Arranging a mortgage and moving home can be a confusing experience. So you'll need expert mortgage advice from a mortgage broker who has access to the competitive mortgage deals, insurance products and investments on the market, in plain English.
That's why Signet Financial Services have produced a plain English guide to mortgage jargon – a glossary of mortgage phrases used by many lenders, estate agents and solicitors
Additional Advance
Previously know as a further advance, this is an additional sum you borrow from your existing lender which is also secured on your property.
Advance
A mortgage loan.
Adverse Credit
This term is used to apply to a borrower or application that has past problems with bad credit, for instance late payment, bankruptcy or County Court Judgment.
Approval
Will they or won't they give you the mortgage? An “approval in principle” gives you an idea of how your mortgage application will turn out. It isn't a formal mortgage offer but it's a useful indication about whether you're likely to get a mortgage offer or not because it means the lender has usually undertaken a credit check and an assessment of your ability to repay the amount you've asked for.
Amenities
A feature that increases attractiveness or value, especially a property or a geographic location such as restaurants, cafes, shops and transport facilities.
A feature that increases attractiveness or value, especially a property or a geographic location such as restaurants, cafes, shops and transport facilities.
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.
Arrangement fee
A fee that a lender charges you to arrange a mortgage. Sometimes on certain products (usually where a special interest rate applies, for example a fixed or discounted rate) your lender will charge an arrangement fee to cover some of their costs.
Assignment
The transfer of ownership of an insurance policy or a lease.
Base Rate
This is a rate set by the Bank of England’s Monetary Policy Committee and lenders can use it to act as the basis of any variable rates they may offer.
Basic Variable Mortgage Rate
Mortgage lender’s standard rate of interest which may be increased or decreased periodically by the lender depending on prevailing economic conditions.
Bridging Loan
A temporary loan providing financial cover which allows a purchaser to complete on the purchase of a new property before selling the previous property – a short term loan that can be used to cover the period between buying a new home and selling your old one if they don’t coincide.
Building Survey (formerly full structural survey)
A full inspection of the property to be purchased, conducted by a chartered surveyor, who then writes a detailed report including any property defects. This type of survey is usually recommended for older properties and those which have been poorly maintained. Also for properties which have been extensively altered or extended.
Buildings Insurance
All lenders will require you to take out a suitable buildings insurance policy to cover both you and them against any structural damage to your home.
Buy To Let
A type of mortgage specifically designed for people buying a property with the intention of letting it out.
Capital
The amount you borrow to help buy your home.
Capital & Interest Mortgage (or repayment mortgage)
With a capital and interest mortgage, you gradually pay off both the amount borrowed and the interest on your mortgage with each monthly installment. Over time you are reducing the amount you owe and by the end of the mortgage term the loan will have been paid off.
Capped Rate Mortgage
A maximum interest rate is set at the start of the mortgage so you know you won't have to pay more than a set amount. During the capped rate period the interest rate can fall below the capped rate but never go over - Bear in mind that there are usually early repayment charges during a capped rate period.
Cash Back Mortgage
With this type of mortgage, you are given a percentage back - in cash - when your mortgage completes. You are then usually tied into the mortgage with an early repayment charge and will have to stay with the lender, often on their standard variable rate, for a set number of years.
With this type of mortgage, you are given a percentage back - in cash - when your mortgage completes. You are then usually tied into the mortgage with an early repayment charge and will have to stay with the lender, often on their standard variable rate, for a set number of years.
Chain
The situation that occurs when a buyer is reliant upon completion of the sale of his existing property, in order to complete on the purchase of his new property.
Completion
The point when all the legal work has been done, the purchase money has all been paid and you now legally own your home.
Contents Insurance
This is an insurance policy to cover any loss or damage to your possessions within the property.
Contract
The legal document that fixes a date for the completion of the sale of the property from the seller to you.
Conveyancer
A qualified individual, such as a solicitor or licensed conveyancer who deals with the legal aspects of buying or selling a property.
