Allows the lender to collect the balance of a loan if a borrower misses one or more payments.
Accident, Sickness And Unemployment Insurance
Insurance cover arranged by the borrower to protect against inability to meet mortgage payments. Unemployment cover is restricted to cover certain events only. Exclusions to this insurance include dismissal due to professional misconduct or taking voluntary redundancy. The accident and sickness cover does not cover any act of self-injury or any injury related to the use of alcohol or drugs.
Additional Principal Payment
An extra payment each month to help reduce a debt.
When lending exceeds a certain loan-to-value, lenders may require additional security. The simplest form of additional security is a single mortgage loan-to-value. However, other security such as cash or shares may be accepted as security.
Date on which interest rates change for variable rate mortgages.
Any fee charged by a bank or other financial institution to cover costs beyond day to day running of an account.
A legal statement made in writing and in the presence of a solicitor or other legal professional. A fee charged when a mortgage lender is required to swear an affidavit. This is a written legal statement to a solicitor in connection with mortgage arrears.
Agreement In Principle
This means you have been accepted for a mortgage or other financial product, but it will depend on issues such as a valuation report and confirmation of employment.
Annualised Percentage Rate (A.P.R)
An explanation to identify the true cost of borrowing and a standard in order to provide a method of comparing costs of different loans. Initially mortgage lenders were not obliged to quote an APR due to its inappropriateness in comparing mortgage loans. APR was designed to reflect the cost of different types of hire-purchase contracts that were quoted on flat and fixed basis giving headline rates which were often half the APR. It is a legal requirement that a true APR figure be provided with any loan.
Another term for a capital interest repayment mortgage.
Any charges made for an application.
Applied Or Nominal Interest Rate
Rate used to calculate interest due.
See Annualised Percentage Rate.
A fee charged by a lender for setting up the loan. Normally payable upon completion but may sometimes be added to the loan.
A late payment or a payment after the event. For example, most salaries are paid monthly in arrears - i.e. the first payment is one month after commencement of work.
Charges for any late payments. See late payment fee.
This is the initial starting price for which the property owner is looking to sell their property. It is rare for the asking price to get paid, except in a rapidly rising property market.
See accident, sickness, or unemployment insurance.
The process whereby something is bought at a price that arises from a process of bidding. If you bid for and win a home at an auction you will be legally bound to buy the house.
These are a set of business accounts that have been ratified by an accountant. Self employed people may need to provide three years worth of figures checked by an auditor to be able to get a mortgage.
Australian Style Mortgage
A form of mortgage where the repayment period is reduced due to interest being calculated daily.
A court official who may repossess goods or property belonging to any person or business which fails to maintain their credit payments and who does not come to any agreement to pay with their creditors .
The process of declaring an individual bankrupt. Bankruptcy remains on your credit rating for seven years and limits a person's ability to borrow.
A debtor is discharged from bankruptcy after a period of approximately three years and his debt is treated as paid. However, credit referencing agencies normally identify former bankrupts for up to 15 years after their discharge.
The minimum lending rate was abolished in 1981, and so the banks introduced the base rate, used to refer to the mortgage lender's standard variable rate.
Basic Annual Income
The annual income earned that is guaranteed regardless of the individual's or his or her company's performance. This is important when establishing a borrower's ability to pay, especially for sales people or other employees where a significant part of their salary package is made up of commissions, bonuses or share options .
A basis point is 1/100th of 1%. For example the difference between a loan at 9.00% and a mortgage at 9.12% is 12 basis points.
An individual's total (gross) income before taxes are deducted.
Time frame in which the interest rate of a mortgage is discounted. (See fixed or capped).
A loan that requires payment every two weeks, therefore reducing the term and cost.
Colloquial term for someone with a poor credit score, originating from Gentlemen's clubs which used to black ball people they did not want as members. Technically, there is no such thing as being blacklisted, although some people clearly have better credit scores than others. Simply being declined for a credit application does not mean that someone is blacklisted, it just means that they do not meet the criteria for that particular institution at that time.
A fee charged by a lender to secure mortgage funds, payable at the time the loan application is submitted and normally applies only to special offer loans, such as fixed or capped rates.
Breach Of Contract
Failure to fulfil the term and conditions of a contract.
Breach Of Covenant
Failure to obey a legal agreement.
Short-term loan used as coverage when buying a new property before selling an existing one.
A third party individual who attempts to find the best available financial or other package. Brokers could be affiliated with a larger network in finance or they may be independent.
A fee charged by an intermediary to the applicant for negotiating a loan.
Trade organisation for building societies - the Building Societies Association.
An essential insurance policy which covers the structure of the building. Where the property is leasehold the buildings insurance will normally be arranged by the freeholder and the cost charged on to the leaseholder within the service charges payable.
Buy To Let Mortgage
A mortgage for a property which the owner intends to let out to students or other tenants. See commercial mortgages.
Citizens' Advice Bureau. A voluntary service provided in most major towns which offers free advice to individuals on financial and other matters. A very useful starting point for anyone experiencing credit problems.
A clause in a loan agreement that allows a lender to ask for the outstanding balance at any time.
