Finance - Mortgages
Practically every new home these days is purchased with the aid of a mortgage. Mortgages jargon is often
the detail of the terms for the loan and needs to be understood by the householder.
Failure to understand the implications of the mortgages jargon could render the homeowner with excessive
repayment terms or penalties for early repayment if they are able.
Mortgages jargon is very complex and Regulators have insisted over the years that more explanation
and examples are given to the applicant which is great news. However, it is still shrouded in jargon and often not
as transparent as one would first believe.
A mortgage loan.
APR (Annual Percentage Rate)
The total cost of a loan, including interest charges and product fees, shown as a percentage rate. The
calculation assumes that you maintain the mortgage for the full term. APR is an industry standard calculation and
enables direct comparison of mortgages from all lenders.
See Product Fee
The transfer of ownership of an insurance policy or a lease.
The amount of loan owed at a particular time.
Bank of England Base Rate
The Bank of England set a rate each month known as the 'Base Rate'. Banks and Building Societies use the Base
Rate to set the interest rates they pay on deposits, or charge on debts.
Bridging Loan / Bridging Finance
A temporary loan advanced to help somebody buy a new property before they have sold their existing one.
Insurance against the cost of rebuilding a property from scratch following structural damage, for example by
flood, fire or storm.
The health and safety requirements that any new construction must meet.
A mutual institution owned by its investors and borrowers that provides a range of savings and mortgages.
Capital and Interest Mortgage
See Repayment Mortgage
You receive a lump sum or a percentage of your mortgage in cash when you complete your mortgage.
An interest in the ownership of a property; usually a mortgage or some other debt secured against the
Completion (Date of Entry in Scotland)
End of the purchase process. The seller moves out, the buyer moves in and ownership is transferred.
Conclusion of Missives
Final part of the purchase process in Scotland.
Insurance against accidental damage or theft of all moveable contents, including furniture, appliances and soft
A document that describes the agreement under which the property will change hands.
A person other than a solicitor who may conduct the conveyancing.
The process of transferring property from one party to another, usually managed by a solicitor or a licensed
A condition, contained within the Title Deeds or lease, that the buyer must comply with, which is usually
applied to all future owners of the property. A restrictive covenant is one that prohibits the owner from doing
Lenders often use a system called credit scoring to help them decide whether to lend to you. They ask a series
of questions about you and your finances and score your answers. Depending on your score you will be accepted or
The process of combining outstanding debts e.g. loans, credit cards etc, into one loan.
Legal documents that show who owns a property or piece of land.
Sum of money which the buyer puts down to secure the mortgage loan after exchange of contracts, usually 5 to 10
per cent of the purchase price.
A Direct Debit is an instruction from a customer to their bank or building society to make regular payments
direct from their account.
All the various costs for carrying out the legal work in relation to buying or remortgaging your home.
Paying off a mortgage.
A discount offered by mortgage lenders to borrowers, reducing monthly mortgage repayments often for the first
two or three years of the loan period.
Early Repayment Charge
A charge payable on some mortgages if they are repaid early (during an Early Repayment Charge period). The
amount depends on the mortgage outstanding and the terms of the mortgage.
A legal right over land, for example the right to access a specified area of land, such as a right of way.
The difference between the value of a property and the amount of mortgage and/or secured loans owed.
Exchange of contracts
The point at which both buying and selling parties sign their copies of the contract which are exchanged by
their respective legal representatives and are legally binding. The buyer usually pays a deposit at this point and
the date of completion is agreed.
Financial Services Authority (FSA)
The regulatory authority for the UK financial services industry. The FSA has taken over the regulation of
mortgages and all lenders and mortgage intermediaries must be directly authorised and regulated by the FSA, or must
be an appointed representative of an authorised firm.
Fixed rate mortgage
A mortgage where the interest rate payment is fixed for a specific time. It then normally reverts back to a
Fixtures and Fittings
All non-structural items included in the purchase of a property.
An arrangement enabling the mortgage borrower to overpay, and with the overpayments that have been built up,
borrow money back, take payment holidays or pay less in some months.
Legal title that gives you absolute ownership of the land your property is on.
Full Structural Survey
A full structural survey looks at all the main features of the property, including walls, roof, foundations,
plumbing, joinery, electrical wiring, drains, and garden.
An additional loan to your existing mortgage taken after the main mortgage has completed which is also secured
against the property.
When a seller pulls out of a sale after accepting a higher offer.
A tactic whereby the buyer offers less than the agreed price just before exchange of contracts.
The annual fee which a leaseholder pays to a freeholder.
A guarantor is someone who guarantees to pay your mortgage if you can't or won't for any reason.
Higher Lending Charge
This charge is payable (usually added on to your loan) if you borrow more, for example, than 90% of the
valuation or purchase price of your property.
Home Buyers Report
This is an intermediate-level survey which is usually offered by the mortgage lender and prepared by their own
surveyor. The homebuyer's report comments on the structural condition of most parts of the property that are
readily accessible, but it does not involve in-depth investigation or the testing of water, drainage or heating
Home Contents Insurance
A policy insuring household contents against theft and damage.
