Glossary of terms

| A | B | C | D | E | F | G | H | I | JKL| M | N | O | P | Q | R | S | T | UVWXYZ|

A

Accident Sickness and Unemployment Insurance (ASU)
A type of insurance policy that can be arranged to protect the borrower for a set amount of time against inability to make mortgage payments. The policy usually pays a monthly amount to cover the mortgage payment and the costs of things like life cover and buildings insurance premiums.

Accountant
A professional person who is responsible for calculating the annual income of either the self employed or companies.

Accountants Letter
A letter of income confirmation for a self employed person who is applying for a mortgage. Accountants letters may also be used for company directors or for people who work within a small family firm.

Added to loan
Some lenders will permit some of the costs involved in a mortgage or remortgage to be added to the loan amount. Whilst this can be convenient for the client it should be borne in mind that the client will pay interest on the higher mortgage figure for the mortgage term.

Additional Security

When lending exceeds a certain Loan to Value some lenders will insist on additional security.The most common form of this is the Higher Lending Charge.

Administration Charge
Some lenders will charge an administration fee on application which is not refundable if the mortgage doesn't proceed.

Agricultural Tie
Restriction placed on certain rural properties which requires that the land adjoining a residence must be actively used for farming. Most mainstream lenders will not offer a mortgage on a property with an agricultural tie.

Annualised Percentage Rate
A method of identifying the true cost of borrowing and to provide the consumer with a way of comparing the true costs of different types of loan.

Application
The form used to apply for a mortgage.

Applicant
Anyone applying for a mortgage.

Arrangement Fee
A fee charged by the lender for setting up the loan on a particular rate. Normally payable upon completion but may sometimes be Added to the Loan

Arrears
Mortgage payments that have not been made by the due date in accordance with the Mortgage Deed

B

Bank
An institution aurthorised by the Bank of England under the Banking Act 1987

Bank of England Base Rate
The interest rate set by the Bank of England each month. This rate reflects the cost to lenders for borrowing money from the money markets. The lenders Standard Variable Rate is often higher.

Bankrupt
An individual who has been declared bankrupt in accordance with the insolvency act.

Base Rate Tracker
Also known as a Tracker.This is a type of Variable Rate mortgage whereby the lender offers an interest rate that is directly linked to an amount above or below the Bank of England Base Rate for a period of time.

Basic Annual Income
The amount of income earned that is guaranteed by an employer.

Basic Valuation Report
See Valuation Report

Broker
A term for a mortgage advisor - usually indicating that they are able to advise on a wide range of mortgage lenders and products

Broker Fee
Fee charged by a broker to the client for negotiating a mortgage loan.

Building Society
An institution regulated by the Building Societies Act

Buildings Insurance
Insurance covering the structure of the building which you must have in place at all times that you have a mortgage.

Buy to Let
A mortgage designed for a person who intends to purchase a property with the express intention of letting the property out. Different rules apply to Buy To Let mortgages with regards to income multiples and the number of properties that can be owned.

C

Capped and Collared Rate
See Capped Rate

Capital
The principle amount of the loan - i.e. the amount borrowed.

Capital and Interest
Otherwise known as a repayment loan. The borrower pays an amount each month to cover the amount borrowed and the interest charged on it.

Capital Raising
When you raise extra money out of the Equity in the property by either a Remortgage or a Further Advance. This money can be used for most legal purposes but some lenders may only permit lending for some purposes to be done below a certain Loan to Value

Capped Rates
A type of mortgage rate where the rate will not exceed a certain level during a certain period of time, but it will fluctuate up and down below that level. Some Capped rates have a upper rate and a lower rate between which rates can fluctuate. Such products are known as Capped and Collar rates.

Cashback
A cash incentive offered by the lender to the borrower upon completion of a mortgage. This can vary between a couple of hundred to a couple of thousand pounds.

Chartered Surveyor
The person responsible for the survey on a property that is to be remortgaged or bought. The Surveyor is responsible for reporting if they feel that a property needs further remedial work and if it is a suitable security for a mortgage loan. Lenders will usually insist that any surveyor who carries out a survey for them is not only suitably qualified but also belongs to a company who has been approved by the lender.