Conveyancing
The legal work involved in selling and buying or re-mortgaging a property.
Credit Reference Agency
An organisation that keeps details of your credit history. Lenders check Credit Reference Agencies to see if you have any know credit problems.
Credit Scoring
Many financial institutions use a credit scoring system as a way of assessing lending applications. These systems combine information provided directly by you, any information already held about you and any information from your credit search.
Daily Interest
Over time you should pay less interest on your mortgage if it's calculated daily. This is because any payments made to your mortgage that reduce its balance immediately reduce the amount of interest you pay as well.
Deeds
Legal title documents which prove legal ownership of a property. The deeds will be held by the mortgage lender.
Legal title documents which prove legal ownership of a property. The deeds will be held by the mortgage lender.
Deeds Release Fee
A charge made by the lender for the administration work involved in sending your title deeds to you or your solicitor.
A charge made by the lender for the administration work involved in sending your title deeds to you or your solicitor.
Deposit
A sum of money paid by the buyer and used as a down-payment on a property when you exchange contracts.
Detached
Term used to describe a property that stands alone and is separated from all others.
Disbursements
Fees paid by the buyer's solicitor on the buyer’s behalf such as stamp duty, land registry and search fees
Fees paid by the buyer's solicitor on the buyer’s behalf such as stamp duty, land registry and search fees
Discount Rate (discounted rate mortgage)
This is a discount off a mortgage lender's normal interest rates for a particular length of time.
This is a discount off a mortgage lender's normal interest rates for a particular length of time.
Early Repayment Charge
A fee lenders charge if a mortgage is paid off in full or part before the end of the incentive period. This doesn't apply to all mortgages - you'll most often find this kind of fee on such products as Fixed Rate and Discount Rate mortgages with initial incentives.
Endowment Mortgage
This is a mortgage where interest only is paid and the proceeds of the endowment policy when it matures is expected to repay the mortgage. There is, however, no guarantee that the proceeds will repay the full amount of the mortgage at the end of the term. 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 the policyholder.
Equity How much your home is worth minus the amount of your mortgage. For example, if your property is worth £120,000 and you have a mortgage or a secured loan of £100,000, you have equity of £20,000.
Exchange Of Contracts
The point at which signed contracts are physically exchanged, legally committing the buyer and seller to the purchase and sale of a property at the agreed price.
Excess
An amount the policy holder must pay towards each and every incident of loss and damage when making an insurance claim.
An amount the policy holder must pay towards each and every incident of loss and damage when making an insurance claim.
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 type of mortgage where the interest rate is fixed at the start and doesn't change for a set period of time - which means that you'll know exactly what you're paying each month even if the general interest rates offered by the lenders which apply to their mortgage business were to change.
Fixtures & Fittings
All non-structural items included in the purchase of a property.
All non-structural items included in the purchase of a property.
Flexible Mortgage
These mortgages are generally for people that intend to repay their mortgage early but can also be used to help smooth out your finances if, for example, you're self-employed. The key to good flexible mortgages is their daily interest calculation (instead of calculating interest annually like traditional mortgages) and the ability to make overpayments, take payment holidays, withdraw any overpayments you've made and so on.
Freehold
Technical word for the ownership of the property, meaning that it belongs to the owner without limitation of time.
Technical word for the ownership of the property, meaning that it belongs to the owner without limitation of time.
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.
Further Advance
An additional loan to your existing mortgage taken after the main mortgage has completed which is also secured against the property.
Gazumping
When a seller pulls out of a sale after accepting a higher offer.
Gazundering
A tactic whereby the buyer offers less than the agreed price just before exchange of contracts.
Ground Rent
The annual charge made by the freeholder to the leaseholder as a right to occupy a property.
Guarantor
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 systems.
IFA
Independent Financial Advisor.
IDD / Initial Disclosure Document
This is a document that is given to you at first contact with the lender. The IDD sets out what service the lender, or brokers, can offer you including whether they can offer you advice and whose mortgage products they can sell you. It is an important document that you should read carefully and ensure that you are comfortable with.
Income Multiples
A yardstick used by lenders to work out how much they are prepared to lend you. Income multiples are the number of times by which mortgage lenders will multiply your gross annual income to determine your maximum borrowing capability. Although multiples vary among lenders many lenders make their final decision on what you are able to afford.
Interest
The cost of borrowing money.
The cost of borrowing money.
Interest Calculation
The way interest on your mortgage is calculated could save you money.
Interest-only Mortgage
With this type of mortgage you are only paying off interest due on your mortgage. You are not reducing the actual amount of money borrowed. These are usually set up in conjunction with investments like personal pensions, ISAs or endowment policies which are designed to repay the loan at a given date after reaching certain levels of growth.
However, there is no guarantee that any of these investments will pay off the mortgage. So, if you choose an interest-only mortgage you will be responsible for making sure that you have enough money available to repay your mortgage at the end of the term.
However, there is no guarantee that any of these investments will pay off the mortgage. So, if you choose an interest-only mortgage you will be responsible for making sure that you have enough money available to repay your mortgage at the end of the term.
- Annual calculation means that you continue to pay interest on capital repayments already made during the course of that calendar year - this is the way that traditional mortgages usually work.
- Daily or monthly interest calculations are used with most flexible mortgages and enable payments (and overpayments) to have a quicker impact on the outstanding balance.
Interest Rates
The cost of borrowing money, expressed as an annual percentage.
Joint Mortgage
A mortgage where there is more than one named individual responsible for the contract.
Joint Tenants
A form of ownership for two parties whereby if one of them dies, their share of the property will automatically transfer to the remaining party, giving them full ownership (regardless of the terms of the deceased owner's will.)
Key Facts Illustration (KFI)
The KFI is a standard document used by all regulated mortgage lenders in the UK. As well as providing you with an illustration of how much the mortgage will cost you, it also has to point out fees and charges you must pay either at the beginning or during the life of the mortgage you intend to take out. It's worth knowing that the lender cannot go ahead with your mortgage or additional borrowing application until you have received, read and confirmed that you are happy with the KFI they have sent you.
Land Registry Fee
A fee paid to the Land Registry to register ownership of a property.
Lease
A legal agreement which gives the ownership of a leasehold property to the buyer for a fixed period of time.
Lease
A legal agreement which gives the ownership of a leasehold property to the buyer for a fixed period of time.
Leasehold
A system where you own a property for a set period of time before handing back ownership to the freeholder or negotiating a new lease. Flats are usually leasehold.
Leaseholder
Typically someone who owns a property, but not the land it stands on, for a fixed period of time.
Letting Your Property
Lenders often have different requirements for properties you intend to live in or let out. If you're intending to let your property you should tell your lender or you may be in contravention of your mortgage conditions.
LIBOR
LIBOR 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.
Life Assurance
A policy designed to repay your mortgage in the event of your death.
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Endowments linked to interest-only mortgages usually have in-built life cover, but if you have an ISA-linked interest-only mortgage or a repayment mortgage, you should arrange separate life cover.
Listed Building
A building officially listed as being of special architectural or historic interest, which cannot be demolished or altered without (local) government consent.
Loan To Value (LTV)
Loan to value (LTV), expressed as a percentage, refers to the amount of the mortgage compared to the value of the property you want to buy. For example, a £120,000 mortgage on a property worth £160,000 would have an LTV of 75%.
Local Authority Search
A request for information about your property which is sent to the local authority for the area in which your property is located.
A request for information about your property which is sent to the local authority for the area in which your property is located.
Maintenance Charge (or service charge)
The cost of repairing and maintaining external or internal communal parts of a building charged to the tenant or leaseholder.
Mortgage
A loan used to buy a property. The property acts as security for the loan and can be repossessed and sold if the mortgage repayments are not made.
A loan used to buy a property. The property acts as security for the loan and can be repossessed and sold if the mortgage repayments are not made.
Mortgage Application Fees
These are fees charged by the lender to organise the mortgage for you. If you do not go ahead with the mortgage these are not usually refunded.
Mortgage Agreed In Principle
An expression of a mortgage lender's willingness to enter into an agreement subject to other conditions being met, such as credit checks and a satisfactory property valuation.
Mortgage Deed
The document that gives the lender a right to the property being mortgaged. This is normally held by the lender until your mortgage is repaid.
Mortgage Offer
A formal document offering you the mortgage you have requested and detailing the terms that will apply.
Mortgage Rate
The rate of interest which is payable on the specific mortgage product chosen.
The rate of interest which is payable on the specific mortgage product chosen.
Mortgage Term
The period of time over which (repayment mortgage) or at the end of which (endowment mortgage) the loan is to be repaid.
The period of time over which (repayment mortgage) or at the end of which (endowment mortgage) the loan is to be repaid.
Negative Equity
When the value of the property falls to less than the outstanding mortgage.
When the value of the property falls to less than the outstanding mortgage.
Offer
A sum of money that the buyer offers to pay for a property.
A sum of money that the buyer offers to pay for a property.
Offset Mortgage
A flexible mortgage with a savings account attached to a mortgage - a tax-efficient option for some borrowers. Money in the savings account is offset against the outstanding balance of the mortgage on a daily basis - so as long as you have funds in your savings account, you’re effectively paying interest on a lower mortgage amount. Some versions, known as Current Account Mortgages, also allow you to offset your current account.
Open Market Value
The price a property would achieve when there is a willing buyer and willing seller.
The price a property would achieve when there is a willing buyer and willing seller.
Payment Break/Holiday
An option usually given on flexible mortgages that allows you to stop making mortgage payments for a specific period of time. Usually any interest payments that you miss by taking a payment holiday are added to your mortgage debt and you are then charged interest on that amount.
Penalties
Costs that may be incurred if the borrower repays the loan too early or switches between lenders
Costs that may be incurred if the borrower repays the loan too early or switches between lenders
Pension Plan Mortgage
A type of interest-only mortgage where the loan is designed to be repaid by a lump sum from a pension plan when you retire.
Planning Permission
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.
Redemption
This is the term used when a mortgage is paid in full
This is the term used when a mortgage is paid in full
Re-mortgage
The process of moving your mortgage without moving home. You take a new mortgage with a different lender to pay off your old mortgage.
Repayment 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.
Retention
A lender may hold back some of the mortgage money until certain works or repairs have been done to the property. The amount held back is known as a 'retention'.
A lender may hold back some of the mortgage money until certain works or repairs have been done to the property. The amount held back is known as a 'retention'.
S
Sealing Fee
A charge made for the administration work involved in processing the document which shows that you have repaid your mortgage.
Search
A request or enquiry for information concerning the property held by a local authority or by the land registry.
A request or enquiry for information concerning the property held by a local authority or by the land registry.
Secured Loans
The mortgage is a secured loan on your home; this means that if you fail to repay it, your lender may be able to sell your home to get its money back.
The mortgage is a secured loan on your home; this means that if you fail to repay it, your lender may be able to sell your home to get its money back.
Security
The property you intend to buy is the lender's 'security' for the loan. This means that the lender has rights over the property. If the mortgage repayments are not kept up-to-date, the lender can repossess the property and sell it to recover the debt.
Stamp Duty
The property you intend to buy is the lender's 'security' for the loan. This means that the lender has rights over the property. If the mortgage repayments are not kept up-to-date, the lender can repossess the property and sell it to recover the debt.
Stamp Duty
A tax which home buyers must pay on properties above a government set figure.
Standard Variable Rate (SVR)
Mortgage lenders' SVRs fluctuate at their discretion as economic conditions change. Until relatively recently, most of the mortgages sold were on a standard variable rate.
Subject To Survey And Contract
Subject To Survey And Contract
You see this stated before exchange of contracts. It means the seller or buyer can withdraw from the property sale if the survey or the contract terms are not satisfactory.
