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JARGON
EXPLAINED ...
APR
Stands
for 'Annual Percentage Rate' which helps you compare the cost of
different mortgage deals. It takes into account the amount of
interest you will pay, the length of the term of the mortgage, and
certain other charges such as any arrangement fee.
Arrangement
Fee
Lenders
sometimes charge a fee to cover the work involved in setting up
your mortgage or for certain mortgage rates.
Bank
Of England Base Rate
This
is also known as the Bank of England's repo rate. This is
announced from time to time by the Bank of England's Monetary
Policy Committee.
Buildings
Insurance
What
you must have to protect your property against hazards such as
fire, flood and subsidence.
Buildings
Survey
This
is 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.
Capital
& Interest Mortgage
Also
known as a repayment mortgage. Your monthly payments gradually pay
off the money (capital) you've borrowed, and also cover interest
on the amount outstanding.
Capped
Rate
Your
interest rate won't go above a certain level - the 'cap' - during
the capped rate period. This means that you can enjoy any rate
reductions, yet have the comfort of knowing that your rate won't
go above the cap.
Cash
Back
Certain
mortgage products offer cash back, which means you get a cash lump
sum when you enter into the mortgage to spend on anything you
want.
CAT
Standard Mortgages
The
Government has laid down CAT standards - fair Charges, easy Access
and decent Terms - to help people identify mortgages which 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.
CML
The
Council of Mortgage Lenders, which has devised the Mortgage Code
to ensure lenders treat customers fairly.
Completion
The
day on which a property becomes legally yours.
Conclusion
Of Missives
The
Scottish equivalent of exchanging contracts.
Contents
Insurance
Protection
for items in your home, including furniture and personal
possessions - in case they're stolen, lost or damaged.
Conveyancer
A
legal practitioner who deals with the conveyancing of land.
Conveyancing
The
legal process involved in buying and selling a property.
Credit
Scoring
We
may use the information you provide to assess the suitability of
your application using a technique known as credit scoring. You
agree that when considering an application for credit, we may use
the information supplied to us to offer additional products.
Daily
Interest
With
this method of calculating mortgage interest, it is charged on the
amount of mortgage outstanding from day to day. This means lenders
take into account any changes in the amount you owe on a
day-to-day basis.
Deposit
The
money you pay on exchange of contracts as part of your initial
contribution to the purchase of your home.
Disbursements
All
the various costs itemised on your conveyancer's invoice for
carrying out your home buying legal work.
Discharge
Fee
You
have to pay this to some lenders for releasing their hold over a
property once you've paid off your loan.
Discounted
Rate
This
means interest is charged at the variable base rate that applies
to the mortgage, less a discount for a set period.
This means the rate, and your monthly payment, will vary - up or
down - whenever the variable base rate changes, but will remain
below the variable base rate during the discounted rate period.
Equity
The
difference between the amount you owe on your mortgage and the
current value of your property.
Exchange
Of Contracts
The
swapping of contracts between a buyer's conveyancer and a seller's
conveyancer. Once you have exchanged contracts you are both
legally bound to the transaction.
Feuhold
A
form of legal title applicable only in Scotland.
First
Charge
Most
mortgage lenders lending money to enable someone to buy their home
would require a first charge. This means the lender has first call
on any funds available from the sale of the property to clear the
outstanding mortgage debt.
Fixed
Rate
A
rate of interest guaranteed not to change over a fixed period of
time.
Freehold
A
form of legal title to land which means you are the absolute owner
of the property and the land it's on.
Ground
Rent
The
annual fee a leasehold pays a freeholder (usually pretty low).
Ground rent generally applies to flats.
Guarantor
Someone
who guarantees to repay your mortgage if you can't borrow enough
to buy the home you want. Parents, for instance, may act as
guarantors for their children when they buy their first home.
Household
Insurance
A
way of referring to both buildings and contents insurance.
Income
Multiplier
The
way lenders work out how much you can borrow, usually by
multiplying your gross annual salary.
Interest-Only
Mortgage
You
only pay interest to your lender throughout the mortgage term and
your mortgage balance doesn't reduce. At the same time, you put
money into a separate investment which should grow and pay off the
mortgage as scheduled. You must make sure you keep premiums up to
date on any mortgage investment products.
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.
Leasehold
This
means you own a property for a set number of years. When the lease
expires, the property returns to the freeholder. Flats are
commonly sold as leasehold.
Local
Authority Search
Part
of the conveyancing process when you buy a property, carried out
by your conveyancer. It gives details of any matters which, from
the local council's point of view, affect the property. It reveals
any proposed changes to the local area, such as road improvements,
and details any planning permission given for the property.
LTV
Loan
to value is the proportion of the value or price of the property
(whichever is the lower), that you borrow on a mortgage. For
example, a £63,000 mortgage on a house valued at £70,000 would
mean a LTV of 90%.
Mortgage
Deed
A
legal document establishing a mortgage on a property.
Mortgage
Term
The
length of time over which you agree to pay back your mortgage -
usually 25 years, but it can be longer or shorter.
Negative
Equity
This
is when the amount you owe on your mortgage is greater than the
value of your property. It particularly becomes a problem if you
want to move house.
Overpayments
When
you're allowed to pay more than your normal monthly payment, so
you can pay off your mortgage earlier if you want and save on
interest charges.
Payment
Break
Sometimes
called payment holiday, you can stop making payments altogether
for a limited period agreed with the lender.
Premium
Amount
you pay on a regular basis, usually for an insurance policy.
Re-Mortgaging
When
you arrange a new mortgage on your home, with a different lender
and use the new mortgage to pay off the old one.
Repayment
Fees
With
some mortgages you have to pay a repayment fee if certain things
happen. For example, if you pay off some or all of your mortgage,
or you transfer to a different mortgage rate, before the end of
the special rate.
Repayment
Mortgage
Your
monthly payments gradually pay off your mortgage as well as the
interest.
Sealing
Fee
A
fee charged by the lender for sealing your deeds.
Stamp
Duty
Government
tax you have to pay on the purchase price of a property worth £60,000
or more.
Structural
Survey
A
specialist report from a structural engineer on the condition of a
property.
Sum
Assured
The
amount paid out on the death of a policy holder.
Total
Amount Payable (TAP)
The
total cost of repaying a mortgage over the loan period, including
the initial money borrowed, interest charges, etc.
Tracker
Rate
Tracker
rates vary in line with changes to the Bank of England base rate.
During the tracker rate period, any changes to the Bank of England
base rate are passed on to you in full.
Tracker
Base Rate
The
tracker base rate is directly linked to the Bank of England's repo
rate of interest. This is announced from time to time by the Bank
of England's Monetary Policy Committee.
Underpayments
You
can under pay up to any previous over payments. You can pay less
than your normal monthly mortgage payments for a limited period,
but you have to build up a fund of overpayments first.
Valuation
Arranged
by your lender to find out if the property is worth the amount
you've agreed to pay, and therefore suitable to lend a mortgage
on.
Variable
Base Rate
A
variable base rate is the basic rate of interest charged on a
mortgage. This may change in reaction to market conditions, so
your monthly payments can go up or down.
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