Commercial Mortgage
A loan granted for a commercial purpose, normally secured against a commercial property. Usually carries a higher rate of interest than a residential mortgage.

Completion
The point at which the legal formalities of a property purchase are finished and the property passes into the new owners hands.

Concrete Construction
A property building type using pre formed pieces of concrete. A property of this type would usually be seen as having Non Standard Construction.

Conditional Insurance
An insurance policy that has to be taken out as a condition of the loan with either the lender or the lenders approved insurance agency.

Contents Insurance
The insurance of property within your home. The quality of the cover offered can very from insurer to insurer so the purchaser is wise to consider the quality of the cover offered as well as the premium

Contract Work
Many employers now offer employment under fixed term contracts rather than taking staff on permanently. This can cause a problem for people on this type of contract when they apply for a mortgage.

Conveyancing Fee
A fee charged by a solicitor for arranging the necessary legal work in the sale, purchase or remortgage of a property.

County Court Judgement (CCJ)
A judgement for debt in the county court. If a judgement is settled in full within 30 days of the date of the judgement then it will not appear in the credit register. If it is not paid in full within 30 days then it will remain on a credit file for six years whether it is paid or not. Having a CCJ can seriously affect your chances of getting a mortgage.

Credit Check
Enquiry made on the credit history of an applicant, normally by reference to one of the major credit agencies.

Credit Scoring
Method of loan assessment carried out by scoring the various answers given on a loan application.

Criteria
The lenders standard terms and conditions for acceptable loan applications. These vary from lender to lender.

Critical Illness Cover (CIC)
A type of Insurance policy.CIC provides a payment in the event of the policyholder suffering from the onset or diagnosis of one of a number of specified serious illnesses. The policy usually pays a lump sum amount to clear the mortgage in the event of a claim but this can vary dependent on the premium and Sum Assured.

Current Account Mortgage
A type of Flexible mortgage where the clients current account is merged in with the mortgage balance. The idea is that if the client does not spend their full income then the extra can be used as an overpayment into their mortgage.

D

Daily Interest
Interest on the mortgage account is charged daily. This means that any payment to the account is credited on the next working day.

Damp
High levels of moisture in a house, usually due to a failure in the brickwork of the property. Damp can affect the integrity of the plaster and can damage timbers.

Damp and Timber Report
A report that a Surveyor may request if they feel that the property has high levels of Damp or if the timbers in the property appear to be in a worn state or suffering from the effects of damp or infestation.

Debt Consolidation
Capital Raising to replace a number of credit commitments with a single loan from a new lender. This can result in a reduction in your monthly payments by spreading the larger loan over a longer period and possibly by reducing the overall interest rate. Care should be taken however as the borrower may end up paying more overall at the end of the term.

Deducted from Loan
Expression used by lenders to refer to certain fees, such as the arrangement fee, that will be deducted from the amount borrowed on completion. This means that the client has effectively paid the fee as opposed having it Added to the Loan.

Deeds release Fees
Fee charged by a 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. Sometimes referred to as a Sealing Fee.

Default
A default is registered on a credit file when the borrower does not keep to the contracted payment terms on a credit agreement. A default will stay on the credit file for six years and can seriously impair the applicant’s ability to get a mortgage.

Deposit
The amount of money that is the difference between the amount the lender provides and the purchase price of the property. The more deposit the applicant puts down the more likely the lender will consider the application for a mortgage.

Disbursments
Costs incurred by solicitors in carrying out their work which they then pass on to their clients, e.g. searches, photocopying, postage, couriers and local searches.

Discharged Bankrupt
A person who has been released from their bankruptcy order.

Discounted Purchase Price
Price of a property that has been reduced below the open market value, such as a builders discount.

Discounted Rate
A type of mortgage where the interest rate is lower than the lenders normal Standard Variable Rate for a certain period of time.This is normally expressed as a fixed percentage reduction such as 2% discount for 2 years.

Draw Down Facility
An additional borrowing facility that is arranged with the lender for certain types of mortgage without the need for additional credit checks or surveys.