Cap And Collar
See capped rate.
The act of remortgaging a property based on a higher value compared to the original purchase price. The capital raised is the amount left over after repayment of the original loan is deducted from the new loan. Some lenders will also take into account home improvement projects as part of the remortgage, if they are likely to significantly raise the value of the property.
The mortgage interest rate will not exceed a certain value during a certain period of time, although it will fluctuate above and below the current level. Some capped products will have a ceiling and a floor between which the rate payable may move; such loans may be known as cap and collar mortgages.
The APR charged by credit cards for cash advances, which is often higher than the purchase APR. Note that the cash APR also includes the cash advance handling fee as part of the calculations.
Cash Back Mortgages
Cash back mortgages provide you with a single lump sum of cash immediately on completion. The amount of cash is usually calculated as a percentage of the overall loan amount, though it can be a set figure. The percentage of the loan that is given as cash back can be as high as 5%, though amounts in the region of 1 to 3% are more common.
A discount offered to a purchaser in a store for paying in cash, as the retailer will avoid paying any transaction charges and will get the funds instantly. Larger multiple stores are unlikely to offer cash discounts, as their transaction charges are calculated from head office.
Formal notice asking a court to suspend action until the party which filed the challenge can be heard.
From the Latin "let the buyer beware". A legal and moral obligation on purchasers of goods to ensure that they are not stolen, and in the case of sold as seen goods, that they are of a reasonable quality.
See Competition Commission.
Act of legislation to clearly define the rules regarding money lending.
If payments on a financial agreement are not made, a magistrate may issue a county court judgment (CCJ) in the name of the individual. This greatly affects your credit rating.
Certificate Of Deposit
Certificates from a financial organisation declaring you have the funds available to pay the deposit.
Chartered Institute Of Arbitrators
The official body covering complaints relating to surveyors who are members of the RICS and ISVA professional bodies. All complaints which cannot be rectified directly with the surveyor in question should be referred here.
The process of lending to customers whose personal circumstances are less than ideal, due to lower income, debt problems or other issues.
Council of Mortgage Lenders.
See Council of Mortgage Lenders.
Where the loan is granted for commercial purposes, and is usually secured against commercial property, though residential property may be used. With a commercial mortgage there is a higher rate of interest, as it is a higher degree of risk for the lender.
A percentage of the overall sale price that is received by the selling party when acting on someone else's behalf.
Common Law Partner
A partner who cohabits with his or her partner, and who can gain a number of financial benefits from such partner, without actually being legally married.
The moment at which all the legal formalities of the purchase or mortgage are finalised and the funds are drawn down from the lender, and usually into the solicitors account.
The official date for completion of a sale of a house, when keys are actually transferred.
Interest on the interest.
Conclusion Of Missives
This is a Scottish term for exchanging contracts.
An insurance policy that has to be taken out as a condition of obtaining a loan. It must usually be taken out via the lender's agency. See compulsory products.
An historic area of a town in which properties are protected by the local authority. Planning regulations are particularly tight in conservation areas, although property values are usually much higher due to the attractiveness of the Architecture.
Constant Net Payment
A form of capital and interest repayment mortgage, where the monthly repayments remain the same throughout the term.
This is the insurance of property within your home i.e. furniture, clothing, personal possessions etc. While lenders will be keen to offer contents insurance to borrowers, it is not essential that you should have it from them, or at all. Some policies offer a wider, all-risks wording, whereas others offer much lower premiums for more basic cover. Make sure you are aware of whether your contents policy includes items in your cars, on student property, or when you are traveling; and ensure you do not end up paying twice. Contents cover is a separate type of insurance to buildings insurance, which covers the structure of your property.
The right a lender has to repossess a property if payments are not kept up on the mortgage or other loan secured on it.
A flat that has been converted from part of a larger property.
The legal documentation relating to the transfer of ownership of a property.
A fee charge by a solicitor or licensed conveyancer for arranging the necessary legal work in transferring the ownership of a property. The total cost of the legal work also includes profit cost, stamp duty, land registry fees and disbursements.
Entries on an individual's criminal records. In addition to affecting one's ability to get employment, some lenders may look at convictions when making a lending decision. A conviction for fraud would make an individual a particularly high risk to many financial institutions, whereas speeding or road traffic offences will affect motor insurance policies.
Shared ownership, a method of purchasing property in partnership with a housing association, where the borrower purchases part of the property and rents the rest from the housing association. The minimum purchase amount is 25% of the property value, and the rest may be bought in blocks of 25%. This arrangement is ideal for those whose personal circumstances prevent them from being 100% homeowners.
An annual fee paid to a local authority to cover essential services such as road maintenance, rubbish collection and leisure centres. Council tax is based on the value of the property according to set bands.
County Court Fee
Fee for when a lender provides information to solicitors regarding county court rules when payments are in arrears.
County Court judgment (CCJ)
A county court judgment is a judgment for debt in the county court. This debt does not appear in the credit register if this debt is settled within 30 days of the date of the judgment. Very few lenders are willing to offer loans to anyone with an outstanding or unsettled judgment, and even if the judgment has been settled many lenders are likely to refuse a mortgage or other credit application.
