The mortgage loan.
Annual Percentage Rate. This is the rate of charge on a loan calculated to a set formula. It includes not just the rate of interest, but also associated costs. It was introduced to provide a meaningful comparison of rates charged by different lenders. You may see this expressed as “The overall cost for comparison is x.y% APR”.
This is normally charged by the lenders for arranging a mortgage loan.
Accident, Sickness and Unemployment. This is an insurance policy designed to provide a regular income for a specified period, should the borrower become unemployed or be unable to work due to an accident or sickness resulting in a loss of earnings.
Bank of England base rate
This is the benchmark lending rate regulated by the Bank of England. If this is altered in an attempt to control the overall economy, then the lenders will normally follow its movement and alter their own Standard Variable Rate.
Capital and interest
Monthly repayments to a lender are made up of interest and capital which reduces the mortgage debt over time (also known as a repayment mortgage).
Some lenders will, for a guaranteed period, ensure that your rate does not exceed a fixed upper limit, even if interest rates rise beyond that limit.
A type of mortgage where you will receive a cash lump sum at the commencement of your mortgage. The amount will vary depending on the scheme offered.
County Court Judgement. A decision made in the County Court, usually for the non-payment of a debt which is registered on your credit file. Once the debt is paid (“satisfied”), and a satisfaction certificate obtained, it is also noted on your credit file.
The day you become the new owner and can move in to your property.
The legal documents under which the buyer and seller of the property agree the terms.
The process of transferring ownership of the property.
The search your lender will carry out to determine your credit payment history.
A process used by some, but not all, lenders to determine whether you are a good credit risk.
Critical illness cover
A plan, normally with benefit to cover the mortgage amount on diagnosis of a critical illness specified in the terms and conditions and you are eligible to claim.
The amount of money you put towards the purchase of the property.
Costs which you will have to pay for things such as land registry, search fees etc. which are in addition to the fee payable to your solicitor.
For an agreed limited fixed period, the lender will apply a discount off their standard variable rate. Generally, the shorter the discount period, the larger the discount.
Early Repayment Charge
A financial penalty for repaying part or all of the mortgage before an agreed date. It is often applied to fixed, discounted, tracker, capped and cash-back mortgages. Quite simply, the lender agrees to offer what it believes is an exceptional package of benefits, providing the borrower agrees to keep the mortgage with them for an agreed length of time.
A savings plan with built-in life assurance which on maturity can help repay an “interest-only” mortgage.
Exchange of Contracts
The date at which both parties confirm the purchase/sale of the property through solicitors. The purchase is then legally binding. The buyer is responsible for the new property’s buildings insurance.
This is where the early repayment charge applies even after the scheme date has finished. It means, in effect, that the lender, in exchange for what it believes is an exceptional scheme, requires the borrower to keep the mortgage with them after the scheme has ended, for a set period of time.
The interest rate is set for an agreed period of time.
A relatively new mortgage type that will allow flexibility of repayments. Options may include the ability to overpay, underpay or take payment holidays. Where the lender calculates interest on a daily basis any overpayments have an immediate effect on the outstanding mortgage balance.
This is where the seller accepts an offer and agrees the sale only to accept a higher offer from another party before exchange of contracts has taken place.
A Homebuyers Report, or a homebuyers survey, is a surveyors assessment of the state of repair and condition of the property. The report will summarise the findings and make recommendations for further investigations or remedial work if required. Any issues or concerns from the report can be discussed directly with the surveyor.
Higher Lending Charge
This insurance covers the lender if the property is repossessed and the subsequent sale proceeds do not repay the outstanding mortgage debt and costs in full. The Higher Lending Charge protects the lender, not the purchaser who would still be responsible for the shortfall.
Determines, in most cases but not always, how much you can borrow. A typical calculation is three times the gross salary of the first applicant plus one times the second, or two-and-a-half times the joint salaries, if this produces more.
The lender will usually request written confirmation of income from your employer.
Individual Savings Account. A tax efficient savings plan which can be used to help repay an “interest-only” mortgage. Tax assumptions are those currently applicable and are subject to statutory change.
A form of land tenure where a person has rights over a piece of land for a specific period. Most residential leases have long terms and are usually set initially at 99 years or 999 years.
An alternative to using a solicitor. They specialise in property ownership transfer.
A policy taken out by most borrowers to help repay the outstanding mortgage debt in the event of death.
Loan To Value. This refers to the size of the mortgage in relation to the value of the property. For instance a mortgage of £75,000 on a property of £100,000 value is said to be 75% LTV.
Mortgage Payment Insurance. A plan which is designed to provide you with a monthly benefit to help pay your mortgage if, due to illness, accident or unemployment (if selected), you are unable to work resulting in a loss of earnings.
Where the property has a value which is lower than all the loans secured against it.
A mortgage arranged under Non Status terms where evidence of income is not necessarily a requirement.
A relatively new mortgage type where you may be able to link your current, savings or deposit accounts to the mortgage, so that the positive account balances are offset against the mortgage resulting in a reduced interest payment.
Personal Equity Plan. A tax efficient savings plan which can be used to help repay an “interest-only” mortgage. Tax assumptions are those currently applicable and are subject to statutory change. PEPs are no longer available.
This is a structured savings and investment plan designed to provide you with an income on retirement. As you can take some of the plan as cash it could be used to help repay an interest-only mortgage.
A new mortgage with a different lender even though you are not moving home. It can be of the same size, bigger or smaller.
See Capital and Interest mortgages.
A fee paid to your “old” lender upon closure of your mortgage account.
These are checks carried out during the Conveyancing process to determine any planning proposals or other matters which might affect the purchase or future saleability of the property.
Self Certification Mortgages
This is a special arrangement whereby the lender relies on the borrower to certify their own income and is primarily designed for the self-employed.
Standard Variable Rate
The interest rate applied to the mortgage account when no other overriding scheme such as a fixed rate is in force. It fluctuates and follows the Bank of England base rate.
This is based on a detailed inspection of the property and reports on the general structural condition. It is typically for older or unusual properties. Any issues or concerns from the report can be discussed directly with the surveyor.
The period of years over which you take the mortgage.
Documents that show proof of ownership.
The Lender agrees a rate linked to the Bank of England base rate in the form of either a loading or discount for a set period. The Bank of England review the base rate every month, although the reviews do not necessarily result in a change of rate.
The document that transfers ownership.
Lenders require a standard valuation to be undertaken on the property before issuing the mortgage offer. The lender will compare the valuation figure with the agreed buying price, and use whichever is lower when deciding on how much to lend.