E

Early Repayment Charge
A penalty charged by a lender for withdrawing from a mortgage before a given specified date. This condition is normally specified in the mortgage conditions. Lenders will normally impose this penalty on a fixed or discounted loan.

Earned Income
Income that is earned from employment or self employment as distinct from investment income from property or securities.

Employed
Normally refers to a person who has an open ended contract of employment and has income tax and national insurance contributions deducted from their salary.

Employers Reference
A written statement from an employer confirming the borrowers employment, usually giving details of their salary and length of service.

Endowment Policy
A life assurance policy into which you make regular payments. The policy is then designed to increase in value over time so that it will repay the mortgage upon maturity. These policies are not now normally used for new mortgages.

Equifax
The name of one of the companies that hold information about a persons credit status.

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

Exchange of Contracts
The "exchange of contracts" is when the transfer of title/ownership happens. In the exchange of contracts, the buyer signs the contract for sale and sends it to the seller who also signs it - once signed both parties are then legally bound to complete the transfer.

Experian
The name of one of the companies that hold information about a persons credit status.

F

Fee
Amount charged by a lender, broker or other intermediary for arranging a mortgage or property purchase.

Feuhold
Equivalent of Freehold under Scottish Law

First Charge
A legal charge used to secure the main mortgage.The lender with a first legal charge over a property has a first call on any funds available from the sale of the property.

First Time Buyer (FTB)
A person wishing to buy a property for the first time. Some lenders would class a person who has not owned a property for some time as a first time buyer whilst others consider a FTB to be a person who has never owned a property. Some lenders will give special deals to this kind of client.

Fixed Rate
A loan where the original payments are based on a certain interest rate for a stated period. The rate will not change during this period regardless of changes in the lender’s Standard Variable Rate

Flexible Mortgage
A mortgage where you can make overpayments to repay the mortgage early. Some flexible mortgages also allow you to pay reduced amounts or take a payment holiday if you have made extra payments into the mortgage.

Flying Freehold
See Freehold

Freehold
Land or property which is owned outright as opposed to Leasehold property where the land is leased from the owner for a number of years for a nominal rent. Some properties have part of the building which is known as a Flying Freehold this is where part of the property that is freehold is over a piece of land that is not owned by the freeholder - such as over a communal alleyway.

Full Retention
A Retention where the works required on the property are so severe that the lender refuses to advance any money at all until the works have been completed to its satisfaction.

Further Advance
A subsequent advance of money from your mortgage lender after you have bought the property. Usually used for home improvements. The rate at which you are charged for a further advance varies from lender to lender.

G

General Conditions
The set of standard conditions that apply to a mortgage, normally provided to the borrower in booklet form at the time the mortgage offer is given.

Graduate Mortgages
Some lenders will over special terms for graduates. These terms usually revolve around enhanced Income Multiples but some lenders will offer graduate exclusive mortgages.

Gross Income
Income per annum before tax and national insurance is deducted. Lenders usually use the gross income when calculating the Income Multiple.

Guaranteed Overtime
See Overtime

Guarantor
A person, usually a close relative, who is prepared to guarantee that a mortgage loan will be repaid. This is usually for first time buyers, especially those whose income may rise considerably over the next few years. It enables a first time buyer to purchase a more expensive property as their guarantor are also legally responsible for the mortgage loan and fully liable should the application default.

H

Higher Lending Charge
An insurance premium which insures the lender against any loss of money if you default on your mortgage loan or get repossessed. This usually applies only if you borrow more than 75% of the property value. Quite a few of the high street lenders will now pay this for you if you put down a 10% deposit.

Also known as Mortgage Indemnity Guarantee, Maximum Advance Premium, Indemnity Guarantee Premium, Mortgage Indemnity Premium

Holiday Home
A home that will not be your main residence.

Home Improvements
Works carried out to improve your home. Some lenders allow you to borrow money for this prior to carrying out the improvements whilst others insist you do the work first then advance you the money.

Homebuyers Survey
Often referred to as an Option 2 Valuation or Homebuyers Report. This is a more thorough survey of the property than the simple Basic Valuation Report carried out by a lender.