The risk that an insurance policy protects against, such as third party, fire and theft.
Companies used by lenders to establish the financial situation of an individual or company.
If a borrower has been bankrupt or has outstanding county court judgments they would be described as credit adverse.
Where an enquiry is made on the credit history of an applicant, normally by reference to one of the major credit agencies such as Equifax and Experian .
Credit Checking Agency
A service used by lenders to establish a level of risk involved in leading money.
Credit Crunch A credit crunch is a period in the economy, distinct from a recession or depression, but potentially heralding one or the other.
The history of a borrowers financial record.
The maximum amount of borrowing allowed on a credit card at any one time.
Rating used to establish risk involved in lending money. This is used in conjunction with credit history and financial status.
Credit Reference Agency
Companies that hold credit information one file.
A generalised way of assessing the credit application, carried out by scoring the answers given on an application. It is important that there are no missing answers on an application otherwise the result for the question becomes a negative.
A description of someone who is deemed by a lending institution to be a low risk to lend to (colloquial term). As with blacklisting, there is no such thing as a perfect credit score, or someone who is completely credit worthy, as there is always some element of risk involved when loans are made, and different institutions use different criteria when evaluating such risk.
Person or company to whom a debt is owed.
Critical Illness Insurance
Insurance cover for major illness, diseases and other potentially fatal medical conditions.
Where interest is applied on a daily basis instead of the usual monthly time frame.
Data Protection Act (1988)
Regulations introduced to protect the transfer of personal data within and between different organisations. Remember that every time you apply for a store loyalty card, credit facility or magazine subscription, you are handing over substantial amounts of personal data for organisations to trade in. While this data may enable them to make special offers which may be of use to you, it also means more opportunity to sell you products or services you would not otherwise have bought. If you are not the kind of person to say no easily, make sure you always tick the no marketing material box.
Replacing a number of existing loans with a single loan from a new lender which may reduce your monthly payments by spreading out a larger loan over a longer period of time, and reducing the interest rate being paid.
A method used by lenders to establish if a person is qualified to receive a mortgage or loan.
The document that proves you own the property. It will also show any land boundaries.
Deed Of Covenant
The document expressing the terms of a covenant (a binding agreement), which may typically be imposed by a lender to restrict certain activities, such as use of a house for commercial purposes, or sub-letting.
Deed Of Proxy
A document enabling one person to manage the financial and legal affairs of another individual.
Deeds Release Fee
This fee is charged by the lender for releasing the deeds of the mortgaged property and returning them to the owner or his solicitor, usually when the mortgage has been repaid.
When a payment or a series of payments are missed.
A letter served by a creditor to the borrower to say that a credit agreement has been breached, and that action must be taken by the individual to prevent the creditor seeking repayment via a County Court Judgement.
A time period on a loan during which no repayments need to be made. This is particularly popular with student and graduate loans, to enable young people to finish their studies, or to travel, before having to start making repayments. Buy now, nothing to pay until next year type offers in furniture and other stores also operate with deferral periods.
A type of loan where some or all of the interest owed by the borrower is added to the amount outstanding which therefore causes the borrower to owe much more than originally borrowed.
Not making payments at the correct time.
A loan whereby the borrower is behind on payments. If payments are not brought up to date within a set time frame the lender may foreclose proceedings.
An individual who depends financially on another person.
Depression A depression is a rare but extremely severe form of recession, marked by unemployment increases, restriced credit, shrinking output, bankruptcies, falling trade and volatile currency. Hyperinflation is a common element of a depression.
See deeds release fee.
Lenders who operate on lower overheads, through use of call centres, mailing houses, or internet based operations, instead of an expensive branch-based network. Although direct lenders.
Search fees, land registration, stamp duties are all examples of disbursement.
Person whose period of bankruptcy has ended.
A county court judgement that has been paid.
Time period in which reduced payments are offered.
Discount Purchase Price
The price of a property which has been reduced below the open-market value, such as in the case of a right-to-buy purchase or a builder's discount. Under right to buy legislation, properties are not offered at the open market value, but at a discount, and if the property is resold within a three-year period, some or all of the discount will have to be repaid.
The mortgage interest rate is lower than the current normal standard variable rate, but only for a certain period of time. Usually shown as a fixed percentage reduction to the lender's normal variable rate e.g. 2.00% discount for 2 years.
Income received from the department of social security towards the payment of mortgage or rent. They are used by a lender only in exceptional circumstances to confirm the ability to service a loan. Benefits are only paid after the first 39 weeks of an income support claim.
Early Payment Discount
A discount offered for payment of a bill before the due date. This is common practice with utility companies, as it saves the paperwork required in sending out reminders. However, paying by direct debit is usually cheaper.
Early Redemption Payment
Penalty charged by a lender for withdrawing from a mortgage before the date specified in the mortgage conditions. These penalties are usually associated with fixed or discounted loans.
Early Repayment Period
Period in which charges are levied by the lender when the mortgage loan is repaid before the end of the full term.
