Accident, Sickness and Redundancy Insurance -
See Accident, Sickness, and Unemployment Insurance
Accident, Sickness and Unemployment Insurance -
The policy pays a percentage of the usual monthly mortgage
payment including any insurance (occasionally an element of
extra cover is allowed for household bills) if the borrower cannot
work because of accident/sickness or
Payments are made for limited periods of time - 6, 12 or 24
months or until the borrower returns to work.
N.B. The following would preclude the payment of benefit:
Voluntary redundancy, summary dismissal for misconduct (the
sack), self injury and injury arising from the misuse of alcohol or
Added To Loan -
This phrase relates to the costs borrowers face when arranging
a mortgage. Often these costs are added to the mortgage
amount being borrowed hence the term. The costs may include
items such as mortgage indemnity fees and/or arrangement
fees and/or administration fees as examples.
Additional Security Fee -
This is required when the mortgage exceeds a certain
percentage of the value of the property (usually 75%). The form
of additional security used is normally a Mortgage Indemnity
Policy. Occasionally the lender may require a parent to be a
guarantor or for other security such as shares or insurance
policies to be pledged.
Administration Fee -
Some lenders charge this fee to cover their costs of
administration and sourcing funds. This fee is not refundable if
the mortgage application does not proceed. Often the
administration fee will form part of the valuation fee and this part
will not be refunded by the lender if the valuation does not
Adverse Credit -
This is a term used to describe credit problems the borrower
may have suffered in the past. Such problems will encompass
County Court Judgements and arrears on loans.
Annual Percentage Rate (APR) -
This is a legal definition which is used to show what the cost of
borrowing actually is. As it is a standard definition it enables a
potential borrower to compare the costs of various types of
mortgage. Every mortgage quotation must show an APR figure.
Annuity Mortgage -
A term used in other countries to describe a Capital and
Interest repayment mortgage.
Someone who applies for a mortgage.
see annual percentage rate.
Arrangement Fee -
Whilst some lenders charge an administration fee others may
charge an arrangement fee. Again this fee is charged to cover
administration and primarily reserving the funds for fixed rate
and/or discounted rate mortgages. This fee may be paid
separately added to the mortgage or in rarer cases taken from
the mortgage loan.
When mortgage payments have not been paid on time and/or
are not made at the correct level. Borrowers with a history of
mortgage arrears will find it harder to effect a further mortgage
with their current lender or a new lender in the future. However,
there are a number of lenders who will consider lending to credit
This is a financial institution authorised through the Bank of
England. Banks now encompass the so-called traditional
clearing banks and the newer banks which have recognised
brand names from the insurance and retail sectors, e.g.
This occurs when someone is unable to pay their debts and
creditors move to secure what monies they can from any
existing assets (property) held by that person. All property is
then administered by the official receiver. A Bankrupt if able to
still work will only receive an allowance to live on after payments
are made to creditors.
Discharged From - After a period of time a Bankrupt Individual
can be discharged from bankruptcy. This then releases them
from their financial obligations. We currently have lenders that will provide mortgages for ex-bankrupts and you
should apply for a decision in principle for your mortgage or loan now.
Basic Earned Income -
Usually this is an individual's basic salary. This is the
guaranteed element and does not include bonuses, overtime
and shift allowance.
Booking Fee -
Another term to describe a fee which is payable upfront to
either source or reserve funds for a mortgage. Usually
applicable for fixed or capped rate mortgages.
Broker Fee -
Usually a fee charged by an adviser to a borrower for locating
the most appropriate mortgage for the borrower.
Buildings Insurance -
All lenders require a property to be insured. It should be insured
for the full rebuilding cost including professional fees and such
insurance cover is normally a condition of the mortgage. N.B.
The full rebuilding cost will normally differ from the mortgage
valuation of the property.
Building Society -
Building Societies are mutual organisations regulated by the
Building Societies Act. This means that their members (those
with an account or a mortgage which confers membership
rights) actually own the organisation. Building Societies are only
allowed to raise limited external funds and are generally stricter
to whom they lend than Banks and other organisations. There
has been much interest in mutual building societies because of
the so-called 'windfall benefits' However, the window of
opportunity to gain has largely been closed now.
Buy to Let -
This term describes where a property is purchased for the
purpose of letting it out to tenants, which will generate an
income for the purchaser. A number of lenders will consider
granting a mortgage for such a purchase.
This refers to either the deposit put down on a property or the
amount over and above the mortgage which would be available
if the property were sold. Also known as equity.
