Glossary of terms
Advance
The amount of money you borrow from the lender.
Adverse Credit
Term used if the borrower has a poor credit history. This could include previous mortgage or loan arrears, defaults, bankruptcy, or County Court Judgement's.
Agricultural tie
Restriction placed on certain rural properties which requires that the land adjoining a residence be actively used for farming.
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 or loan payments which have not been paid on time and have become overdue
Arrangement Fee
The fee you pay your Lender in return for them providing you with a mortgage. This is usually required with your application. Arrangement fees are usually charged when you take out a discount, cashback, or fixed rate mortgage.
Assured tenancy
The landlord can charge a market rent (the current rate for similar property in that area) and take back the property under certain conditions, as set out in the Housing Acts of 1988 and 1996
Balance
The amount you owe, after taking payments (credits) and any debits into account.
Bank of England base rate
The Bank of England 'repurchase' or 'repo' rate which is main factor influencing interest rates charges by lenders.
Brokers Fee
A fee charged by an intermediary or advisor for sourcing the most appropriate mortgage for the borrower.
Buildings insurance
Covers the house you are buying against damage - take it out from the day you exchange contracts.
Buy to Let
A mortgage meant for those who wish to purchase a property to rent out to others.
Capital
The balance of your mortgage loan excluding costs and interest outstanding.
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.
CCJ (County Court Judgment)
A judgement reached in the County Court generally realted to non payment of a loan, mortgage etc debt in general. If you pay off the debt, the CCJ will be satisfied and a note is put on your records that states this.
Collateral
The property. The lender can take possession and sell it if the borrower does not keep up the mortgage payments.
Completion
The term used when the seller and buyer exchange the finances required to buy a property through their respective solicitors. At exchange of contracts a deposit, usually 10%, will have been paid. At this point the buyer becomes legal owner of the property.
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.
Conveyancing
The legal work involved in the sale and purchase of land or property.
Daily interest
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.
Deposit
A percentage of the price of the property, paid when contracts are exchanged.
Drawdown date
Drawdown is the date when the mortgage starts.
Early redemption charge (ERC)
If you decide that you want to sell your property or remortgage then you will be redeeming you mortgage early. Most lenders charge a penalty fee, especially during any period of a fixed, capped or discounted rate. Be sure you are clear about any potential penalties when you are about to take on a mortgage.
Equity
The amount of value in a property that isn't covered by a mortgage
Endowment mortgage
An interest only mortgage supported by an endowment policy.
Endowment policy
A savings policy with life assurance often taken out at the start of a mortgage to run for the same term. The Life Assurance company invests the premiums over the term which should provide a lump sum at the end of the policy. This money can then be used to repay all or part of the mortgage. If the life assured dies during the term of the policy a sum equal to the mortgage should pay out to repay the loan.
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.
Final reminder
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.
Fixed Rate
A set interest rate on a mortgage fixed for a period of time. This varies from lender to lender.
Gazumping
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.
Higher Lending Charge
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. (Previously referred to as Mortgage Indemnity Premium or lender's risk fee.)
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.
Intermediary
A mortgage broker or advisor who finds the most suitable mortgage for a borrower and arranges the mortgage on their behalf.
Initial interest
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.
Land Registry fee
A fee paid to the Land Registry to register ownership of a property.
Leasehold
If you buy a leasehold property you don't own the property rather the right to live there for a specified period of time, however much time remains on the lease. The owner of the property is called the freeholder or landlord.
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.
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.
Mortgagee
The company or organisation that lends you the money.
Mortgagor
The person taking out the mortgage.
Mortgage
Has a specific meaning in law but has come to mean a loan with property as security.
Mortgage term
The term over which you agree to repay the loan.
Negative equity
When the value of the property has fallen and is less than the loan secured on it.
Non status
Loan granted without making enquiries as to the borrower's income or credit history.
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.
Payment Holiday
An agreed period during which the borrower makes no mortgage payments.
Principal
The amount of the loan on which interest is calculated.
Right to Buy
A tenant in a council owned property may purchase the property at a discount depending on length of their tenancy.
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.
Second charge
A legal charge that ranks behind a first charge, possibly to secure a second mortgage, or a guarantee given to secure other borrowings.
Second mortgage
A further loan on a property which ranks after the first charge mortgage.
Security
The property. The lender can take possession and sell it if the borrower does not keep up the mortgage payments.
Self Certified
If it is difficult or inconvenient for you to provide this evidence of your income, you can choose to self-certify your income. This involves signing a declaration which states your income.
Stamp Duty
Tax paid by the buyer of a property set at 1% for properties over £60k, 3% for properties over £250k and 4% for properties over £500k.
Structural survey
The most detailed check of the structure of a property. This is carried out by professional surveyor and should uncover any defects or faults with the building.
Studio flat
Flat comprising a single habitable room, plus bathroom and possibly separate kitchen.
Tenancy
A legal written agreement between a landlord and tenant that sets out the terms of the rental.
Title deeds
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.
Unencumbered
Where the property is owned outright and no mortgages or loans are secured against it.
Underwriting
The process of evaluating a loan application to determine the risk involved for the lender. This involves an analysis of the borrower's creditworthiness and the quality of the property itself.
Valuation Fee
The fee paid by a borrower to cover the cost of the lender checking that the property is suitable security for the mortgage.
Variable Rate
A type of interest rate the lender can charge. It goes up and down and your repayments change accordingly.
