Mortgage Jargon Buster
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V W X
Y Z
A
Advice
A recommendation about the most suitable mortgage for
you made by an adviser who is regulated by the FSA or an
advisor who is an appointed representative of a directly
authorised firm.
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Adverse Credit
A term applied to a borrower or application that has
problems with credit, for instance - late payment,
bankruptcy or County Court Judgement (CCJ).
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Adverse Credit Lender
A lender who lends to
applicants with adverse or bad credit.
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Administration Order
Similar to debt management but administered by the
courts (also called a court administration Order) - only
applies if you owe less than £5,000 and have at least 1
CCJ registered against you - like a debt management plan
the courts charge for this service.
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Agreement in Principle
A lender agrees to advance monies conditional upon the
verification of the borrowers details. This is therefore
obtained before mortgage underwriting commences.
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Annual Statement
A statement from your mortgage lender, sent every year,
showing among other things what you've paid and what you
still owe.
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Applicant
The person or persons applying for the mortgage.
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Application
The process of applying for a mortgage.
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Appointed Representative
A firm
which has permissions to deal in regulated activities
through a directly authorised firm.
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Appreciation
The increase in a property value due to market
conditions.
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Approval in principle
A certificate which some lenders will give you that
shows the amount they will probably be prepared to lend
you. This is not a guarantee, but can be helpful when
signing up with estate agents.
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APR
Annual Percentage Rate. This shows the overall cost of a
loan, taking into account the term, interest rate and
other costs.
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Arrangement Fee
The fee for the lender for arranging the mortgage, to be
paid either on application or completion. Can usually be
added to the loan amount.
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Arrears
The amount of mortgage payments you have fallen behind
with - usually termed in either months missed or pounds
outstanding.
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Authorised firm
A firm that has permission from the FSA to carry out
regulated activities.
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B
Bad Credit
A term applied to a
borrower or application that has problems with credit,
for instance - late payment, bankruptcy or County Court
Judgement (CCJ).
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Bankrupt
A debtor (person, company, organisation) whose assets
are administered by a court appointed trustee for the
purpose of redistribution to the debtors creditors.
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Bankruptcy
The legal process by which a debtor who owes more than
their assets has these assets transferred to a court
appointed administrator.
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Bank
of England Base
Rate
The rate of interest set by the Bank of England.
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Broker
See 'Mortgage Broker'
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Broker Free
The fee charged by a
mortgage broker for locating and processing the most
appropriate mortgage, can usually be paid upfront
or on completion.
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Buy-to-let mortgage
A loan you take out to buy a property which you intend
to rent to tenants.
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C
Capital
The amount you borrow to help buy your home.
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Capped Mortgage
A mortgage that has a maximum limit on the interest rate
you'll have to pay during a special deal period.
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Capped Rate
A capped rate mortgage sets a maximum interest rate - a
cap - the lender can charge for a specified period.
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Cash Back Mortgage
A mortgage that comes with a cash sum (often a
percentage of the amount you're borrowing).
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Caution
A 'Registration of Caution' is a caution registered on
the land registry title of a property which means the
property can not be sold or remortgaged without the
cautioner (the person or organisation who registered
the caution) being notified. Usually the caution needs to
be repaid upon completion of any sale or remortgage.
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Charging Order
A charge registered through the courts on a piece of
property or land by someone (a person or organisation)
you are in arrears with - if you remortgage or sell the
property the charge will have to be repaid. It is
sometimes possible to have a charging order 'postponed'
in order for a remortgage to proceed (if their is
limited equity in the property) by way of a deed of
postponement.
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Collared Mortgage
A mortgage with a set minimum and maximum interest rate
you'll pay during a deal period.
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Commission
A payment received by a mortgage broker from the lender
for introducing business to them.
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Completion
The completion date is the date your solicitor transfers
the money from your lender to the vendors solicitor or,
in the case of a remortgage the date the new lenders
funds are transferred to your existing lender to repay
your existing mortgage.
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Contract
A legally binding agreement, either oral or written, to
do or not do something.
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Conveyancing
The process surrounding the transfer of
property between a buyer and seller, typically carried out
by a licenced conveyancer such as a solicitor.
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Conveyancing Fee
The charge paid - usually to a solicitor for
transferring property ownership.
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County Court Judgement - CCJ
A ruling of bad debt issued by the courts - the
judgement will be recorded on your credit file.
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Credit
An agreement under which one party (the borrower)
receives money or property on the condition they repay
the other party (the lender) at a later date.
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Credit Check
The process where a check is made on the credit
history of a mortgage applicant - see about
credit reference
agencies
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Credit History
A history of a persons debts. Checking a credit history
allows a lender to make an assessment as to whether a
prospective client will maintain their mortgage
repayments.