Effective Gross Income
Total income, including extra income that the lender considers when assessing a loan application, such as bonuses, rent payments, alimony or share dividends.
A written statement from an employer confirming the borrower's employment, giving details of salary and length of service. This is essential in assessing an employee's ability to repay the mortgage.
A life assurance policy into which you pay monthly premiums. The proceeds are free from all taxes as long as the policy conforms to all the qualifying rules. See also: with profit, unit linked, unitised with profits.
The share that you own in your home, i.e. The property value less the mortgage loan outstanding.
Increase in the equity you have in your home.
Particular mortgage lenders fund and administrate certain mortgage products that are only available whilst such mortgage products are funded and administered by a particular mortgage lender, they are available only from certain mortgage brokers or other particular distribution channels.
A person who executes the instructions in a will.
Loans and other repayments which are taken into account by lenders when you apply for a mortgage.
Extended Redemption Penalty
When a redemption penalty continues beyond capped and fixed rates.
An addition to any existing property in order to provide more space. Major extensions should always be drawn up by an RIBA registered Architect, and will require planning permission from the relevant local authority . See also: overdraft extension.
The amount charged by a lender, broker or other middleman for arranging a mortgage or property purchase. See arrangement fee, booking fee, Conveyancing fee, land registry fees, fees added to loan, IGP, stamp duty and valuation fee.
Fee Indemnity Guarantee Premium (Igp)
Fee indemnity guarantee premium (IGP) an insurance premium which insures the lender against any loss of money, e.g. If you default on your loan or get repossessed. This usually applies only if you borrow more than 70 per cent of the price asked for the property you are buying. Even though you have to pay for the insurance premium, it does not mean that you are covered by the insurance, the lender is.
Fees Added To Loan
The additional costs that are associated with arranging a mortgage and are incorporated into the amount you borrow, they may include indemnity guarantee premiums and arrangement fees. These fees that may be added vary with lender, and therefore care should be taken when the sum of the loan and any costs added to the loan may cause the total advanced to exceed a given loan to value ratio. See fee, arrangement fee, booking fee, conveyancing fee, land registry fees, IGP, stamp duty and valuation fee.
This is the equivalent of a freehold under Scottish law.
A person who helps individuals with their financial situation.
A legal charge used to secure the main mortgage. A lender with a first legal charge over a property has a first call on any funds available from the sale of the property. See also: second charge.
First Time Buyer
A person that is purchasing a property for the first time. Some lenders offer preferential lending terms to first time buyers. A borrower who has owned a property before but has sold this prior to buying again may be offered first time buyer terms by some lenders but this is dependent on the lender.
Fixed Rate Loans
Offer a fixed rate of interest for a set time frame.
A loan where the initial payments, for a certain period of time, are based on a specific interest rate. The rate payable will not change during that period regardless of changes in the lender's standard variable rate.
Flat Over Shop
Residential habitation situated above retail premises. Some lenders will not lend on this type of security because it is seen as having limited appeal to prospective purchasers and therefore have a lower value compared to an otherwise similar property. Any property that is located above commercial property usually takes longer to sell than properties which do not have any commercial element. A flat above a take-away restaurant is more difficult to arrange a loan on than a flat above a book shop.
A self contained flat that has been converted out of part of a larger property, is known as a converted flat. A flat which has the freehold of the land on which it is built, is known as a freehold flat. A flat designed and built as such; a self contained residential unit contained within a larger structure containing several self contained units or flats all sharing a common entrance, is known as a purpose built flat a studio flat, is a flat comprising a single habitable room, plus bathroom and possibly separate kitchen. Many lenders will not lend on these properties as they are considered more difficult to resell.
An abbreviation for flexible. Flexible mortgages are offered by some lenders and allow you to make overpayments in order to repay the mortgage early or save for a special event.
An action a lender may take to delay foreclosure or legal issues with a delinquent borrower.
The legal process when a borrower defaults on a loan.
Foreign Currency Mortgage
It is now possible to get a mortgage for your property in the UK in a mortgage denominated in a foreign currency. It sometimes gives you the opportunity to borrow money at a lower rate of interest than is possible in the UK.
When a delinquent borrower surrenders their property rights.
Land or property which is owned outright, as opposed to leasehold where the owner has the right to occupy the land or property for a given period of years only. See also: Feuhold.
Financial Services Authority.
FTB see first time buyer.
A loan where complete checks are made on the borrower's credit history and income.
Full Structural Survey
This is very important as it will tell you if there is any problem or faults with the property you are buying.
The seller's agent takes a higher bid after accepting yours.
A number of standard rules and conditions that apply to a mortgage, and are presented to the borrower in booklet.
Insurance companies identify different types of insurance policy as falling into different branches. For instance the life branch covers the insurance of people and is generally known as life assurance. The insurance of property, is known as personal lines.
Time frame in which loan payments can be made after due date without penalty.
Total income after tax.
When you are a leaseholder you will probably have to pay ground rent to the person that owns the land you property stands on.
Guaranteed Earned Income
Is income that you receive along with your basic salary that is not part of your normal basic pay under the terms and conditions of your employment but which you are guaranteed to receive.