Housing Association
A society, body of trustees or company which is established for the purposes of providing, building, improving or managing housing accommodation. It does not trade for profit. Anyone wanting housing can apply to the housing association in the same way that they can to the council.

I

Illustration
An example of the monthly cost of a mortgage and other expenses associated with the loan such as set up costs, redemption penalties and variable rates. These should be given in writing and are more accurately called Key Facts Illustrations

Incentive
Inducements such as Cashbacks or rates offered to borrowers to persuade them to take out a loan with a lender.

Incentive Term
The period of time that an incentive such as a Fixed Rate lasts for.

Income Multiple
The amount a lender will multiply a clients income by to calculate how much they can borrow.For example if a lender has an income multiple of 4 and the client has a salary of £15000 then the lender will lend a maximum of £60000.

Individual Savings Accounts (ISA)
A way of holding cash deposits, life assurance policies and investments in stocks and shares in a tax privileged way. There are many kinds of ISA and providers include insurance companies, investments houses, banks and building societies. An ISA can be used as a Repayment Vehicle for an Interest Only mortgage.

Initial Interest
The payment of interest to cover the period between the date of Completion and the normal date from which a mortgage payment is due. Thus dependent on the date of completion the borrowers first monthly payment may comprise of one full months payment plus the initial interest.

Initial Rate
Interest rate that is payable from the commencement of the loan. Many mortgage products e.g. Fixed and Discounted rates have an initial rate of interest which will change at the end of the initial period.

Insurance
There are many different insurance products which are recommended when you have a mortgage. These include; Life Cover, Critical Illness Cover, ASU, Buildings and Contents. When taking out a mortgage you would be advised to seek specialist advice regarding the correct way to protect the mortgage.

Interest Only

(We are unable to advise on these products)

A type of loan where only payments of interest are paid to the lender during the term of the loan. The loan is then repaid at a specified point by either a Repayment Vehicle, refinancing the loan or the sale of the property.

Introducer

Person, such as a Mortgage Broker, who introduces a loan to a lender. Or someone who introduces business to the Mortgage Helpline.

Irregular income

Income above basic salary that is of an erratic nature and not guaranteed. Examples of this could be income from a bonus or overtime.

Individual Voluntary Arrangement (IVA)
A way in which an individual can avoid bankruptcy by making an arrangement with their creditors and making maximum possible restitution to them. If the debtor fails to meet payments under an IVA they risk being petitioned as a bankrupt.

J

Joint Application
Mortgage application involving more than one person as the borrower.

K

Key Facts Illustration
A document given to an Applicant by a Lender or Broker. This Illustration is designed to show the Applicant all the relevant information about the mortgage they are applying for.

L

Land Registry
The central record of property run by HM Land Registry. Details of the property, property ownership and the mortgage lender is held here.

Land Registry Fee
Fee payable to the land registry to change an enry in their records following a transaction involving registered land. This can be following a change of ownership or just a change of mortgage lender. This fee is usually paid to the solicitor dealing with the transaction.

Landlords Reference
Reference from the applicants landlord regarding the conduct of the tenant and the payment of their rent. Failure to pay rent promptly can adversely affect a mortgage application.

Large Town Allowance
An portion of extra salary payable to an employee for the additional expenses incurred as a result of working or living in a major city.

Leasehold
The land on which the property is build is not owned directly by the property owner and a rent is payable. Most leasehold properties have a long period of time remaining on the lease. Properties with leases shorter than 100 years may be difficult to obtain a mortgage on. With some leasehold properties the Leaseholder can specify the company that the property owner takes out the Buildings Insurance with.

Leaseholder
The person who owns the lease on a property and to whom the rent is payable.

Legal Charge
The means by which lenders enforce their rights to a property. It is recorded at the Land Registry. There are various types of legal charge and the type used will vary from lender to lender. A primary mortgage will be secured by a First Charge. Subsequent borrowing on the property may be secured by a Second Charge or subsequent charges.