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Credit Rating
See 'Credit Scoring'
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Credit Reference Agency
A company or organisation that stores financial and
public records dealing with the payment history or a
prospective borrower - see
credit reference agencies
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Credit Report
A report prepared by a Credit Reference Agency which
details the credit history of an individual - the credit
report will be used by a lender to help assess the
application of an individual.
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Credit Scoring
The procedure by which a lender allocates a 'score'
based on the information held on the credit file and the
lenders application - different lenders use different
formats for credit scoring - not all mortgage lenders
credit score and they may use other factors and criteria
when determining to lend
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D
Daily
Interest Mortgage
A mortgage in which interest is calculated daily.
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Debt
An amount owed by one person or party to another.
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Debt
Consolidation
A procedure whereby a number of loans, each with
individual interest rates are repaid with another loan -
consolidated into one loan with one interest rate.
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Debt
Management
An informal arrangement between a debtor (borrower) and
creditor (lender).
The
borrower pays one monthly fee to a third party (usually
a company or organisation) and they distributes the one monthly
payment around the borrowers creditors on a pro-rata
basis. The payment is worked out after the borrowers
disposable income has been ascertain, thus ensuring the
borrower is able to maintain a reasonable standard of
living whilst repaying the creditors. If done through a
business, they will typically take a monthly fee from
the disposable income to cover administration costs.
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Decision in Principal - DIP
See - 'Approval in Principle'
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Deed of Postponement
A document in which
one party agrees to postpone their rights to those of
another.
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Default
The failure to keep up with repayments on a credit
agreement (such as a mortgage) - see
what is bad credit
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Deposit
A deposit usually refers to the amount of money a
borrower pays towards the property purchase.
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Depreciation
The decline or reduction of a properties value due to
market conditions.
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Discharge Fee
The fee charged by lenders at the end of a mortgage term
to cover the administration costs of transferring the
property ownership documents, also known as a deeds
release fee.
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Discharged Bankrupt
A bankrupt can be relieved of the status (of being
Bankrupt) by a court of residual liability, usually
after a certain number of years. The former bankrupt
assumes the status of 'discharged bankrupt' and is
eligible to obtain credit again.
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Discounted mortgage
These mortgages have a discounted variable rate of interest for a
set period, after which the rate will increase.
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Discount Period
With a discounted rate mortgage, the discount period is
the length of time (usually in years) the discounted
rate will apply.
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Disposable Income
The money left from a persons income (usually calculated
monthly) after living costs and priority debts have bee
deducted.
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E
Early Repayment Charge
A charge you may have to pay if you break off a mortgage
deal early. Usually applies to special deals such as fixed
or discounted rates and usually ends at the end of the
special term.
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Equity
The amount of the property, in monetary terms, that is
not taken up by a mortgage or loan secured on a
property.
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Eviction
The legal expulsion of an occupant from a property.
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Exchange of Contracts
The point at which the buyer and the seller legally
exchange contracts and terms of sale are legally binding
on both parties.
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F
Financial Ombudsman Service - FOS
An organisation established by law to help settle
individual disputes between consumers and financial
firms.
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Financial Services Authority - FSA
The Financial Services Authority - the UK's financial
services regulator.
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First
Charge
The first (or main) mortgage held on a property.
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Fixed Rate Mortgage
An interest rate that is fixed (i.e. it doesn't move up
or down) for a set period of time. This type of mortgage
can be good for budgeting purposes as your monthly
mortgage payment will not change for a set number of
years.
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Freehold (England & Wales only)
A situation where the owner owns both the property and
the land it sits on.
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FSA Register
A list of firms that are regulated by the Financial
Services Authority to carry out financial services in
the UK. You can check online to see whether a firm is
regulated by the FSA, see
Check the FSA Register.
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G
Gazumping
This is when another potential buyer puts in a higher
offer for a property after your offer on the same
property has been accepted.
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Guarantor
A person, other than the borrower, who guarantees to
meet the mortgage payments in the event the borrower
defaults.
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H
Higher Lending Charge - HLC
A fee charged by the lender when the loan to value (LTV)
ratio is above a certain limit - not all lenders charge
a HLC.
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Homeowner Loan
See 'Secured Loan'
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Home Buyers Report
A type of property survey that is more comprehensive
than a standard mortgage valuation but less extensive
than a full structural survey.
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Home Information Pack - HIP
A report required on all UK properties, paid for by the
seller, the purpose of HIPS is to speed up the mortgage
process, it includes information such as a local
authority search, drainage search, energy performance
certificate.
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I
Income multiples
The factor by which your earnings are multiplied to
determine how much you can borrow, as set by the lender.
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Initial Disclosure Document
A document giving information about the scope and nature
of the services offered by a regulated firm.
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Interest
The charge made by lenders when you borrow their money.
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Interest Rate
The figure that determines how much interest you pay.
Usually linked to the Bank of England's rates and can
move up or down.