Is a person who agrees to guarantee that a loan will be paid. The guarantor is therefore fully liable for the repayment of the borrowed amount should the borrower default.
High Lending Charge
This is an insurance policy that your lender takes, to cover themselves' in case you don't pay and they need to reposes you property.
High Loan To Value Fee
An insurance premium which insures the lender against any loss of money, should you default on your loan or get repossessed. This only usually applies if you borrow more than 75 per cent of the price asked for the property you are buying. You are not covered by the insurance premium, even though you have to pay for it, the lender is. This is also known as indemnity guarantee premium.
High Street Lenders
Mortgage providers based on the high street. These are mainly banks and building societies.
A property that will not be your main address or place of residence.
Home Equity Loan
A method releasing capitol from people's homes.
Work carried out to improve your home. Previously mortgage interest relief was given on loans for home improvements in the same way as for house purchase. Loans taken out before its abolition still receive this relief but this is lost if you move lender.
A less stringent report than a full structural survey.
Homebuyer's Valuation Fee
This is the fee paid for a full thorough, inspection of the property you are thinking of buying. This is frequently referred to as an option valuation fee.
House Or Flat Buyer's Report
A more thorough survey than the simple valuation carried out on the property by the lender. If your lender does not offer this as an alternative to the basic valuation, you can negotiate with the surveyor carrying out the valuation for the fuller inspection and this may cost you less than a separate inspection.
Insurance cover for your home. The two main types are building and contents insurance.
A body of trustees or company that is established for the purposes of providing, building, improving or managing, or facilitating, or encouraging the construction or improvement of, housing accommodation. It does not trade for profit. Anyone wanting help with housing puts his or her name down on the housing association list which acts in the same manner as council house lists.
Independent financial advisor is an advisor who has no affiliation with other financial companies.
An insurance premium that insures the lender against any loss of money. This usually applies only if you borrow more than 70 per cent of the price asked for the property you are buying. Even though you have to pay for the insurance premium, you must remember that you are not covered by the insurance, the lender is.
Indemnity Guarantee Premium (IGP)
An illustration is an example of the monthly cost of a mortgage and other expenses associated with the loan such as set-up costs.
Specialist loans for those aren't applicable for standard loan products.
Is a way of motivating the people to take out a loan with the lender by offering deals such as cashbacks.
Provides protection if you are unable to make payments on an outstanding agreement.
Income Protection Insurance
Third party conformation of income.
Individual Saving Accounts (ISA)
A tax-efficient plan launched in April 1999 to replace PEPs. Permits investment in stocks and shares, cash deposits and insurance.
Individual Voluntary Arrangement (IVA)
IVA was introduced under the insolvency act 1986 with the intention of allowing an individual to avoid bankruptcy and make maximum possible restitution to creditors. An IVA is seen as preferable to bankruptcy as the debtor can retain his tools of trade and, in the case of a professional person, continue to practice, or hold company directorships. IVA's can be set up for either a person or a company. An insolvency practitioner petitions the high court for protection for a borrower debtor under an IVA. A proposal is put to the creditors of whom 75% must accept. If this is achieved, the arrangement becomes binding upon debtor and all creditors named in the agreement. If the debtor fails to meet payments under an IVA the insolvency practitioner is likely to petition for the individual to be made bankrupt. Whilst bankruptcy normally lasts for only three years some creditors insist that IVA's last a longer period.
Increase in earnings or prices, which change in accordance with price inflation, and the national average earnings.
Tax payable on your estate when you die and possibly on certain gifts during lifetime if in excess of the nil rate band £7,700 this is based on the rate for the tax year 2002/2003.
The payment of interest to cover the period between the date of completion and the normal date from which an interest payment is due. For example if mortgage payments are normally due on the 30th of a month and the loan completes on 14th march, the first monthly payment may be due one month from 30th march, on 30th April. Any interest due for the period from completion until 29th march will be due with the initial mortgage payment. Therefore, the borrower's first mortgage payment will normally comprise one full month's payment plus the initial interest.
Interest Only Mortgage
A loan where only payments of interest are paid to the lender during the term of the loan. All mortgages other than capital and interest repayment loans are a form of interest only loan. Some lenders will allow loans to be set up without any specific provision to repay the capital at the end of the period this is known as a pure interest only loan.
Percentage of your loan that a lender charges each year for lending you money.
Broker or person who attempts to sort and arrange financial packages for you.
Person who introduces a loan to a lender.
Insurance premium tax.
Irregular Earned Income
This is any additional income over the basic salary that is of an unusual nature; additional payments to which the employee may be entitled but which are not received on a regular basis.
A tax free saving scheme, which allows investors to save up to £7,000 a year in shares, cash, or insurance policies, without having to pay any capital gains tax when the portfolio value rises.
Individual voluntary arrangement (IVA).
A mortgage application that involves more than one person as the borrower.
Two people who are responsible for a loan or debt.
Court ordered monetary judgement against a property owner which has not been paid.
NO DEFINITIONS FOR (K)
A record of property, ownership and the mortgage is registered in a central register at HM land registry.