Capital and Interest Mortgage -
This is one of the most usual types of mortgage. The monthly
repayment made by the borrower includes a repayment of
capital borrowed and an amount for the interest charged. At the
beginning of the mortgage most of the payment is used to cover
the interest and only a small amount is paid towards reducing
the mortgage. Over the term of the mortgage more and more of
the monthly payment is comprised of paying back the capital
borrowed. As long as the monthly payments of repayments are
always made on time the mortgage is guaranteed to be paid off
at the end of the term.
Capital Raising -
This refers to re mortgages which are used to allow a borrower
to release equity (capital) from the property. As a result the new
mortgage is for a larger sum.
This refers to a capped rate mortgage which is a cross
between a fixed rate and a variable rate mortgage. The interest
rate will never rise above a certain rate within what is known as
the capped rate period. If the usual variable mortgage rate is
less than the capped rate then the borrower is charged that
variable rate. Such a mortgage is attractive as the borrower can
benefit from falling interest rates but will not have to pay more
than the capped rate.
Along with the term capped rate the phrase cap and collar
mortgages is often encountered. The 'collar' is the minimum
interest rate, whilst the maximum interest rate payable is known
as the 'cap'. As these mortgages involve the lender having to
source funds it is usual for early redemption penalties to be
imposed if the mortgage is redeemed within a capped rate
Cap and Collar - see Capped.
Car Allowance -
This is a payment made by a company to an employee in lieu of
a company car. Normally paid monthly through salary and is
broadly equivalent to the leasing cost of the car.
Cash Back -
With these schemes once a mortgage is completed a lender
will pay a percentage of the mortgage as a lump sum to the
borrower. The higher the percentage of cash paid the greater
the amount of strings attached. These may be reflected in
higher redemption penalties if the mortgage is redeemed in the
early years and/or reflected in a less favourable rate of interest
on the mortgage. It should be noted that if the cash back is large
then this could result in a capital gains tax liability for the
Centralised Lender -
This is a lender who does not have any branches and may
operate from one location either through brokers or via the
Charge or Legal Charge -
When an individual takes out a mortgage the bank take a
charge or a legal charge over the property. This means that they
are registering the interest in the property.
This is the last stage in the purchase of a property. The legal
documentation is finalised and the lender has sent the
mortgage funds to the purchaser's solicitor. Once the
purchaser's solicitor forwards the funds to the seller's solicitor
the property is now owned by the Purchaser.
Compulsory Insurances -
see Conditional Insurances.
Concrete Construction -
Mainly local authority high rise blocks built in the 1960s and
1970s, which are regarded by some lenders as not as
mortgageable as some properties.
"We have lenders who will consider lending on concrete construction, high rise blocks of flats, orlit
pre-fabricated type construction and other non-standard construction. Apply now for a decision in principle"
Conditional Insurances -
This is where a lender insists that certain insurance products be
taken out before a mortgage is granted . Very often a lender will
insist that buildings and contents insurance is effected and/or
accident, sickness and unemployment cover is in place before
mortgage monies are released. This is usually encountered with
capped, discounted or fixed rate products.
Contents Insurance -
This is insurance which should be considered by all
householders whether or not they have a mortgage. It covers
items such as furniture; carpets, curtains; electrical goods and
many policies also cover personal possessions, which may be
removed from the home. This is separate to buildings
Contract Work -
With the labour force becoming more flexible and employers
having to meet different business needs, many workers are now
employed on fixed term contracts. Fixed term contracts means
that the individual is not employed directly by the company and
is often not included in company benefit schemes, such as
pensions and life assurance. As the company does not employ
the individual they are not included in any redundancy schemes.
Contract working has become popular as some individuals are
paid a higher salary than those who are directly employed by
companies to make up for the lack of company benefits. In
some cases contract work is also suitable for those also who
do not wish to be tied to one employer. Mortgage lenders will
wish to see a consistent pattern of employment before they will
Converted Flat -
This is a flat, which has been created out of a larger house or
Conveyancing Fee -
This is the fee charged by a solicitor or licensed conveyer after
the legal paperwork for transferring a property has been
completed. It should be remembered that as well as this fee,
stamp duty, land registry fees and legal disbursement fees also
require to be paid.
County Court Judgements (CCJ) -
This is a judgment for debt lodged in a County Court. Such
judgements are recorded and will be shown when a credit
check is run. An individual with CCJ's will not easily be able to
get a "High Street" mortgage and some Lenders will normally insist that such CCJ's are satisfied or have been
satisfied for some time before a mortgage will be granted.
However, we at CCC Financial have Lenders that will lend in these circumstances and you should apply now to get
a quotation for your mortgage, no matter what your current credit circumstances are.
Credit Check -
This is where the mortgage lender evaluates the credit history of
an applicant by referring to one of the major credit agencies.
