

Repayment Mortgage
Mortgage repayments on these loans represent both interest and a portion of the capital owed each month. This means that your outstanding mortgage balance will reduce year on year over the term of the loan.

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

Right-to-Buy mortgages
Mortgages for council tenants who qualify to buy their home under the Government's Right-to-Buy scheme.

S

Self Certification
A mortgage whereby the borrower provides confirmation themselves of their income, rather than from an employer or company accounts. Typically the lender will charge higher rates of interest, or require a larger deposit.

Stamp Duty Land Tax
A tax which home buyers must pay on properties above a government set figure.

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 Rate (SVR)
This is the standard variable mortgage interest rate that is offered by a lender. It is usually the rate that accounts revert to after a fixed, capped or discount product ends.

T

Term
The period of time between the start and finish of the mortgage loan.

Tracker mortgage
A Tracker mortgage is a variable rate mortgage where the interest rate is linked directly to the Bank of England Base Rate. So whenever the Bank of England Base Rate changes, the rate on the tracker mortgage are guaranteed to change by the same amount, within an agreed period.

U

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

V

Valuation Fee
Whether you are purchasing or re-mortgaging a valuation of the property will have to be undertaken, to ensure it provides adequate security for the lender. There is often a charge for this valuation and it can increase with the valuation or purchase price.