Land Registry Fees
A fee payable to the land registry to change an entry in their records following a transaction involving registered land. This can be following a change of ownership or just a change of mortgage. See fee, arrangement fee, fees added to loan, booking fee, conveyancing fee, IGP, stamp duty and valuation fee.
This is a reference from the previous landlord regarding the general conduct of the tenant and whether rent has been paid promptly.
A fee the lender imposes for receiving payments late.
A payment a lender receives after the due date has passed.
The land on which the property is built is not owned directly by the property purchaser and is held under a lease for a fixed period.
The means by which lenders enforce their rights to a property, and is recorded at the land registry. There are various different types of legal charge and the type used will vary from lender to lender. Building societies tend to use a charge for the specific amount that they have lent. Banks tend to use an all monies charge, allowing them to free equity in a property if it is owned by them. This may allow them to recover overdrafts and other loans if they have granted more than just a mortgage. A primary mortgage will normally be secured by a first charge. Building societies are allowed to lend only if they have a first charge on a property. Second or subsequent charges may be granted on a property if additional money has been borrowed against it.
Legal Mortgage Fee
The fee charged by the solicitors acting for the lender in creating their legal charge over the property.
An organisation which offers mortgage products.
Lender's Arrangement Fees
Fee for arranging a loan passed on by the buyer to the lender.
Designed to cover costs incurred by the lender to secure the loan. This is paid by the borrower.
Person to whom the lease is granted.
An individual or company who grant a lease.
Debts and outgoing payments that you are legally responsible to pay.
London interbank offered rate is the rate at which banks notionally buy and sell money to each other. It varies from day to day and is closely linked to base rate. The relationship of libor to base rate can give an indication of the possible future direction of base rates. If libor is significantly above base rate it indicates that the money market believes interest rates are about to increase. If it is significantly below, the reverse is true. The key libor rate is 3 month libor, however rates are also quoted for one, six and 12 month periods. Libor-linked a mortgage linked to libor will be charged at a given margin over the interbank rate (typically 1 to 1.5%) and is likely to be reset quarterly. They offer the customer the opportunity to pay a rate closer to the true cost of money. In a low interest rate environment they are likely to result in lower overall payments but will be more expensive in periods of higher interest rates.
Loan Authority Search Fee
This is the fee payable for the local authority search.
A large loan is taken to help pay for smaller loans held elsewhere.
Loan To Value Ratio
Is the ratio of the loan amount to the property valuation expressed as a percentage. E.g. If a borrower is seeking a loan of £20,000 on a property worth £40,000 it has a 50% loan to value rate. If the loan were £30,000, the LTV would be 75%. The higher the loan to value the greater the lender's perceived risk. Lenders will be more cautious in underwriting high loan to value loans. Loans above normal lending LTV ratios may require additional security.
Local Authority Search
A search of local authority records to confirm the status of the property. Local authority searches should reveal any proposed changes in the area, the details of the planning permission for the subject property and whether any enforcement notices have been served by the local authority.
Low Cost Endowment
Is the most common form of endowment policy used to repay a home loan. It is a mix of full endowment and term assurance designed to provide full life cover in the event of death during the loan period. If investment returns are high enough it should also provide sufficient funds to repay the loan at the end of the term and ideally provide the borrower with a tax free cash surplus. It is not guaranteed to pay off the loan and that any shortfall will have to be made up by the borrower.
Low Start (Premiums)
A premium structure for a low cost endowment or other investment policy which allows the level of premiums payable to commence at a low level and build up over a period of time (normally the first five years). The total premiums payable under a low-start arrangement will exceed those payable under a normal contribution structure to compensate for the loss of investment growth on the reduced payments in the early years.
A concessionary bonus (usually by way of a temporary reduction in interest) payable for maintaining a satisfactory account with a lender for a period of years. Alternatively, loyalty bonuses may be offered to existing customers who return to the lender for a new mortgage. In which case the bonus may be dealt with by way of a reduction in the set-up costs of the new loan or a lump sum payable upon completion.
The normal place of residence. See also: holiday home and second home.
A property comprising of more than one separate living areas; used to describe a flat which extends over more than one floor or a flat that has its own entrance at street level.
Compulsive items in the financial package that you are purchasing.
The name given to credit used to buy property or loan secured by land.
The regulations that mortgage provider have to stick to.
Legal document establishing a loan on property.
Mortgage Indemnity Guarantee
See high loan to value fee.
A payment made by an employer to subsidise the cost of interest payments on a home loan. The amount and extent of the subsidy will vary from employer to employer and these can be calculated in a variety of different ways.
Is the length of time before the mortgage loan must be repaid.
Mortgage Payment Insurance (MPI)
This is an insurance cover to protect your mortgage payments.
An abbreviation for mortgage multipliers (income) this is a factor applied to a prospective borrower's income to calculate how much the prospective borrower is able to borrow.
This is the act of a national government taking public ownership of an asset. The nationalisation of Northern Rock took place in 2008, after it was severely affected by the credit crunch in 2007/2008.
A situation that occurs when the amount loaned against a property is in excess of the market value of the property.
Net Monthly Repayment
Monthly repayment made to the creditor.
The income of a company or self employed business after making full allowance for the expenses of running the business. This should be the amount available to the owners of the business for their own benefit. It is the figure that can be used to calculate their ability to service a mortgage.
Net Profit Declining
This is where the net profit from a business decreases from one year to the next. Many lenders will not lend in this situation, as in the near future, the business may be unable to provide sufficient income to cover the cost of loan repayments. Capital raising remortgages are especially avoided in this situation as the borrower may be seeking funds to shore up a failing business.
Refers to new properties developed on green field sites. Can refer to a single property or whole estates.
A loan granted without making enquiries as to the borrower's income or credit history.
Notice Of Default
A lender's initial contact when you have fallen behind on your credit repayments.
Same as conditional insurance.
Office Of Fair Trading (OFT)
It aims to protect consumers by ensuring that trading practices are as fair as possible and by encouraging competition among businesses. It is headed by the director general of fair-trading, and one of its responsibilities is the administration and enforcement of the consumer credit act 1974. Any business planning to provide consumers with credit facilities, or refer them to a source of credit, or hire out goods, must first obtain a consumer credit licence from the OFT.
Open Market Value
The value of a property on the basis of a willing buyer and willing seller in the open market allowing for a reasonable period for sale.
This includes existing liabilities and, or your debts, other than an existing mortgage such as hire purchase, personal loans, school fees etc.
The amount that is outstanding on your credit.
For property purchased under the right to buy scheme at a discounted price, the value of the discount, or a portion of it, that has to be repaid to the local authority if the property is sold within a certain period of time, normally 3 years from date of purchase.
The amount you have paid over your normal payments.
A mortgage that is arranged partly on an endowment basis, the balance of the loan most commonly being arranged on a capital and interest basis.
A legal limit on the amount a monthly payment can go up by on a variable rate loan / mortgage.
If you default on your credit repayments, the lender is entitled to reposes your house to recover the debt.
Payment Protection Insurance
See ASU accident, sickness and unemployment insurance. And unemployment insurance.
An interest-only mortgage where the capital will be repaid from the tax free cash sum that can be received from the pension fund at maturity.
Describes a mortgage that can be transferred from one property to another. This most commonly applies to loans in the category of treasury product.
The best interest rate possible to the lender's most valuable customers.
The amount of credit still outstanding - the amount on which interest is calculated.
A person who is a member of a recognised profession, such as a doctor or solicitor. The definition of a professional can vary substantially from lender to lender with occupations such as banker being accepted as a profession by some but rejected by others. Many professions are disquvalified from practicing if they become bankrupt.
A detailed document itemising costs, fees etc. Which will be incurred in taking out the specified loan.
Advertising regulations these are the rules laid down under the consumer credit act 1974 and controlled by the secretary of state. The advertising regulations control all loan advertising and are enforced by local trading standards officers.
This is paying off the mortgage, either to move to another property or at the end of the mortgage term.
These are any charge levied by the lender when the mortgage loan is repaid before the end of the full term. See also early redemption penalty.
The outstanding amount to be repaid on an existing credit arrangement.
This is also known as accident, sickness and unemployment insurance this insurance cover that is arranged by the borrower to protect against the inability to meet mortgage payments. This cover is generally restricted to cover only events that are entirely beyond the control of the insured person. Typical exclusions include dismissal following professional misconduct and any act of voluntary redundancy.
This is where borrowings are rearranging with a different lender, usually to receive more attractive terms or to raise fresh capital.
Regular Earned Income
This is a payment which is not guaranteed but is still a regular part of an employees remuneration. Lenders will normally ask for evidence of such payments being made on a regular basis, e.g. Payslips or p60s covering a period of months or years. See also: guaranteed income.
The arranging of a loan on a property in which the borrower already resides. Normally this involves redeeming an existing loan on the property.
Remortgage With Outstanding Discount
This refers to a property that was purchased under a right to buy legislation, where the owner wishes to remortgage whilst there is still an outstanding discount remaining.
This is payment made to cover interest or reduction in principal of a loan.
The amount of unpaid credit on your loan.
If you fall behind on your payments a lender may try to renegotiate your repayment plan.
The timer frame that the borrower must repay the lender.
When a lender offers renegotiated terms.
Retirement Annuity Contract
This is the investment of a lump sum which produces a regular income for a retired person.
Cost that your lender incurs when recovering items or debt.
Right To Buy
This is an option for council tenants to purchase the property in which they live in. The property price is often at a discount, proportional to the length of occupancy.
Royal Institute Of Chartered Surveyors
The professional body for surveyors which sets a code of practice for its members.
This is another name for right to buy and an option for council tenants to purchase the property in which they live in.
Schedule Of Payments
Schedule of monthly payments under a loan sealing the fee see discharge fee.
Before you buy your property you have to check with your local authority that there are no plans that will effect the value of your property.
A legal charge that ranks behind a first charge, possibly to secure a second mortgage, or a guarantee given to secure other borrowings.
A loan that is secured using your property.