Credit Scoring -
Assessing the ability of borrowers to be able to meet the
mortgage payments from answers entered on a mortgage
Criteria (Mortgage) -
These are the standard terms and conditions of a lender.
Current Standard Variable Rate -
This is the usual mortgage rate charged by a lender. This rate
moves up and down in line with interest rates and the general
movement in mortgage rates.
Debt Consolidation -
Borrowers with a number of different loans usually which are
unsecured - (not secured on the property) may find that they can
replace these loans with a single loan secured on the property.
This can often reduce the borrowers monthly outgoings by
paying only one loan which is secured on the property
sometimes over a longer term. As the loan is secured, the
interest rate may be considerably lower.
Deeds Release Fee -
This is the fee charged by a lender when it has released its
charge over the property deeds and returned them to the
solicitor. It covers the administration carried out.
Deferred Interest Mortgage -
This is a mortgage where not all of the interest due is paid in the
early years. The interest not paid is added to the mortgage. As
a result a borrower will end up owing more than the initial
mortgage amount and the interest payments will be higher over
the rest of the mortgage term. This type of mortgage is usually
marketed to professionals whose salaries are expected to
increase rapidly in order that they can meet the later interest
payments over the rest of the mortgage term.
This is another term for the equity put into a property by
borrowers. The phrase may also refer to the amount paid upon
exchange of contracts.
These are costs related to the conveyancing of a property.
These costs usually encompass photocopying, postage,
couriers and legal documentation.
Discharge Fee -
Lenders charge this fee when releasing the charge over a
property after a mortgage has been repaid.
Discharged Bankrupt -
see Bankrupt and Bankruptcy - discharged from.
Discounted Rate mortgage -
This phrase refers to mortgages which have an interest rate
lower than normal variable rate. The discounted rate is a fixed
discount off the normal variable rate for a set period of time. It
should be remembered that a discounted rate will move up and
down with the normal variable rate but the rate paid will always
be at a fixed percentage less for the discounted rate period,
e.g. a rate may be 3% below the variable rate for 3 years.
If a Discounted Rate mortgage is redeemed during the early
years it is likely that there will be early redemption penalties.
Draw Down Facility -
This refers to mortgages, which have a facility allowing
additional funds to be borrowed later on during the mortgage
term. A borrower then knows that they have got the facility to
access future funds without having to go through all the normal
Early Redemption Fees -
This refers to any redemption fees that a lender will charge if a
mortgage is redeemed before the end of the term.
Endowment Mortgage -
This is a mortgage where interest only is paid and the proceeds
of the endowment policy when it matures will repay the
mortgage. The most popular type of endowment is the low cost
endowment, which is designed to repay the mortgage as long
as certain investment assumptions are met. The endowment
does not guarantee to repay the mortgage. As well as being an
investment vehicle the endowment policy will also include life
assurance and may include critical illness and other benefits for
Equity Appreciation -
see Capital. This is the increase in capital available in the
property over and above the mortgage amount.
Exchange of Contracts
(England only) - At this stage of property purchase legally
binding contracts are exchanged between the buyer and the
seller. After contracts have been exchanged the vendor must
sell and the purchaser must buy on the terms agreed.
Existing Liabilities -
This phrase simply refers to all the other financial commitments
apart from the existing or proposed mortgage. Liabilities will
include credit cards, bank loans, maintenance payments to
ex-spouse and school fees, etc. Lenders will take these items
into account when evaluating the mortgage amount they are
prepared to lend.
This is someone who is working or what is known as domiciled
(living in) in a country which is not the place of his or her birth or
A lender, mortgage broker or adviser may charge this for
arranging a property purchase.
This is found in Scotland and is similar to freehold.
First Charge -
A lender will always use this to secure the main mortgage
therefore a lender who has a first legal charge over a property
will have the first call on any funds raised from the property sale.
First Time Buyers (FTB) -
The lending market is very competitive for first time buyers.
Mortgage lenders want to be the first to lend to such borrowers
in order to keep them as customers for subsequent mortgages.
Generally this phrase is used for those borrowers who are
buying a property for the first time. Some lenders will also
consider someone who has owned a property before but
maybe currently renting. First time buyers may be able to
access particularly attractive mortgage packages such as fixed
rates and discounted rates.
Fixed Rate Mortgage -
These are mortgages where the interest rates are set for a
number of months or years. After the fixed rate period the
interest rate will revert to the normal variable mortgage rate. If
the mortgage is redeemed during the fixed rate period there
are usually redemption penalties.
Flat over shop -
This is a private flat which is located above a retail outlet. Some
lenders do not view this type of property as favourably as those
flats found in blocks which are completely residential.
