Jargon buster – the ABC of most often used financial terms
A mortgage loan.
Stands for Annual Percentage Rate which helps you compare the cost of different mortgage deals. It takes into account the amount of interest you will pay, the length of the term of the mortgage, and other charges such as any arrangement fee.
Lenders sometimes charge a fee to cover the work involved in setting up your mortgage or for certain mortgage rates.
Bank of base rate
This is also known as the Bank of England’s repo rate. This rate can go up or down from time to time and is announced by the Bank of England’s Monetary Policy Committee.
Insurance against the cost of rebuilding a property from scratch following structural damage, for example by flood, fire or storm.
This is a technical report following an inspection of the property. It will give you a comprehensive account of the condition of the property, describing any structural or other defects.
Your interest rate won’t go above a certain level the ‘cap’ during the capped rate period. This means that you can enjoy any rate reductions, yet have the comfort of knowing that your rate won’t go above the cap.
Certain mortgage products offer cashback, which means you get a cash lump sum to spend on anything you want.
CAT standard mortgages
The Government has laid down CAT standards – fair Charges, easy Access and decent Terms – to help people identify mortgages which meet minimum standards. If a mortgage is described as meeting the CAT standards it doesn’t mean that it is ‘Government approved’ or necessarily right for you.
The day on which a property becomes legally yours.
Conclusion of Missives
The Scottish equivalent of exchanging contracts.
A policy insuring household contents against theft and damage.
A legal expert handling all documentation for the sale and or purchase of a property. This will be a solicitor or licensed conveyancer.
The legal process involved in buying and selling a property.
A technique used by the lender to assess the suitability of your application.
With this method of calculating mortgage interest, it is charged on the amount of mortgage outstanding from day-to-day. This means lenders take into account any changes in the amount you owe on a day-to-day basis.
The money you pay on exchange of contracts as part of your initial contribution to the purchase of your home.
All the various costs itemised on your conveyancers invoice for carrying out your homebuying legal work.
You have to pay this to some lender’s for releasing their hold over a property once you have paid off your loan.
Early Repayment Charge
With some mortgages you have to pay an early repayment charge if certain things happen. For example, if you pay off some or all of your mortgage, or you transfer to a different mortgage rate before the end of the special rate period.
The difference between the amount you owe on your mortgage and the current value of your property.
Exchange of contracts
The swapping of contracts between a buyers conveyancer and a sellers conveyancer. Once you have exchanged contracts you are both legally bound to the transaction.
A form of legal title applicable only in .
Financial Services Authority (FSA)
An independent body which regulates the financial service industry in the . Their aim is to help consumers become better informed about financial matters.
A rate of interest guaranteed not to change over a fixed period of time.
A form of legal title to land which means you are the absolute owner of the property and the land its on.
Someone who guarantees to repay the mortgage if the borrower can’t or won’t for any reason. Guarantees are usually entered into where the borrower’s circumstances would not allow them to borrow enough to buy the home they want. For example, parents may act as guarantors for their children when they buy their first home.
Higher Lending Charge
Fee or premium sometimes charged by lenders if your mortgage represents a high percentage of the property’s value.
A way of referring to both buildings and contents insurance.
Initial Disclosure Document
Initial disclosure is the information you will receive from a lender when you first contact them regarding a mortgage or related product. It informs you about the service you will receive, details whether you will receive advice and may help you to decide whether to use that lender.
You only pay interest to your lender throughout the mortgage term and your mortgage balance doesn’t reduce.
As with an interest only mortgage, you only pay interest to your lender throughout the mortgage term and your mortgage balance doesn’t reduce. At the same time, you put money into a separate investment which should grow and pay off the mortgage as scheduled. You must make sure you keep premiums up to date on any mortgage investment products.
Key Facts Illustration
A Key Facts Illustration sets out details of the mortgage product that a customer is interested in. All lenders are required to set out the details in a Key Facts Illustration in the same format, so it’s easier for you when you want to compare products.
Land Registry Fee
Your conveyancer pays this on your behalf to register your details in the Land Registry records once you’ve bought a property or changed your mortgage lender.
This means you own a property for a set number of years. When the lease expires, the property returns to the freeholder. Flats are commonly sold as leasehold.
A form of insurance by which someone’s life is insured. Life assurance policies can run parallel with a repayment mortgage, so the mortgage will be repaid if you die before the end of the term.
Local authority search
Part of the conveyancing process when you buy a property, carried out by your conveyancer. It gives details of any matters which, from the local council’s point of view, affect the property. It reveals any proposed changes to the local area, such as road improvements, and details any planning permission given for the property.
This means ‘Loan To Value’ and is the proportion of the value or price of the property (whichever is the lower), that you borrow on a mortgage. For example, a £63,000 mortgage on a house valued at £70,000 would mean a LTV of 90%.
A legal document establishing a mortgage on a property. This is called a standard security in .
The length of time over which you agree to pay back your mortgage, up to a maximum of 40 years.
This is when the amount you owe on your mortgage is greater than the value of your property. It particularly becomes a problem if you want to move house.
Amount you pay on a regular basis, usually for an insurance policy.
When you arrange a new mortgage on your home, with a different lender and use the new mortgage to pay off the old one.
Your monthly payments gradually pay off your mortgage as well as the interest.
This is also known as Bank of England base rate. See the definition of this term earlier in this glossary.
Holding back part of a mortgage loan until repairs to the property are satisfactorily completed.
Government tax you have to pay based on the purchase price of a property worth £120,000 or more.
Structural engineers report
A specialist report from a structural engineer on the condition of a property.
Survey and valuation
A property survey that includes a valuation and should reveal any major faults in the property.
Tracker rates vary in line with changes to the Bank of England base rate. During the tracker rate period, any changes to the Bank of England base rate are passed on to you in full.
Arranged by your lender to find out if the property is worth the amount you want to borrow and is suitable to lend a mortgage on.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE