Advance
A mortgage loan.
Annual Percentage Rate
(APR)
Shows you the interest rate paid over the course
of a year. Use it to compare mortgage offers
when you're looking around.
Arrangement Fee
Sometimes charged in order to access a particular
mortgage deal. Usually apply to fixed or discounted
rate mortgages. May be payable up front, added
to the loan on completion, or deducted from
the loan on completion.
Assignment
The transfer of ownership of something from
one person to another. If you are buying a leasehold
flat, for example, ownership is 'assigned' to
you through the contract.
Assured Shorthold Tenancy
(AST )
A tenancy that gives the landlord the right
to repossession of their property after a fixed
amount of time as set out in the tenancy agreement.
New tenancies are automatically AST’s
unless otherwise stated.
Bank of England Base Rate
Can go up or down from time to time and is announced
by the Bank of England Monetary Policy Committee.
Also known as the Bank of England Repo Rate.
Base Rate
The lowest rate at which a bank will charge
interest and which is used as a benchmark to
set the interest rates for borrowers. Banks
usually charge borrowers a margin above base
rate. This margin varies and is designed to
reflect the risk of the lender entering into
the mortgage with you.
Building Insurance
A policy designed to insure the building rather
than its contents. Protects against the cost
of rebuilding a property following structural
damage, for example by flood, fire or storm.
Lenders often offer their own policies, but
it may be cheaper to buy elsewhere.
Building Regulations
Legal requirements designed to ensure the health
and safety of building users.
Building Survey
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.
Bridging loan
A temporary loan designed to bridge the gap
in time and money if you have to complete the
business of buying your new home before you've
sold your existing one. Some lenders may only
offer bridging loans secured by way of a solicitor's
undertaking. This is a personal legal guarantee
by the solicitor that something will be done
- usually the repayment of a mortgage or production
of title deeds.
Capped Rate
A capped rate mortgage is a mixture between
a fixed rate and a variable rate. The interest
rate is guaranteed not to rise above a set level
within the capped rate period but if the normal
variable mortgage rate is below the capped rate
then the variable rate is charged.
CAT Standard Mortgages
The Government has laid down CAT standards -
fair Charges, easy Access and decent Terms -
to help consumers identify mortgages that 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.
Chain
The line of buyers and sellers involved in each
house move. e.g. while you're selling your home,
you'll be buying a new house from another vendor
who's buying from someone else - and everyone
has to wait for everyone else's deals to go
through. First time buyers are chain-free as
they don't have to sell anything.
Charge
A technical word for the security or collateral
a company relies on when lending money on property.
Collateral
An asset pledged as security to a lender until
a loan is repaid. If you default on your mortgage,
for example, your lender could sell your home
to get the money back after appropriate legal
action. And that's something you want to avoid
at all costs.
Completion
The day when the seller and buyer finally exchange
money via their respective solicitors and the
buyer becomes legal owner of the property and
can move in.
Contents insurance
A policy insuring household contents against
theft and damage.
Contract
The agreement between the buyer and seller that,
once signed, binds both parties to the purchase
and sale of the property. Each party signs a
separate copy and the two copies are 'exchanged'.
Usually followed by completion.
Conveyancing
The legal process by which ownership of the
property is transferred from the seller to the
buyer. This is usually carried out by a solicitor
or licensed conveyancer.
Deposit
The money you pay on exchange of contracts as
part of your initial contribution to the purchase
of your home.
Discounted rate
A type of mortgage. Essentially, it's a standard
variable rate mortgage that offers a discount
for a fixed period of time. The discount will
be set at a certain percentage below the standard
variable rate and the interest rate will move
up and down in line with the variable rate.
Early Redemption Charges
If you sell your house or change to another
lender, you'll be paying back your loan early.
Many mortgage lenders charge a penalty fee if
you do this, particularly during any period
of a fixed, capped or discounted rate. Check
in advance, so you know how much this will be.
Endowment Mortgage
An interest only mortgage supported by an endowment
policy. During the term of the mortgage only
interest on the mortgage is paid to the lender.
At the same time premiums are paid into an endowment
policy that should mature at the end of the
mortgage term.
Equity
The difference between the amount you owe on
your mortgage and the current value of your
property. Negative Equity, on the other hand,
is when the value of your property in current
market value, is worth less than your mortgage,
making it hard and expensive to move.
Excess
The amount you will have to pay before your
building or contents insurance policy kicks
in to cover any claim you might make. For example,
if your roof disappears in a hurricane, you
may have to pay the first £100 towards
a new one. The amount varies so always check
what the excess is before buying a policy. The
cost of the insurance cover can be affected
by the level of the excess.
Exchange of Contracts
This is the stage in the property transaction
at which legally binding contracts are exchanged
between the buyer and the seller. Once contracts
are exchanged the vendor becomes legally obliged
to sell and the purchaser to buy on the terms
agreed.
Exclusions
Most insurance policies have exclusions - the
things they don't cover. For example, a household
insurance policy might exclude the loss of personal
possessions while you're on a holiday. It's
worth checking your policies for exclusions
as they could affect any claims you make.
Financial Services Authority
(FSA)
An independent body, which regulates the financial
service industry in the UK. Their aim is to
help consumers become better informed about
financial matters.
First Time Buyer
Lenders differ in their definition of a First
Time Buyer. Some will include in this people
who have owned a property before but have no
property to sell. Other lenders will include
joint borrowers where just one of them is a
First Time Buyer. Some lenders only apply this
to someone who has never owned a property before.
Fixed Rate Mortgage
The lender will fix the interest rate that they
charge at a set level for a fixed period of
time. There are a range of fixed rate products
available which vary in terms from very short
periods (three to six months) up to the whole
25 year mortgage term. The lender will normally
charge early redemption charges if the mortgage
is repaid.
Flexible mortgage
Generally, this describes a mortgage that offers
a bit of flexibility over how you pay it off,
although some product restrictions may apply.
A flexible mortgage could allow you to pay off
your mortgage early or make overpayments, for
example.
Freehold
A legal title to land, which means you are the
absolute owner of the property, and the land
it’s on. This compares with leasehold
property where the property is held for a limited
period of time.
Gazumping
What happens if your offer is accepted and then
the seller pulls out if they receive a higher
offer.
Gazundering
Gazumping in reverse. This happens if the buyer
is in a strong position and threatens, just
before contracts are exchanged, to pull out
of a deal unless the price is reduced.
Ground rent
The annual rent paid by a leaseholder to the
person or company owning the freehold. It's
usually paid by people living in leasehold flats
to the company owning the land on which the
block was built. Ground rent is not the same
as a service or maintenance charge, which leaseholders
may pay to cover such things as the management,
maintenance and repair of the block of flats
or property.
Home Buyers Report
A survey report that is more detailed than a
Mortgage Valuation but not as in depth as a
Full Structural Survey. The proposed lenders
surveyor usually carries out a Home Buyers Report
and the report can then be used for the lender
to replace the Mortgage Valuation. In addition
it can be used as a detailed report for the
borrower. A Home Buyers report may not be suitable
for certain types of property where a Structural
Survey may be more relevant.
Household Insurance
A way of referring to both buildings and contents
insurance.
Income Multiplier
Used to calculate how much a mortgage lender
is prepared to lend on a mortgage.
Interest Only Mortgage
Interest only mortgages can be supported by
an endowment policy, pension plan, etc. An interest
only mortgage may, however, be arranged without
the support of any particular repayment vehicle.
Many lenders will now accept payment of interest
only on the basis that the borrower makes their
own arrangements to repay the capital at, or
before, the end of the mortgage term. This could
be done in a number of ways such as inheritance,
sale of the property or from the realisation
of other assets.
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 Register
The Land Register is a record of all land registrations
in England and Wales.
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.
Lease
The legal document that details the agreement
between the freeholder and those who occupy
their property for a specified period of time
and at an agreed price or rental. It's often
full of legal jargon and is the document to
turn to if you want to know what responsibilities
the landlord has and whether you have the right
to keep a pet in your new home.
Leasehold
This is the tenure that applies to most flats
and maisonettes in the UK. As opposed to freehold
property the rights to the property are owned
only for a fixed period of time, with the freehold
being held by a third party. This means you
own a property for a set number of years. When
the lease expires, the property returns to the
freeholder
Legal Completion
The time at which the legal ownership of the
property changes hands. This date will usually
be agreed upon at exchange of contracts. This
will also be the date at which the mortgage
becomes effective (sometimes the mortgage completion
date may be a couple of days before this to
ensure that the solicitor has funds on the due
day).