Flexible Drawdown/Repayment Features -
This refers to mortgages which permit additional funds to be
borrowed later on during the mortgage term and/or flexible
repayments to be made. Flexible repayment mortgages may
allow payment holidays and/or the amount of monthly payments
to be varied.
Foreign Currency Mortgage -
These are mortgages where the loan has been drawn down in
another currency which is not Sterling. Such loans require
careful consideration as they can be beneficial however the
opposite also applies and in some cases borrowers have found
the mortgage debt has increased. because of currency
movements. Financial advice should be sought if considering
such a mortgage.
Freehold (England only) -
This refers to land or property which is owned indefinitely.
Leasehold property only gives the owner a right to hold for a
limited period of time. Full Status - This refers to a mortgage
where full credit checks and information has been sourced on
Further Advance -
This describes when a further loan has been granted by the
current mortgage lender. This loan is also secured by the first
charge on the property. Further advances are generally used for
debt consolidation or home improvements.
General Conditions -
These are the standard conditions applicable to a mortgage.
These will be found in the paperwork given to a borrower.
Geographical Restrictions -
These are areas where mortgage lenders wish to lend or
operate in. This may simply be because they have no branches
in this area or a lower awareness of the area. This is usually
applicable to smaller lenders.
Gross Monthly Payment -
This refers to the monthly mortgage payment before the
deduction for MIRAS tax relief.
Gross Profit -
This is the profit of a company before allowing for expenses.
This is a person who will guarantee that the mortgage
repayments are made in the event of default by the borrower.
Usually this will be a parent or relative of a borrower. It should
be remembered that a guarantor would be fully liable for
repayment of the mortgage amount if a borrower defaults. The
guarantor should therefore be confident that the borrower will
meet all the necessary monthly payments.
Higher Early Redemption Fee -
This phrase will usually be found in conjunction with fixed rate,
capped and discounted mortgages. As the lender has given the
borrower an attractive mortgage package they will impose a
penalty over and above the normal redemption fees if the
mortgage is paid off within the period of the special terms.
Holiday Home -
This refers to a property which is purchased for use at
weekends and for holidays only. As the borrower is not living in
the property all the time, mortgage lenders have stricter lending
criteria and borrowers may find that they have to put down
Home Buyers Report -
This is a property survey report which has more information than
a mortgage valuation but is not as detailed as a full structural
survey report. This report is used by the lender in place of the
mortgage valuation report and gives more information that will
enable a borrower to reach a decision on whether or not to
purchase. A detailed a structural survey report may be more
suitable for some types of property, e.g. older. It is essential that
professional advice is sought in this area.
Home Buyers Valuation Fee -
see Home Buyers Report. This is the fee payable for the report.
This is a quotation given to a potential borrower to show the
monthly cost of a mortgage and any other expenses incurred
with the loan.
Impaired Credit -
This refers to the credit rating of an individual who may have
CCJs or maybe behind with payments to personal loans or a
mortgage. This phrase is also applicable to someone who has
been declared bankrupt.
Income Multiplier -
Lenders use income multipliers in calculating how much they
can lend on a mortgage. Usually a single income has a
multiplier of three times and a joint income has a multiplier of
two and a half times. Some lenders will give higher multiplies of
income if a borrower is a professional.
Indemnity Premium -
See Mortgage Indemnity Fee.
Initial Fees -
This figure includes an assumption of expenses which include
the solicitors fees, valuation fees and any arrangement,
reservation, booking and application fees applicable. This is
only an estimate and the costs are likely to differ dependent on
the type of survey carried out and property purchased.
Initial Interest -
This often catches borrowers unaware. Initial interest is a
payment which covers the period between completion and the
normal date when the mortgage payment is due, e.g. a
mortgage maybe completed on the 15th October and the first
payment due is on the 28th. A borrower will have to pay interest
for the period between the 15th and the 28th, 13 days interest.
This is an extra cost not always pointed out to borrowers until
they have completed.
Initial Rate -
This is the interest rate that is paid from the beginning of the
mortgage to the end of the initial rate period. This usually
relates to fixed and discount mortgages which may have an
initial rate of interest lower than the normal variable rate. At the
end of the initial period the normal variable rate will be payable.
Insurance Guarantee Premium -
see Mortgage Indemnity Fee.
Interest Calculated -
This is a figure for guidance purposes only and shows the
interest only which is payable on a typical mortgage. You should
be aware that to get an exact costing an illustration will be
required from a lender. This is particularly the case if your
circumstances do not meet standard mortgage lending criteria.
Interest Only Mortgage -
This is a mortgage where only the interest is paid to the lender.
