Jargon Buster

 

APR
Is short for ‘Annual Percentage Rate’ which helps you compare the cost of different mortgage deals. It considers the amount of interest you will pay, the term of the mortgage, and certain other charges such as any arrangement fees etc.

Arrangement Fee
Some lenders will charge a fee if you take a certain product to cover the work involved in setting up your mortgage or for certain mortgage rates.

Bank of England Base Rate
This is announced from time to time by the Bank of England’s Monetary Policy Committee. Lenders use this rate for their tracker rate products & indicate the level of interest rates they will set in the future.

Buildings Insurance                                                                                                                                             

This is insurance that protects your property against hazards such as fire, flood and subsidence and it is mandatory to have it in place when purchasing with a mortgage.

Buildings Survey
This is a report following an inspection of the property. It will give you a comprehensive account of the condition of the property, describing any structural or other defects. There are various levels of surveys such as a homebuyer’s report and/or full structural survey.

Capital and Interest Mortgage
This is also known as a repayment mortgage. Your monthly payments gradually pay off the money (capital) you’ve borrowed and also cover interest on the amount outstanding.

Cashback
Some mortgage lenders offer products that come with cashback, meaning you get a cash lump sum upon completion.

Completion
This the day that you get the keys to your new property which is now legally yours.

Contents Insurance
Protection for contents in your home which can include furniture and personal possessions – in case they’re stolen, lost or damaged.

Conveyancer
A legal practitioner who deals with various aspects relating to land and/or property purchase as well as other legal matters relevant to property.

Credit Scoring
The majority of lenders will conduct credit scoring upon submission of a mortgage in principle. Certain lenders have certain levels/scores that need to be met to accept your application.

Daily Interest
With this method of calculating mortgage interest, it is charged on the amount of mortgage outstanding from day to day. This means lenders consider any changes in the amount you owe on a day-to-day basis.

Deposit
This is the amount of money you pay on exchange of contracts as part of your initial contribution to the purchase of your home. 

Discharge Fee
This is usually an administration fee payable to lenders for releasing their mortgage over the property once you’ve paid off your loan and closing the mortgage.

Discounted Rate
This means interest is charged at the lender’s variable base rate that applies to the mortgage, less a discount for a set period.

This means the rate, and your monthly payment, will vary – up or down – whenever the variable base rate changes, but will remain below the variable base rate during the discounted rate period.

 

Equity
The difference between the amount you owe on your mortgage and the current value of your property.

Exchange of Contracts
The swapping of contracts between a buyer’s conveyancer and a seller’s conveyancer. Once you have exchanged contracts you are both legally bound to the transaction.

First Charge
Most mortgage lenders lending money to enable someone to buy their home would require a first charge. This means the lender has first call on any funds available from the sale of the property to clear the outstanding mortgage debt.

Fixed Rate
A rate of interest guaranteed not to change over a fixed period meaning your monthly repayments also remain the same over this period.

Freehold
A form of legal title to land which means you are the absolute owner of the property and the land it’s on.

Ground Rent
The annual fee a leasehold pays a freeholder (usually low). Ground rent generally applies to flats and other leasehold properties.

Guarantor
Someone who guarantees to repay your mortgage if you can’t borrow enough to buy the home you want. Parents, for instance, may act as guarantors for their children when they buy their first home.

Income Multiplier
The way lenders work out how much you can borrow is usually by multiplying your gross annual salary along with other committed monthly expenditure.

Interest Only Mortgage
You only pay interest to your lender throughout the mortgage term and your mortgage balance doesn’t reduce. At the same time, you put money into a separate investment which should grow and pay off the mortgage as scheduled. You must make sure you keep premiums up to date on any mortgage investment products. Some lenders will consider the sale of the mortgaged property as a suitable method of repayment.

Leasehold
This means you own a property for a set number of years. When the lease expires, the land the property stands on returns to the freeholder. Flats are commonly sold as leaseholds.

Local Authority Search
Part of the conveyancing process is when you buy a property. It gives details of any matters which, from the local council’s point of view, affect the property. It reveals any proposed changes to the local area, such as road improvements, and details any planning permission for the property. Most properties now have a Home Information Pack available (HIP) and this will include the search along with an energy performance rating.

LTV
Loan to value is the proportion of the value or price of the property (whichever is the lower), that you borrow on a mortgage. For example, a £63,000 mortgage on a house valued at £70,000 would mean an LTV of 90%.

Mortgagee

The lender.

                                                                                                                                                                                 

Mortgagor

The borrower

 

Mortgage Deed
A legal document establishing a mortgage on a property. The ownership, mortgages & any legal notes regarding the property are noted at the Land Registry.

Mortgage Term
The length of time over which you agree to pay back your mortgage – usually 25 years, but it can be longer or shorter depending on your age and monthly budget.

Overpayments
When you’re allowed to pay more than your normal monthly payment, you can pay off your mortgage earlier if you want and save on interest charges. This varies depending on which mortgage product you take.

Premium
The amount you pay regularly, usually for an insurance policy.

Remortgaging
When you arrange a new mortgage on your home, with a different lender and use the new mortgage to pay off the old one.

Early Repayment Fees
With some mortgages, you have to pay a repayment fee if certain things happen. For example, if you pay off some or all your mortgage, or you transfer to a different mortgage rate, before the end of the special rate.

Stamp Duty – Land Tax (SDLT)
Government tax you must pay on the purchase price of a property worth £250,000 or more. There are concessions for first-time buyers.

Sum Assured
The amount paid out on the death of a policyholder.

Total Amount Payable (TAP)
The total cost of repaying a mortgage over the loan period, including the initial money borrowed, interest charges, etc.

Tracker Rate
Tracker rates vary in line with changes to the Bank of England base rate. During the tracker rate period, any changes to the Bank of England base rate are passed on to you in full. Normally the month following the base rate change.

Underpayments
You can underpay up to any previous overpayments. You can pay less than your normal monthly mortgage payments for a limited period, but you must build up a fund of overpayments first.

Valuation
Arranged by your lender to find out if the property is worth the amount you’ve agreed to pay, and therefore suitable to lend a mortgage on. This is for the lender’s purposes only.