Lender
An organisation which offers mortgage products

LIBOR (London Interbank Offered Rate)
The rate at which banks notionally buy and sell money to each other. It is closely linked to the Bank of England Base Rate.

LIBOR Linked
A mortgage linked to LIBOR will be charged at a given margin over LIBOR. LIBOR linked mortgages are quiet rare and are usually only seen when dealing with clients with Adverse Credit.

Life Assurance
An Insurance policy payable upon the death of the insured.

Loan
A credit agreement whereby the applicant agrees to pay a regular monthly payment for a certain period of time in return for an amount of money for a purchase. If a client has a loan then the lender will usually take the annual amount paid into the loan away from the clients income before using the Income Multiple to work out how much they can borrow.

Loan to Value Ratio
The amount of Equity in a property expressed as a percentage.For example a person owing £75000 on a property valued at £100000 would have a loan to value ratio of 75%. The lower the loan to value ratio the more likely it is that a lender will consider a mortgage on the property as its risk is greatly reduced.

Local Authority Search
A search of local authority records to confirm the status of the property and the immediate area. Local authority searches should reveal any proposed changes in the area with regards to planning permission for new buildings or changes to roads or businesses.

M

Main Residence
The normal place of residence, as opposed to a Holiday home or Second home.

Maintenance Payments
Money, either paid or received under a court order in respect of a previous partner or child. Some lenders will accept this income when calculating the amount a client can borrow.

Mortgage
A loan secured by land

Mortgage Arrears
See Arrears

Mortgage Deed
Legal document establishing a loan on property.

Mortgage Offer
Formal offer of a mortgage on a property. The offer will stipulate all the conditions of the mortgage.

Mortgage Subsidy
A payment made by an employer to subsidise the cost of interest payments on a mortgage.

Mortgage Term
The length of time that the mortgage will run for.

N

Negative Equity
Situation which occurs when the amount loaned against a property is in excess of the market value of the property.

Net Profit
The income of a self employed person after the deduction of the costs of running the business. This figure is usually calculated by an Accountant but some people prefer to do this themselves. Unlike Gross Income which is used for an employed person a lender will use the Net Profit when calculating how much they will lend a self employed person.

New Build
Refers to a brand new property

Non Status
Loan granted without making enquiries as to the borrowers income or credit history.

Non Standard Construction
A property that has been built using non-conventional methods. Mortgages on properties of this type can be hard to obtain.

O

Open Market Value
Value of a property based upon a sale on the open market.

Outgoings
Existing liabilities - the debts of an applicant when they apply for the mortgage, such as credit card payments, loans, hire purchase etc.

Overtime
Hours worked by an employee in excess of the amount of hours they are contracted for. Overtime is usually irregular, regular or guaranteed and each of these is viewed differently by a lender.

P

Part and Part
A generic phrase that refers to a loan where part of the loan is calculated on an interest only basis and part of which is being calculated on a repayment basis.

Pay Rate
See Initial Rate

Payment Schedule
A printed document showing the payments expected on the mortgage loan.

Payment Method
The means by which the mortgage is to be repaid, eg Interest Only or Repayment.

Pension Mortgage
An Interest Only mortgage where the capital will be repaid from the tax free cash sum that can be received from a pension fund at maturity.

Portable
Describes a mortgage that can be transferred from one property to another. This feature is useful if your mortgage has a Redemption Penalty.

Profit Related Pay
A type of bonus income where the employee receives a bonus based upon the profitability of the company.

Purpose Built Flat
A flat designed and built to be a flat from the outset. As opposed to a flat which may be part of a converted former house.

Q

Quotation
A detailed document itemising costs, fees etc that will be incurred in taking out the specified loan. More commonly referred to as a Key Facts Illustration.

R

Redemption
Paying off the mortgage, either to move to another property, Remortgage with another lender or at the end of the mortgage term.

Redemption Penalty
A penalty charged by lenders on some mortgage products. If the client redeems the mortgage before a certain date then a penalty will be charged to the client. This penalty can often be quite a large sum. See Early Repayment Charge

Regulated Loan
A loan of under £25000 regulated under the terms of the consumer credit act.