A borrower should be aware that any capital repayment is an
extra amount which will be over and above the interest paid.
The capital will be repaid from an endowment policy, pension
plan or PEP/ISA. It is the responsibility of the borrower to
ensure that the repayment vehicle will pay off the mortgage at
the end of the term. Remember that Life Assurance will also be
A mortgage broker or adviser who introduces a borrower to a
ISA Mortgage -
A mortgage which will be repaid from the proceeds of an ISA.
Land Registry Fee -
This is the fee paid to the Land Registry to record a change in
the records following a transaction involving land registered with
them. The change is usually notified to them by the borrower's
Landlords Reference -
This is a reference from the borrowers previous landlord stating
whether the rent and conduct would make him or her a suitable
Large Town Allowance - This is a part of salary paid to an
employee because of extra expense incurred from working in a more expensive area of the country. This payment
usually taken into account by mortgage lenders when calculating
the amount that can be borrowed.
Leasehold (England only) -
If a property has a tenure which is Leasehold then the land is not
owned by the property purchaser, and is only leased to them for
a certain fixed period.
Legal Charge -
see Charge or Legal Charge.
The organisation offering the mortgage loan.
is the London Interbank Offered Rate. This is the rate at which
banks buy and sell money to each other. It changes daily and is
linked to base rates set by the Bank of England. LIBOR usually
changes daily and a LIBOR linked mortgage may be adjusted
at fixed intervals, e.g. every three or six months. Studying the
movements of LIBOR compared to the base rate can indicate
the direction of bank base rates. If bank base rates are
significantly below LIBOR then the money markets think that
interest rates are about to fall. Conversely if LIBOR is
significantly more than the base rate this indicates that the
markets believe interest rates are about to rise. Most analysts
follow the three month LIBOR rate, however, there are also rates
quoted for one, six and twelve months periods.
LIBOR Linked Mortgage -
This is linked to LIBOR and the lender adds a fixed margin over
this rate which is reset usually quarterly. The margin dependent
on type of mortgage will vary but for a normal borrower is
around 1-1.5%. LIBOR mortgages tend to have more interest
rate changes than a normal mortgage. They may be beneficial
where interest rates are relatively low and more expensive when
interest rates are high.
Life Company -
This is the term used for a life assurance company. Life
companies are authorised and supervised by various
Life Insurance -
Term used to describe a policy which pays out benefits if the
policy holder dies.
Loan to Value (LTV) -
This term explains the relationship between the value of the
property and the amount of mortgage, e.g. a mortgage of
£75,000 on a property valued at £100,000 would have an LTV
of 75%. The higher the LTV required (i.e. the more of the
property value being borrowed), the fewer lenders willing to
Loan Consolidation -
see Debt Consolidation.
Local Authority Search -
This is carried out by the purchaser's solicitor to check the
status of the property. This search reveals whether any
proposed changes in the area are taking place, details of
planning permission for the property and whether enforcement
notices have been served by the Local Authority on the
Local Authority Search Fee -
This is the fee payable to the Local Authority for the search.
Low Cost Endowment -
This is the most usual form of endowment used to repay a
mortgage. It provides life cover which would pay off the
mortgage if the policy holder dies. As long as investment
assumptions are met the endowment should provide a lump
sum sufficient to repay the mortgage at the end of the term. If
the assumptions are exceeded then there would be a lump sum
over and above the mortgage amount for the borrower to enjoy.
Low Start Low Cost Endowment -
also known as Low Start. This is a low cost endowment where
the premiums are lower to start with and build up gradually,
usually over the first five years. As the premiums are initially
lower the total paid over the term is greater than a low cost
endowment to make up for the loss of growth.
Main Residence -
Sometimes referred to as the principal private residence. This
is the normal home where someone lives.
Maintenance Payments -
Normally paid or received under a Court Order for a child or to
make up income.
Usually a flat which may have more than one floor or has its own
entrance at street level.
Mortgage interest relief at source. This is tax relief allowed on
mortgage payments. The tax relief is usually allowed at source.
MIRAS is now at a relatively low level.
Mortgage Deed -
This is the legal document which establishes the loan on a
Mortgage Indemnity Fee -
If a 'high percentage loan to value' mortgage is required, then
this fee is payable. The lender uses the mortgage indemnity fee
to purchase insurance which covers against a borrower
defaulting on the mortgage and a loss on repossession if the
property has to be sold. It should be noted that the borrower
receives no benefit and no protection from the policy. If a lender
does have to claim on a mortgage indemnity policy then the
insurance company who paid the claim to the lender can pursue
the borrower for repayment of the amount. The mortgage
indemnity fee varies from lender to lender and generally this fee
is levied on loans of more than 75% of the property value. The
fee is calculated as a percentage of the amount borrowed over
75% of the property value. Some lenders do not charge
mortgage indemnity fees or have higher or lower property value
Mortgage Indemnity Guarantee -
see Mortgage Indemnity Fee.