A property, the construction of which is controlled by the borrower; not a finished unit. Loans on self build properties will normally be advanced in stage payments and are subject to strict limits on loan to value. A qualified architect will need to be involved.
A mortgage loan where the borrower makes a statement of his or her income and the lender makes fewer checks than normal on the accuracy of this statement.
An individual working on own account. For mortgage purposes this will include partners in unlimited liability businesses and professional practices.
A property that has at least part commercial use. A semi-commercial mortgage is a loan on security that is not entirely used for residential purposes, e.g. A shop.
A method of property purchase in partnership with a housing association. The borrower purchases part of the property and rents the remainder from the housing association. Also known as co-ownership, this arrangement is designed for people who could not otherwise become homeowners. Under most arrangements, the minimum purchase amount is 25% of the property value with the remainder available to be purchased in blocks of 25%.
A person having a legal right of occupation, even if the property changes ownership, and who is able to apply to the local authority to set a fair rent. Properties with sitting tenants are generally worth at least 30% - 40% less than their open market value with vacant possession.
A property that is occupied by the borrower and his or her immediate family only. No paying tenants are in residence.
Special Status Or Non Status
Where the individual is unwilling or unable to provide the necessary documentary evidence of income and status.
A mortgage where a notional rate is set designed to be a true reflection of the likely average rate over a period. The borrower makes payments each month based on this rate, but the rate charged to the account may vary in line with market conditions. These products are designed to protect borrowers from wildly fluctuating interest rates.
Stamp duty is a tax that must be paid on purchases of property or land. Stamp duty is payable on residential properties worth £125,000 or more. Stamp duty of 1% of the property's value must be paid on properties worth between £125,000 and £250,000. A fee of 3% is paid on properties worth between £250,000 and £500,000, a fee of 4% is paid on properties over £500,000 and up to £1 million and a fee of 5% is payable on properties worth more than £1 million.
First-time buyers don't have to pay stamp duty on properties under £250,000 until March 2012.
Standard Variable Rate
The rate your mortgage lender will transfer you to when your current deal comes to an end. It's typically 1% to 2% above the base rate.
The widest form of inspection that can be undertaken by a chartered surveyor. In the case of properties with movement, lenders may require a structural engineer's report. This is a different type of survey carried out by a chartered building engineer and should not be confused with a structural survey.
A flat comprising a single habitable room, plus bathroom and possibly separate kitchen. Many lenders will not lend on these properties as they are considered more difficult to resell.
A payment made by an employer to subsidise the cost of interest payments on a home loan. The amount and extent of the subsidy will vary from employer to employer and these can be calculated in a variety of different ways.
An inspection carried out for the benefit of the mortgage lender to make sure that the property forms a good security for a loan. This inspection and should not be relied upon on when deciding whether to purchase a property or not. Purchasers should be advised to obtain either a house or flat buyer's report or a full structural survey before proceeding with a purchase.
See valuation fee, home-buyer's survey fee.
The mortgage term is the length of time before the mortgage loan must be repaid.
This is the simplest form of life assurance. The insured person is covered against death within a fixed period depending up on the payment of the premiums. If an insured person dies within the policy term the sum assured is paid out. If the insured person survives the term the premium has been spent and the insurance ends with nothing being paid to the policyholders.
This bonus is paid at the end of an endowment mortgage and will depend on the performance of the investment fund you are using to repay your mortgage.
The Council Of Mortgage Lenders (CML)
This board publishes many booklets on buying property and ways to protect the borrowers.
IG premium the loan to value ratio above which mortgage indemnity guarantee premiums are payable.
Most advisers and agents have access to mortgages that you would not normally find on the high street. They may be part of a particular financial organisation or estate agent. Therefore they are not fully independent.
A method of house construction. Timber framed properties have traditionally suffered from poor damp-proofing and so this restricts the number of lenders willing to accept them as security.
Top Up Loan
A form of second mortgage, used to provide an overall loan in excess of the loan to value ratio allowed by the primary lender. Top up loans will invariably be charged at a higher rate than the first mortgage.
An approach for analysing whole markets by using economic data, for predicting market direction, and estimating profit growth.
A process of following the progress of a loan application. This information should be fed back from the lender or packager to the introducer.
A mortgage that has conditions that control the future of the interest rate, so that the rate is not totally subject to market interest rate movements.
An example of the annual percentage rate for a given mortgage product.
See accident, sickness and unemployment insurance.
A property that is owned without borrowing or other legal charge over it.
This fee is charged on the release of property title deeds following redemption of a mortgage advance.
Is an abbreviation for the term valuation.
When a surveyor values your property.
A fee paid by the borrower for the lender's inspection of the property. This is normally paid on application. See fee, arrangement fee, fees added to loan, booking fee, conveyancing fee, land registry fees, IGP, and stamp duty.
An interest rate that will vary over the term of the loan, normally in line with the general cost of borrowing.
Verification Of Employment
Most lenders will contact your employer to confirm you work there and your paid regularly.
A technique which permits an existing loan to be refinanced at an interest rate between the original loan rate and the currently prevailing market rates.
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