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Interest-only mortgage
A mortgage where you only pay the interest charges of
the loan each month. This means you are not reducing the
loan amount (or
capital) itself, and this will need to be repaid in some
other way.
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IVA -
Individual Voluntary Arrangement
A formal arrangement between the debtor (borrower) and
creditors (lenders), it is a legally binding agreement
intended to help those with serious debt - must be
arranged by a licenced Insolvency Practitioner.
J
Joint Income
The total income of two borrowers in a joint mortgage.
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K
KeyFacts documents - KFI
The KFI document summarises all the important features
of the mortgage and must be clear, fair and not
misleading. It is set out in a standard way and allows
you to check all the costs and benefits of the mortgage
being offered.
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L
Leasehold (England & Wales only)
A type of ownership whereby a person owns a property but
not the land it sits on - the land will typically be
owned by the Freeholder.
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LIBOR
London Inter Bank Offered Rate - The rate of exchange
banks lend money to each other, many sub prime lenders
use LIBOR when setting interest rates for consumers.
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Loan-to-value
The percentage of money you want to borrow compared to
the cost of the property. See
loan to value
explained
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M
Mortgage
A loan which is secured against your property.
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Mortgagee
The lender in a mortgage.
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Mortgage broker
A mortgage broker helps you understand the various
mortgage types and deals available to you. A mortgage
broker may recommend a mortgage to you or they may
provide you with information to enable you to make your
own choice.
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Mortgage Packager
An intermediary between the lender and mortgage broker,
they usually have special deals not available through
the lender directly and do not deal with the public.
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Mortgage
Statement
See -
'Annual Statement'
Mortgage Term
See - 'Term'
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Mortgagor
The borrower in a mortgage.
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N
Negative Equity
Where a mortgage and other loans held on a property is
more than the property value.
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None Status Mortgage
See 'Self Certification'.
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O
Ombudsman
See 'Financial Ombudsman Service'
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Open Market Value
The value of a property based on current market values.
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P
Principle
The principle loan or capital.
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Poor
Credit
A term applied to a
borrower or application that has problems with credit,
for instance - late payment, bankruptcy or County Court
Judgement (CCJ).
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Priority Debt
These are debts which
must take priority over normal debts and credit
commitments - priority debts are numerous, a few
examples would be - council tax arrears, child support
agency arrears, Magistrates' Court Fines, for a full
list please contact the Citizens Advice Bureau.
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Q
Quotation
See 'Key Facts'
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R
Redemption Charge
See 'Early Repayment Charge'
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Register
See 'FSA Register'
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Remortgage
The process of changing your mortgage for a different
one, without moving home.
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Repayment mortgage
A mortgage that pays off both the home loan and the
interest at the same time. Make all the payments over
the mortgage term and the
mortgage will be fully repaid.
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Repayment Period
See 'Term'
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Repossession
The Legal process by which a defaulting borrower is
deprived of their interest in a mortgages property,
typically involving a forced sale of the property at a
property auction.
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Restriction
See - 'Caution'
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Retention
The ability by the lender to hold back (retain) part of
a mortgage until certain conditions are met.
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Right to Buy
Mortgages for public sector tenants who qualify to buy
their home under the government's Right to Buy scheme.
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S
Self Certification Mortgage
A mortgage whereby the borrower does not officially
prove their income, rather they 'Self Certify' that
their income is as they stated on the application form -
also known as a 'none status' mortgage.
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Stamp duty
A tax which home buyers must pay on properties valued
above a government set figure. At The moment, Stamp Duty
starts on properties valued over £120,000.
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Standard Variable Rate
A rate of interest at the lender's
normal
mortgage rate - i.e. without any discounts or deals.
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Secured Loan
A loan that is secured your home - also called a 'second
charge' or 'second mortgage'.
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Survey
A report on the condition of the property you are
planning to buy.
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Sub Prime
An industry term used to describe credit impaired
lenders, products or clients.
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Sub Prime Lender
A lender who lends to
applicants with bad credit.
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Structural Survey
A survey of the construction of a property carried out
by a qualified surveyor - this is the most comprehensive
and most expensive report
available.
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T
Term
The period of time over which the mortgage must be
repaid.
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Title
The document that confirms the right of possession to an
area of land or property.
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Tracker mortgage
A mortgage with an interest rate that is usually linked
to a particular rate that is set independently from the
lender and moves up or down with it.
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U
Unencumbered
A property that has no mortgages or loans secured on it.
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V
Valuation
A brief inspection, for the benefit of your lender, of
the home you hope to buy or remortgage. This is to make sure they are
not lending more than the property is worth and that the
property is suitable security for the mortgage, but this
will not tell you if it is a good or bad buy. For your
own peace of mind, you may want your own survey.
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Valuation Fee
The fee charged to cover the cost of the lenders
valuation, typically paid by the borrower.
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