Mortgage Indemnity Premium -
see Mortgage Indemnity Fee.
Mortgage Subsidy -
This is a payment made by an employer to help an employee
purchase a home. The way in which the subsidy is calculated
and paid can vary substantially from employer to employer. In
recent times many employers have either phased out the
subsidy or frozen the mortgage amount it is based on.
Mortgage Term -
The length of time the borrower has a mortgage.
Mortgage Valuation -
This is the cheapest and most basic type of property survey. It is
the minimum required survey by lenders in order that they can
evaluate the suitability of the property for mortgage purposes.
The borrower normally receives a copy of this report, however, it
is not a comprehensive report on the condition of the property.
The borrower should consider a home buyer's report or
structural survey if they require more detailed information before
deciding to purchase.
Multiplier (Income) -
see Income Multiplier.
Mutual Membership Terms -
This refers to whether or not taking out a mortgage with this
lender will enable the borrower to become a mutual member of
the organisation or society. Such membership usually confers
voting rights and perhaps an entitlement to any so called
windfall benefits if the society or organisation demutualises.
Negative Equity -
A phrase now quite well known although its affects have more
recently, largely disappeared. This occurs when the property
value has fallen below the amount of mortgage still owing. There
are a number of lenders who have products which can help such
Net Profit -
This is the income of a company or self employed person after
the expenses of running the business have been deducted. In
the case of a limited company, corporation tax will also have
been deducted. With regard to the self employed, the net profit
figure is the one that can be used to calculate their ability to
repay a mortgage.
New Build -
Newly built housing on either a brown field or green field site.
No Capital Raising -
This refers to a mortgage which replaces an existing mortgage
for exactly the same amount.
Non-Contributory Pension -
A company pension scheme which does not require employees
to make any contributions.
Non-Status Mortgage -
Mortgages offered by lenders without any proof of previous
mortgage history, proof of income. The usual maximum loan to
value is around 70% and a credit check is still carried out.
Obligatory Insurance -
Referred to as compulsory insurances or conditional
insurances. See Conditional Insurances.
Occupational Pension -
Pension scheme provided by an employer. The pension may be
based on years of service or on contributions made.
Open Market Value -
The normal value of a property assuming usual market
Other Income -
Income over and above the basic salary.
Outgoings - see Existing Liabilities.
Part Capital and Interest Mortgage -
This refers to a mortgage which is partly repaid on a capital and
interest basis and also repaid by another method, hence the
term 'part capital and interest mortgage'. Sometimes a
mortgage may be part capital and interest and also repaid from
the proceeds of an endowment.
Part Endowment Mortgage -
This refers to a mortgage which is partly repaid on a part
endowment basis and also repaid by another method, hence
the term 'part endowment mortgage'. Sometimes a mortgage
may be part endowment and also part capital and interest.
Part ISA Mortgage -
This refers to a mortgage which will be repaid from the fund built
up through an ISA and also from repayments made to perhaps
a capital and interest mortgage.
Part PEP Mortgage -
This refers to a mortgage which will be repaid from the fund built
up through a PEP and also from repayments made to perhaps
a capital and interest mortgage.
Payment Method -
This is the way in which the mortgage is repaid at the end of the
term. The repayment may be from an ISA, endowment or from a
tax free cash sum from a personal pension.
Payment Protection Insurance -
see Accident, Sickness and Unemployment Insurance.
Pension Mortgage -
This is an interest only mortgage and it is paid off from the
proceeds of the tax free cash sum at maturity.
PEP Mortgage -
This is an interest only mortgage and it is paid off from the
proceeds of the PEP at the end of the mortgage term.
Permanent Health Insurance (PHI) -
This is a policy which pays out regular sums of money to the
insured after specified period during disability through sickness
or accident and injury. The benefit is payable until the policy
holder returns to work, dies, or the policy term expires,
whichever is earlier. Such a policy is used to replace a
percentage of full income and not just the monthly mortgage
repayment. PHI is not an accident, sickness and unemployment
and insurance policy which usually only give cover for up to two
years. PHI pays an income until a return to work or normal
retirement age. N.B. PHI does not cover unemployment.
