Advance
The mortgage loan.
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 payments which have not been paid as requested
and have become overdue.
Bank
of England base rate
The Bank of England 'repurchase' or 'repo' rate which
is the main factor influencing interest rates charged
by lenders.
Buildings
insurance
Needed from exchange of contract to cover your house.
Capital
The amount you owe 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.
Closing
administration charge
A charge made by the lender to cover administration costs
when a mortgage is repaid.
Collateral/security
The property which the lender can sell to repay the loan
if the borrower does not keep up the mortgage payments.
Completion
The final legal transfer of ownership of the property
- when the property becomes yours.
The start of the mortgage (also known as 'drawdown').
Contents insurance
Cover for all your personal belongings
Contract
The written agreement between the seller and the buyer
of a property to transfer ownership.
Contract
race
The seller has received two or more offers on the property
and will sell to whoever is ready to exchange contracts
first.
Conveyancer
Solicitor or licensed conveyancer who deals with the legal
aspects of buying or selling land.
Conveyancing
The legal work involved in the sale and purchase of land.
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.
Deposit
Two deposits may be payable:
A reservation charge payable by the buyer as a sign of
good faith to the seller when they initially agree to
buy/sell to each other.
The deposit paid towards the total price of the property,
payable at exchange of contracts.
Drawdown date
The date when the mortgage starts.
Drawdown
deadline
Some mortgage funds are available for a limited period
only and usually these mortgages must start by a certain
date - the drawdown deadline.
Early
repayment charge (ERC)
A charge payable on certain types of loan if it is repaid
or partly repaid within a certain period eg during a fixed-rate
period or while a discount applies.
Equity
The difference between the value of the property and the
amount of any loan secured against it.
Essential
repairs
Work required to be carried out on the property before
we'll issue 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.
Endowment
mortgage
Sometimes used to describe an interest only mortgage supported
by an endowment policy.
Endowment
policy
A combined life assurance and investment policy often
taken out at the start of a mortgage to run for the same
term. Premiums are paid by the borrower to a life assurance
company, usually monthly. The company invests the premiums
and the investment should provide a lump sum at the end
of the policy term (which can be used to repay all or
part of the mortgage) or earlier if the borrower should
die.
Final
reminder
A letter requesting payment and sent to a customer who
is in arrears before legal proceedings start.
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.
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.
Guarantor
A person who promises they will pay the borrower's debt,
usually if the borrower fails to.
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.)
Home-buyer's
survey
A surveyor's report on a property which is less extensive
than a building survey and is paid for by the purchaser.
Initial
interest
Any payment due for the period from the day the mortgage
began up to the first payment date.
Interest
only mortgage
A mortgage where only interest is paid during the mortgage
term. The capital is repaid at the end of the term, usually
from the proceeds of an investment plan such as an endowment
policy.
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 Certificate
Provides details of the property including a plan and,
if the property is leasehold, a copy of the lease.
Land
Registry fee
A fee paid to the Land Registry to register ownership
of a property.
Leasehold
The right to possession, but not ownership, of a property
for an agreed period of time. Ultimate ownership remains
with the freeholder.
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.
Life
assurance
An insurance policy that pays a lump sum on death. Often
taken out with a mortgage to provide money for the loan
to be repaid if the borrower dies during the term.
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.
Mortgage
Has a specific meaning in law but has come to mean a loan
with property as security.
Mortgagee
The lender.
Mortgagor
The borrower.
Mortgage
term
The period over which the mortgage loan is to be repaid.
Negative
equity
When the value of the property has fallen and is less
than the loan secured on it.
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
Protection
Insurance which pays your monthly mortgage payments, usually
for a specified period, if you lose your income through
sickness, injury or unemployment.
Pension
Plan
An investment plan which can provide a lump sum on and
an income after retirement. A pension plan is sometimes
used as a way of providing a lump sum to repay the capital
of an interest only mortgage.
Principal
The amount of the loan on which interest is calculated.
Repayment
When a mortgage is repaid. (Also called redemption.)
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
A mortgage where the capital borrowed is gradually repaid
over the agreed term.
Specialist
report
A report required by the lender into particular defects
discovered at the property to be purchased, such as dry
or wet rot, damp, etc, before they will agree the mortgage.
Stamp
duty
A government tax payable on exchange of contracts on properties
of a certain value.
Building
survey
A full inspection of the property by a surveyor on behalf
of and paid for by the buyer.
Subject
to contract
The phrase used before exchange of contracts which allows
either party to withdraw without incurring a penalty.
Surveyor/valuer
The person qualified by the Royal Institution of Chartered
Surveyors or the Incorporated Society of the Valuers and
Auctioneers to carry out valuations and surveys of properties.
Tie
in Term
The period of time you would need to remain on certain
mortgage terms to avoid an early repayment charge.
Title
deeds/title documents
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.
Valuation
An inspection of the property to ascertain its acceptability
to the lender as security against the mortgage loan, for
which the borrower may have to pay.
Vendor
The person(s) you are buying your new home from.