A report on detailed flood, subsidence and land contamination history for each UK neighbourhood.
Independent Financial Advisor.
IDD / Initial Disclosure Document
This is a document designed to assist you in comparing the services provided and the fees and charges made by
lenders and intermediaries.
Interest Only Mortgage
This is where you only repay the interest on your mortgage debt each month. Alongside this you will need to put
money into a separate investment vehicle which is designed to grow sufficiently to pay off your loan when your
mortgage comes to an end. You are responsible for the repayment of the capital when the mortgage reaches the end of
its term. You may want to seek professional advice on the investment vehicle.
A mortgage where there is more than one named individual responsible for the contract.
A form of ownership frequently used by couples which ensures that when one dies, the property passes
automatically to the other. The alternative is Tenancy in Common
Key Facts Illustration (KFI)
This document contains key mortgage information which is designed to help you compare the costs and features of
different mortgages from one or more lenders. It is designed to make it easy to compare mortgages at a glance.
A Land Registry certificate proving ownership of a property.
A government organisation that holds records of all registered properties in England and Wales.
Land Registry Fee
A fee paid to the Land Registry to register your details if you have bought a property or changed mortgage
To be given ownership of a property but not the land it is built on. This normally requires payment of ground
rent to the landlord.
Insurance which pays out on the death of the policy holder. Policies can run alongside your mortgage and will
pay off all or part of the outstanding debt in the event of your death.
Local Authority Search
A search of the local area to highlight anything that may impact on the property or surrounding area, e.g.
planned road building, planning permissions etc
Loan to Value (LTV)
The amount of mortgage expressed as a percentage of the property value. For example, if your mortgage amount was
£80,000 and your property is valued at £100,000 your loan to value, or LTV, is 80%.
A method of calculating mortgage interest on a monthly basis.
A legal document relating to the mortgage lender's interest in the property.
Mortgage Indemnity Guarantee
See Higher Lending Charge
Sum of money that the lender offers to lend you to pay for a property.
Mortgage Payment Protection Insurance (MPPI)
This is insurance designed to pay your monthly mortgage payment for a limited period, usually a year, if you are
unable to work through illness, accident or redundancy.
The length of time over which the mortgage is to be repaid. Often this is 25 years - but it can be shorter, or
in some cases for longer periods of time.
When the value of the mortgage which is outstanding on the property, is more than the market value of the
National House Building Council. A warranty scheme for new properties providing cover against major structural
defects for 10 years.
An independent professional body which is set up by law to help settle individual disputes between consumers and
firms, for example, estate agents, solicitors and insurance companies.
The permission granted by the local planning authority (usually the local council) for any new building or
engineering operations or change of use of a building if it meets the public's interest.
The amount you pay regularly, monthly or annually, to an insurer for an insurance policy.
Sale of a property without the use of an estate agent.
There may be a fee involved when you apply for a mortgage. This is to reserve the mortgage and to cover
The process of moving your mortgage without moving home. You take a new mortgage with a different lender to pay
off your old mortgage.
Also known as a Capital and Interest mortgage. Your monthly payments pay off the interest and some of the
capital borrowed. By the end of the term of your mortgage you will have paid off all your mortgage debt.
How you pay back your mortgage. See Repayment Mortgage or Interest Only Mortgage.
Holding back part of a mortgage loan until any repairs to the property are satisfactorily completed.
The choice of a single estate agent to act on the seller's behalf.
Legal expert handling all documentation for the sale and purchase of a property.
A tax you must pay on a property when you buy it. The duty must be paid at the point of completion.
Subject to Contract
Words to indicate that an agreement is not yet legally binding.
A thorough report on the property you are planning to buy
Person who conducts the survey.
People living in a property on a non-ownership basis.
Tenancy in Common
A form of ownership by two or more people in which, if one dies, their share of the property forms part of their
estate and does not automatically pass to the other(s).
The record of ownership of a property, the evidence of which is found in the title deeds.
Total Amount Payable
The total cost of repaying a mortgage.
Tracker mortgage normally follow movements in the base rate set by the Bank of England. The interest rate is
then set at a constant level above or below the base rate, rising and falling in line with any changes during the
tracking period. This means that if the base rate falls, the amount you pay falls. Likewise, if the base rate goes
up, so will your payments. Tracker mortgages tend to be for a set period of time, say five years, after which you
usually transfer to a new tracker rate, or to a different type of rate altogether.
The Land Registry document that transfers legal ownership from seller to buyer.
Transfer of Equity
Adding or removing a party to/from a mortgage.
A term applied to a property for which the seller has provisionally accepted the buyer's offer.
A valuation of the property for mortgage purposes to ensure that the property is worth the amount requested for
The charge for the valuation of the property.
Variable Interest Rate
Rate of interest payment that fluctuates over time with general interest rates.
The seller of a property or piece of land.
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