Personal Pension Plan -
Such plans are suitable for those who are self employed or
employed in non-pensionable employment. Contributions made
to a personal pension plan are exempt from tax at the
individual's highest rate. This means that a higher rate tax payer
can receive 40% relief on contributions made. Retirement age
maybe between the ages of 50 to 75. Importantly up to 25% of
the pension fund at retirement can be taken as a tax free cash
sum. It is a percentage of this tax free cash sum which is used
to repay a mortgage if a pension mortgage is the repayment
This is an important area for borrowers to be aware of. It
describes the facility to move a particular type of mortgage from
one property to another if a property move is required. This
would be important if a capped, cash back, discounted or fixed
product has been used by a borrower and early redemption
fees would be incurred if the mortgage was not portable.
Previous Lenders Reference -
Often a new mortgage lender will ask for a reference from a
previous lender to check that the borrower did make all due
payments. Principal - Other word for capital or the amount of
This is a person who is a recognised professional. An
accountant, actuary, doctor, solicitor, vet, etc., are all
recognised as being members of a profession. In recent years
the term has widened and takes in some senior managerial
positions. Not all lenders go as far as this. Therefore, some high
earners will be able to borrow more from certain lenders than
Qualifying Loan -
This is a loan which is eligible for MIRAS. The interest on the
first £30,000 borrowed to purchase the principal private
residence is currently eligible for relief at 10%. As the years
move on the MIRAS payment is now relatively small.
Qualifying Part -
This is the part of a mortgage loan which is eligible for MIRAS..
Rate Type -
This refers to the type of mortgage you are enquiring about. It
may be fixed, discounted or capped and if you require further
information just tab through this Glossary.
This refers to repaying the mortgage when moving to another
property or at the end of the mortgage term.
Redemption Charges -
see also Early Redemption Fees and Higher Early Redemption
Fee. This is a charge made by a lender if the mortgage is
repaid within a set time period, normally in the early years of a
mortgage these are now quite usual as many borrowers are
opting for fixed rate and discounted rate mortgages. The
penalties are usually in the form of a set number of months
interest within the agreed early redemption period. As an
example, if a borrower repays a mortgage within three years
they may have to pay four months interest. When taking out a
mortgage, borrowers should be aware of these penalties.
Regional Lenders -
These are usually smaller local building societies who only lend
within the regional location. There are also lenders who will not
lend in Scotland or Northern Ireland because they do not have a
branch presence in these countries.
When a borrower moves a mortgage from one lender to another
this is known as a remortgage. The new mortgage will pay off
the existing lender and sometimes the borrower may raise
additional funds over and above the old mortgage amount. With
a competitive mortgage market, remortgaging has greatly
increased in popularity and many borrowers usually
re-mortgage to secure a competitive interest rate. It should be
noted that remortgages carry costs and the borrower should
also be wary of any redemption charges when considering a
Repayment Mortgage -
see Capital and Interest Mortgage.
In some cases lenders will hold back monies until certain
conditions of the mortgage have been met. Normally these are
essential repairs or improvements which require to be made.
Right to Buy -
Sitting council tenants have an option to purchase the property
in which they live in. Usually the property can be purchased at a
discount based on the length of time they have been a tenant.
Sealing Fee -
see Discharge Fee.
Second Charge -
This is a legal charge which is used usually to secure a second
mortgage or other borrowings. It will always rank behind a first
Self Build -
Property which has been constructed by the borrower.
Mortgage loans on self build properties will usually only be paid
in stages and are subject to lower loan to value limits. The
lender will insist on a qualified architect drawing up plans and
often for the builder to give an NHBC guarantee.
With this mortgage the borrower provides a statement of his or
her income and the lender may or may not check the accuracy
of the information provided.
An individual who works for himself/herself. This will include
partners in businesses and professional practices such as
Shared Equity -
This allows a borrower to purchase a new property in
partnership with the builder. Often the builder will allow the
borrower to purchase say 90 or 95% of the property now and
pay the balance off say in 5 years time. The builder will register
a second charge on the property until this balance has been
paid. The 5 or 10% owing maybe interest free or interest may
be allowed to roll up and added to the debt. Obviously this can
benefit some borrowers but the consequences of not being able
to take on the additional debt in the future are serious. Financial
advice must be undertaken before proceeding with this type of
Shared Ownership -
A housing association tenant may have the opportunity to
purchase a property. The scheme works by allowing the
borrower to purchase part of the property and rent the other part
from the housing association. This subsidises home ownership
for people who would otherwise not be able to become home
Sitting Tenant -
This is someone who has the right to occupy a property. This
right remains even if the property changes hands. Properties
with sitting tenants are much less marketable than those with
Sole Occupancy -
This is a property occupied by the borrower and his or her
family only. It contains no tenants.
Special Conditions -
These are special terms or specific terms outlined on the
mortgage offer letter. These maybe where the lender requires
the borrower's solicitor to confirm that special conditions have
been met or that areas of concern have been resolved.