Lender
Any person or company who offers to lend you
money for an agreed period of time. In return,
you will have to repay the loan and the interest
on it. The company that gives you your mortgage
is a lender
LIBOR Linked Rate
The London Inter Bank Offered Rate is the rate
at which banks lend money to one another. LIBOR
changes daily and a LIBOR linked mortgage will
normally be adjusted every three months. LIBOR
linked rates are usually quoted as X% above
LIBOR.
Life Insurance
If you've got a joint mortgage, you'll probably
want to take out life insurance - this means
the cost of the property will be paid off if
one of you dies.
Loan to Value (LTV)
Loan to value is expressed as a percentage and
represents the relationship between the size
of the mortgage and the value of the property.
For example a mortgage of £30,000 on a
property valued at £40,000 would be shown
as 75% LTV. This is an important figure to look
at when considering the various mortgage options
as the higher the LTV required the fewer the
options.
Local Authority Search
Part of the conveyancing process and carried
out by your conveyancer. It gives details of
any matters that, from the local council’s
point of view, affect the property, such as
road improvements and details of any planning
permission given for the property.
Mortgage Deed
A legal document establishing a mortgage on
a property.
Mortgage Term
The number of years over which the mortgage
is arranged, up to a maximum of 40 years.
Mortgage Valuation
This is the most basic form of survey and is
the minimum required by lenders in order to
ascertain the suitability of the property as
security for their loan. Although the borrower
will normally receive a copy of this report
it should not be relied upon as a comprehensive
report on the condition of the property. A more
detailed report (either a Home Buyers Report
or Structural Survey) should be commissioned
when considering the purchase of a property.
National Association of
Estate Agents (NAEA)
Members are bound by rules of conduct drawn
up to protect public interest and are backed
by disciplinary procedures. Members must be
competent in Estate Agency law, practice and
ethics. The NAEA also offers a mediation service.
The National Association of Estate Agents, Arbon
House, 21 Jury Street, Warwick CV34 4EH.
Tel: 0 1926 496800; www.naea.co.uk
Negative Equity
Describes the situation where the value of the
property has fallen below the outstanding mortgage
debt.
OEA
The Estate Agents Ombudsman Scheme provides
an independent service for dealing with disputes
between member Agencies and consumers buying
or selling residential property in the UK. The
Ombudsman is independent, and undertakes to
offer a free, fair and speedy review of complaints.
Further information is available from the Ombudsman
for Estate Agents, Beckett House, 4 Bridge Street,
Salisbury, Wiltshire SP1 2LX Tel: 01722 333306;
www.oea.co.uk
Portable
The ability to move a particular mortgage product
from one property to another in the event of
a property move. If the mortgage is not 'portable'
then moving would involve the payment of early
redemption charges even if another mortgage
was taken with the same lender.
Re-mortgage
The process by which a mortgage on a property
is moved from one lender to another. The new
mortgage is used to repay the existing lender
and at the same time additional funds may be
raised for other purposes
Repayment Mortgage
Also called an Annuity mortgage or Capital and
Interest mortgage, your monthly payments gradually
pay off your mortgage as well as the interest.
Stamp duty
This is a tax which is levied on the purchase
of property. The tax is paid by purchasers and
is currently levied at the following rates:
1% of property value £ 60,000
- £250,000
3% of property value £250,001
- £500,000
4% of property value £500,001
and above
The appropriate rate is paid on
the whole purchase price and not just the excess
applying to that band i.e. a purchase price
of £350,000 will attract £10,500
stamp duty, being 3% of £350,000.
Structural Survey
The most detailed type of survey report normally
undertaken in connection with a House Purchase.
If a Structural survey is opted for then the
lender will also need to have a mortgage valuation
carried out for their own use and the borrower
will be responsible for both fees. An alternative
is a Home Buyers Report that will cover both
the borrower and the lender. Advice should be
taken from a qualified surveyor who will be
able to advise on individual properties and
circumstances.
Term Assurance
This is life assurance that pays out an insured
sum on the death of the policyholder. It is
a common method to protect the mortgage in the
event of death and to ensure that the mortgage
debt is repaid.
Valuation
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.
Variable Rate
This was the traditional way that mortgages
were arranged before the concept of fixed rates.
A variable rate will fluctuate up and down to
reflect the true cost of borrowing. They may
be discounted for a period of time.