Survey
The lender's inspection of the property to assess whether it is suitable for a mortgage.
There are three levels of valuation/survey:
The lender's inspection of the property to assess whether it is suitable for a mortgage.
There are three levels of valuation/survey:
- Basic valuation - a basic report carried out on behalf of the mortgage lender (even though you may have to pay for it). Most lenders charge valuation fees on a sliding scale according to the value of the property. You will probably have no comeback against the surveyor for any defects or problems overlooked in the report.
- Homebuyers' report - a more detailed and expensive, but still limited, report on the readily accessible parts of the property. It may offer you some limited recourse if the surveyor, who is acting on your behalf rather than the lender's, is negligent.
- Full structural survey - the most thorough (and most expensive) report. If the property is defective, the surveyor should discover this. If major defects are not discovered then the surveyor acting for you would have some legal liability, and you would be able to claim against them.
With any level of survey, if there are potential or actual defects found, the surveyor may suggest you get additional specialist reports, which could be at your expense and may be time-consuming.
If you choose a homebuyers' report or full structural survey, you will sign a contract with the surveyor to formalise their responsibilities to you.
Applicants should always check with mortgage lenders before instructing their own valuer or surveyor. Lenders tend to work with set panels of surveyors and it is usually the lender who will instruct them. If you instruct a surveyor who is not known to your lender you may find yourself paying again for a valuation by one who is.
T
Tenancy
A temporary possession of a property by a tenant.
A temporary possession of a property by a tenant.
Tenancy Agreement
A legal agreement designed to protect the rights of the tenant and landlord and setting out all the terms and conditions of the rental arrangements.
Tenant
A person who has temporary possession of a property.
Tenants In Common
A form of ownership by two or more people in which if one of them dies, their share of the property forms part of their estate and does not automatically pass to the other(s).
Tenure
Conditions on which a property is held (ie: length of lease).
Tenure
Conditions on which a property is held (ie: length of lease).
Term
The length of time over which you pay your mortgage. This is agreed at the start of the mortgage, but many lenders allow you to change the term to help with repayments if it is sensible to do so.
The length of time over which you pay your mortgage. This is agreed at the start of the mortgage, but many lenders allow you to change the term to help with repayments if it is sensible to do so.
Term Assurance
Life insurance to pay off a mortgage if the borrower dies during the term of the mortgage.
There are two types of assurance
There are two types of assurance
- Decreasing term assurance - if you die during the term of your mortgage, a life assurance policy should repay it - although the amount paid out reduces over time. This is most commonly used with repayment mortgages.
- Level term assurance - a life assurance policy where the sum assured will remain the same throughout the term of the policy. This type of policy is typically taken with an interest-only mortgage so that it could repay your mortgage if you die during the term.
Title Deeds
Documents showing the legal ownership of a property.
Documents showing the legal ownership of a property.
Tracker Mortgages
Tracker mortgages 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.
Transfer Deeds
The land registry document that transfers legal ownership from seller to buyer.
Valuation
A figure that an agent will place on a property once the required surveys have been completed.
Valuation Survey
Valuation Survey
A survey that must be carried out on behalf of the mortgage lender to establish the amount and terms of the loan.
Variable Interest Rate
This rate can go down as well as up during the course of your mortgage and is a reflection of overall interest rates and economic conditions. The advantage of having a variable rate is that the rate you pay will fall if rates generally fall. But, if rates rise then the rate you pay will rise along with it - without a ceiling.
This rate can go down as well as up during the course of your mortgage and is a reflection of overall interest rates and economic conditions. The advantage of having a variable rate is that the rate you pay will fall if rates generally fall. But, if rates rise then the rate you pay will rise along with it - without a ceiling.
Vendor
The seller of a property or piece of land.
Your home may be repossessed if you do not keep up repayments on your mortgage. There may be a fee for mortgage advice, the precise amount will depend on your circumstances but if you are charged a fee we estimate it will be £250.