Stamp duty -
This is a Government tax which is levied when a property is
purchased. The tax is paid by a property purchaser and is
currently charged at the following rates: 1% - £60,000-£250,000
2% - £250,001-£500,000 3% - £500,001 and above It should
be noted that the rate is paid on the whole purchase price and
not just on the slice, e.g. £500,001 requires stamp duty of
£15,000 to be paid. This is 3% of £500,001.
Standard Construction -
This refers to houses which are also known as traditionally built.
These are constructed of brick with a tile or slate roof. Lenders
will give lower loan to value mortgages on non-standard
Standard Property -
This is the normal semi-detached, terraced house, bungalow or
Start Up Business -
This is a business which does not have a set of accounts.
Structural Survey -
This is the most expensive and detailed type of survey report
carried out by a chartered surveyor. If the borrower requests a
structural survey the lender will still need to have a mortgage
valuation carried out. The borrower will then have to cover the
costs of both. If the property has movement or is of unusual
construction a lender may ask for a structural engineer's report.
Such a survey is undertaken by a chartered building engineer
and is a further step on from a structural survey. This survey will
only be asked for on more rare occasions.
Studio Flat -
This is a flat comprising of one room. It will usually have a
bathroom and may have a separate kitchen. Lenders will only
consider those in more desirable locations.
Survey Fee -
The fee payable for a structural survey, home buyers report, or
Tax Free Cash Sum -
This is the part of a pension mortgage which is used to repay
the mortgage loan at retirement. Usually lenders will set a
ceiling on the amount of tax free cash that is used to repay the
mortgage of no more than 70 or 80%. Alternatively, the lender
may base repayment of the mortgage amount on the full tax-free
cash sum, and in this case, a lower rate of growth is assumed in
the pension fund.
Term Assurance -
This is the simplest form of life assurance. It pays out the sum
assured on the death of the policy holder as long as it occurs
within the term of the policy. This is mainly used in conjunction
with capital and interest mortgages. In particular the policy is
known as a mortgage protection assurance. This version of
term assurance has cover which reduces in tandem with the
reduction in the mortgage amount owing. Some borrowers
prefer to use level term assurance which does not reduce. The
means that there would be a capital sum left over if they died in
the later years of the mortgage.
If the borrower lives to the end of the mortgage term the term
assurance cover simply expires and has no value. As this is a
protection only contract premiums are relatively inexpensive.
Timber Framed -
A method of building where no inner cavity wall is constructed.
In the past timber framed properties suffered from damp and
accordingly some lenders did not view them as secure as other
types of property to lend on. More recent building techniques
have eradicated such concerns and most lenders find such
properties as acceptable for lending purposes.
Typical APR -
Mortgage quotations and advertisements will usually show a
typical APR figure in order to comply with the Consumer Credit
This is a property without any loans or borrowings secured on it.
Unit Linked -
This phrase refers to the type of life assurance product where
the premiums are invested into an asset backed fund.
Therefore a unit linked UK equity fund will invest in UK shares
either directly through the fund or through the life company's unit
Unitised with Profits -
Is a modern version of the traditional with profit policy which
seeks to smooth the peaks and troughs of the stock market and
other asset backed investments. Bonuses are allocated in a
form more akin to annual interest payments. Such contracts are
easier for investors to understand. See With Profit Policy.
Variable Rate -
Many mortgages are still arranged in this manner. Such
mortgages have interest rates which fluctuate up and down
often in tandem with bank base rates. In more recent years
many variable rate mortgages are marketed with an initial
discounted rate or fixed rate period.
With Profit Policy -
At one time such policies were the most popular method of
repaying mortgages, particularly low cost versions.
A conventional With Profit Policy is designed to smooth the
returns from different investments. Under such a policy the
insurance company will declare annual bonuses usually known
as reversionary bonuses. Once declared, these bonuses are
guaranteed. At the end of the policy term if the insurance
company has managed investments well and market conditions
allow, a final or terminal bonus would be paid. Under a unitised
With Profit Policy the annual bonuses are declared by a method
more akin to interest payments. The units grow at a
predetermined rate during the year and if the Actuary is
comfortable with the performance of the investments the rate
may be increased or maintained. Terminal bonus maybe paid
as a lump sum at the end of the policy term or as further
increases in the rate of bonus on units after a period of time,
e.g. five years. With Unitised With Profits an Actuary may level
what is known as a market value adjuster if a policy holder
surrenders the plan early.
Actuaries prefer Unitised With Profits to conventional With
Profits Plans as the Insurance Company does not have to set
aside as much in the way of reserves to cover their liability.
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