Remortgage
Changing mortgage lender on a property that the applicant already owns.This can either be for Capital Raising or simply to obtain a more competitive interest rate.

Rent Allowance
Payment received from an employer to be used towards the cost of accommodation.

Retention
An amount of mortgage money held back by a lender until certain essential building works are carried out on a property. The Chartered Surveyor normally sets the retention and the details of it are reported to the client as a Special Condition in the Mortgage Offer.

Retired
A person who is retired will still be eligible for a mortgage with a lot of lenders. The lender would use the persons pension income and treat it as Earned Income.

Repayment Mortgage
Another term for a Capital and Interest mortgage.

S

Schedule of Payments
See Payment Schedule

Sealing Fee
See Deeds Release Fee

Second Charge
A loan other than the primary mortgage that is secured against the home. See First Charge.

Second Home
An alternative home to your main residence.

Second Job
An employed or self employed position other than the applicants main employment.

Self Build
The building of a property by an applicant. Self build mortgages are usually released in stages as the building work progresses and are subject to quite strict criteria. The lender will want to see that the proper planning permission has been obtained and that the building project is supervised by a qualified architect.

Semi Commercial
A property that has at least part commercial use such as a shop with a self contained flat above.

Shared Equity
A method of property purchase designed to help those on lower incomes and first time buyers. The applicant purchases a percentage of the property from the builder or Housing Association. The builder or housing association then registers a second charge against the property for the remaining amount. The amount owing may have different terms for repayment. For example a housing association may allow the applicant to purchase 75% of the property and will hold a second charge for the remainder. Upon sale the applicant would pay the housing association 25% of the sale price of the property.

Shared Ownership
A method of home purchase usually in conjunction with a Housing Association. The applicant agrees to buy a percentage of the property and pays a rent on the remaining share of the property which remains owned by the housing association. The applicant can then purchase further amounts of the property from the housing association at a later date. Under normal arrangements the minimum purchase price is 25% of the property value with the remainder available in blocks of 25%. This arrangement is designed to help those on lower incomes and first time buyers obtain a property.

Sitting Tenant
A person having a legal right of occupation in a property, even if the property changes ownership.

Sole Occupancy
A property that is occupied by the borrower and his or her immediate family only.

Special Conditions
Specific terms, usually outlined in the Mortgage Offer that apply to a particular offer of mortgage.

Stamp Duty
A government land tax charged as a percentage of the purchase price of a property. Charged on property purchases over £125,000. The amount charged is a percentage and varies by price. Some under privileged areas are exempt from stamp duty payments on properties below £150,000.

Standard Construction
A property constructed in a standard way using bricks and a slate or tile roof.

State Benefit
Any regular payment from a government department. Lenders vary greatly in their treatment of state benefit income with some lenders not accepting these in any form.

Steel Framed
A method of property construction whereby the brickwork is attached to a steel frame. Whilst not a common method of building properties of this type would be classed as Non Standard Construction.

Structural Survey
An in depth survey carried out on a property by a Chartered Surveyor.This is the most detailed survey commonly carried out on a property.

Structural Engineers Report
A report by a structural engineer on a property with movement.This is different from a Structural Survey.

Sub Prime
A mortgage industry term for those applicants who have a history of Adverse credit. Some lenders will not consider sub prime cases at all whilst others specialise in them. Sub Prime mortgages tend to be at a higher interest rates than other mortgages as the lenders feel that there is a higher risk of Mortgage Arrears.

Surveyor
An abbreviated term for a Chartered Surveyor.

T

Total Amount Payable
Total due to the lender over the lifetime of the credit agreement.

Term Assurance
A type of life cover that is commonly used with a mortgage.

Thatched Roof
A lender would see this kind of property as being of Non Standard Construction

Timber Framed
A type of building construction. A lender would normally consider this type of property as being of Non Standard Construction.

Tracker
See Base Rate Tracker

Typical APR
An example of the Annual Percentage Rate for a given mortgage product.

U

Unemployed
A person not in employment.

Unencumbered
A property that is owned outright and has no borrowing or legal charge secured on it.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED AGAINST IT.