Vendor
The person selling the property.
The amount of money you borrow from the lender.
Adverse Credit
Term used if the borrower has a poor credit history. This could include previous mortgage or loan arrears, defaults, bankruptcy, or County Court Judgement's.
Agricultural tie
Restriction placed on certain rural properties which requires that the land adjoining a residence be actively used for farming.
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 or loan payments which have not been paid on time and have become overdue
Arrangement Fee
The fee you pay your Lender in return for them providing you with a mortgage. This is usually required with your application. Arrangement fees are usually charged when you take out a discount, cashback, or fixed rate mortgage.
Assured tenancy
The landlord can charge a market rent (the current rate for similar property in that area) and take back the property under certain conditions, as set out in the Housing Acts of 1988 and 1996
Balance
The amount you owe, after taking payments (credits) and any debits into account.
Bank of England base rate
The Bank of England 'repurchase' or 'repo' rate which is main factor influencing interest rates charges by lenders.
Brokers Fee
A fee charged by an intermediary or advisor for sourcing the most appropriate mortgage for the borrower.
Buildings insurance
Covers the house you are buying against damage - take it out from the day you exchange contracts.
Buy to Let
A mortgage meant for those who wish to purchase a property to rent out to others.
Capital
The balance of your mortgage loan excluding costs and interest outstanding.
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.
CCJ (County Court Judgment)
A judgement reached in the County Court generally realted to non payment of a loan, mortgage etc debt in general. If you pay off the debt, the CCJ will be satisfied and a note is put on your records that states this.
Collateral
The property. The lender can take possession and sell it if the borrower does not keep up the mortgage payments.
Completion
The term used when the seller and buyer exchange the finances required to buy a property through their respective solicitors. At exchange of contracts a deposit, usually 10%, will have been paid. At this point the buyer becomes legal owner of the property.
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.
Conveyancing
The legal work involved in the sale and purchase of land or property.
Daily interest
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.
Deposit
A percentage of the price of the property, paid when contracts are exchanged.
Drawdown date
Drawdown is the date when the mortgage starts.
Early redemption charge (ERC)
If you decide that you want to sell your property or remortgage then you will be redeeming you mortgage early. Most lenders charge a penalty fee, especially during any period of a fixed, capped or discounted rate. Be sure you are clear about any potential penalties when you are about to take on a mortgage.
Equity
The amount of value in a property that isn't covered by a mortgage
Endowment mortgage
An interest only mortgage supported by an endowment policy.
Endowment policy
A savings policy with life assurance often taken out at the start of a mortgage to run for the same term. The Life Assurance company invests the premiums over the term which should provide a lump sum at the end of the policy. This money can then be used to repay all or part of the mortgage. If the life assured dies during the term of the policy a sum equal to the mortgage should pay out to repay the loan.
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.
Final reminder
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.
Fixed Rate
A set interest rate on a mortgage fixed for a period of time. This varies from lender to lender.
Gazumping
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.
Higher Lending Charge
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. (Previously referred to as Mortgage Indemnity Premium or lender's risk fee.)
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.
Intermediary
A mortgage broker or advisor who finds the most suitable mortgage for a borrower and arranges the mortgage on their behalf.
Initial interest
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.
Land Registry fee
A fee paid to the Land Registry to register ownership of a property.
Leasehold
If you buy a leasehold property you don't own the property rather the right to live there for a specified period of time, however much time remains on the lease. The owner of the property is called the freeholder or landlord.
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.
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.
Mortgagee
The company or organisation that lends you the money.
Mortgagor
The person taking out the mortgage.
Mortgage
Has a specific meaning in law but has come to mean a loan with property as security.
Mortgage term
The term over which you agree to repay the loan.
Negative equity
When the value of the property has fallen and is less than the loan secured on it.
Non status
Loan granted without making enquiries as to the borrower's income or credit history.
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.
Payment Holiday
An agreed period during which the borrower makes no mortgage payments.
Principal
The amount of the loan on which interest is calculated.
Right to Buy
A tenant in a council owned property may purchase the property at a discount depending on length of their tenancy.
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.
Second charge
A legal charge that ranks behind a first charge, possibly to secure a second mortgage, or a guarantee given to secure other borrowings.
Second mortgage
A further loan on a property which ranks after the first charge mortgage.
Security
The property. The lender can take possession and sell it if the borrower does not keep up the mortgage payments.
Self Certified
If it is difficult or inconvenient for you to provide this evidence of your income, you can choose to self-certify your income. This involves signing a declaration which states your income.
Stamp Duty
Tax paid by the buyer of a property set at 1% for properties over £60k, 3% for properties over £250k and 4% for properties over £500k.
Structural survey
The most detailed check of the structure of a property. This is carried out by professional surveyor and should uncover any defects or faults with the building.
Studio flat
Flat comprising a single habitable room, plus bathroom and possibly separate kitchen.
Tenancy
A legal written agreement between a landlord and tenant that sets out the terms of the rental.
Title deeds
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.
Unencumbered
Where the property is owned outright and no mortgages or loans are secured against it.
Underwriting
The process of evaluating a loan application to determine the risk involved for the lender. This involves an analysis of the borrower's creditworthiness and the quality of the property itself.
Valuation Fee
The fee paid by a borrower to cover the cost of the lender checking that the property is suitable security for the mortgage.
Variable Rate
A type of interest rate the lender can charge. It goes up and down and your repayments change accordingly.
Vendor
The person selling the property.