APR (Annual Percentage Rate)
The interest rate reflecting the cost of a mortgage as a yearly rate.
The APR provides home buyers with the ability to compare different types
of mortgages based on the annual cost of each.
Arrangement Fee
The fee you pay your Lender in return for them providing you with a
mortgage. Usually paid on completion or with your application, these
fees usually apply when you take out a fixed rate, discount or cashback
mortgage.
AST (Assured Shorthold Tenancy)
A form of tenancy that gives the landlord the right to
repossess their property after a set amount of time laid out in the
tenancy agreement. New tenancies are automatically ASTs unless otherwise
stated.
Assured tenancy
The landlord can charge a market rent (the current rate for
similar property in that area) and take back the property under certain
conditions, as set out in the Housing Acts of 1988 and 1996.
Bridging Loan/Finance
Short term loan to enable the purchase of one property before the sale
of another essentially releasing funds that are required for the
purchase. You should always consult a professional before considering
any bridging finance as it could be a solution that is worse than the
problem.
Brokers Fee
A fee charged by an intermediary or advisor for locating the most
appropriate mortgage for the borrower.
Buildings insurance
Insurance you can take out when you buy a property that will
cover the cost of any damage to the house and or contents..
Buy to Let
A mortgage meant for those who wish to purchase a property to rent out
to others. The decision on whether you are able to repay this type of
mortgage is often based up on the future rental income from the property
rather than the personal income of you the borrower.
CCJ (County Court Judgment)
A judgement reached in the County Court generally realted to non payment
of a loan, mortgage etc debt in general. If you pay off the debt, the
CCJ will be satisfied and a note is put on your records that states
this.
Chain
A housing 'chain' made up of a number of buyers and sellers,
essentially the line of buyers and sellers involved in each house move.
Charge
Any right or interest, especially with a mortgage, to which a freehold
or leasehold property may be held. Basically a charge is the claim the
lender has on the property until the mortgage or loan is satisfied.
Completion
The term used when the seller and buyer exchange the finances
required to buy a property through their respective solicitors. At
exchange of contracts a deposit, usually 10%, will have been paid. At
this point the buyer becomes legal owner of the property.
Conveyance
The legal process in which ownership of the property is
transferred from the seller to the buyer. Generally undertaken by a
solicitor, or licensed conveyancer.
Early redemption fee
If you decide that you want to sell your property or remortgage
then you will be redeeming you mortgage early. Most lenders charge a
penalty fee, especially during any period of a fixed, capped or
discounted rate. Be sure you are clear about any potential penalties
when you are about to take on a mortgage.
Equity and negative equity
The amount of value in a property that isn't covered by a
mortgage - simply take the amount of the mortgage from the valuation to
work out the equity. This is where the money you owe on the mortgage is
greater than the value of your property.
Exchange of contracts
The contract is a written agreement that lays out the terms
between the buyer and the seller. When both parties exchange contracts,
usually weeks before completion, the deal becomes legally binding. Often
a deposit of around 10%, is paid at this stage.
Fixed Rate
A set interest rate on a mortgage fixed for a period of time. This
varies from lender to lender.
Freehold
If you are the property owner outright then your property is
freehold. Most houses are freehold wheres many flats are leasehold,
since you are not the owner of the whole building containing the flats.
Gazumping
If you are in the process of purchasing a property and your
offer has been accepted but the seller gets a better offer, before you
complete, and takes it then, you've just been 'Gazumped'.
Interest Only Mortgage
A mortgage whereby the borrower is only required to pay inerest on the
amount borrowed during the mortgage term. It is the borrowers
responsibility to ensure that enough funds will exist (either through an
investment policyor other means) to repay the full mortgage at the end
of the term.
Intermediary
A mortgage broker or advisor who finds the most suitable mortgage for a
borrower and arranges the mortgage on their behalf.
Leasehold
If you buy a leasehold property you don't own the property
rather the right to live there for a specified period of time, however
much time remains on the lease. The owner of the property is called the
freeholder or landlord.
Liability
This relates more to commercial mortgages. With a commercial mortgage
liability for the repayment of the loan depends on the legal structure
of the business:
A sole trader will be personally liable for the mortgage debt.
Personal assets could be seized if the business defaults.
Partners are jointly liable for the debts of the partnership and
their personal assets are at risk
With a limited-liability partnership and a limited company, the
liability falls firstly on the business rather than on the individual
partners and directors. The lender may take a floating charge on
business assets in general, rather than simply on the current property
being purchased.
The lender may also insist on personal guarantees as a condition of
granting the loan, in which case the partners and directors may be held
personally liable anyway.
Life insurance
If you have a joint mortgage, life insurance can be acquired
that will see the mortgage paid of should one of you pass on.
LTV (Loan to Value)
The size of the mortgage as a percentage of the value of the property
i.e. A £90k mortgage on a house valued at £100k would mean an LTV of
90%.
MIG (Mortgage Indemnity Guarantee)
A one off payment made when you set up a mortgage a kind of
insurance policy for the lender. This offers them protection against the
value of the home falling to less than the mortgage. It is generally
only charged to borrowers with a less than 10% deposit, but this can
vary.
Mortgage
A loan to buy a property where the property is used as security against
you paying back the loan.
Mortgagee
The company or organisation that lends you the money.
Mortgagor
The person taking out the mortgage.
Non-Status
Where a lender may not require income details from you or may accept
some previous poor credit history i.e. CCJ's or previous mortgage
arrears.
Payment Holiday
A period during which the borrower makes no mortgage payments.
Regulated tenancy
A legal right to live in your accommodation for a period of
time. Your tenancy might be for a set period such as a year (this is
known as a fixed term tenancy) or it might roll on a week-to-week or
month-to-month basis (this is known as a periodic tenancy).You are a
regulated tenant if you moved in before 15 January 1989, you pay rent to
a private landlord and your landlord does not live in the same building
as you.
Remortgage
The taking on of a second mortgage to pay off the first. The most common
reasons for doing this are that another mortgage is available at a
better rate or that the value of the property has gone up allowing for
the opportunity to borrow more money against the property.
Right to Buy
For example, a tenant in a council owned property may purchase the
property at a discount depending on length of their tenancy.
Self Certified
Generally when a borrower applies for a mortgage he or she will be asked
to provide pay slips or company accounts to prove their income. If it is
difficult or inconvenient for you to provide this evidence, you can
choose to self-certify your income. This involves signing a declaration
which states your income sources and amounts. Lenders will charge you
higher rates than average and offer you a more limited range of
mortgages if you choose to self-certifyyour income, in general it's not
a good idea to self-certify just to avoid some paperwork.
Stamp Duty
Tax paid by the buyer of a property set at 1% for properties
over £60k, 3% for properties over £250k and 4% for properties over
£500k.
Structural survey
The most wide ranging check of the structure of a property. This is
carried out by professional surveyor and should uncover any defects or
faults with the building.
Tenancy
A legal written agreement between a landlord and tenant that
sets out the terms of the rental.
Term
The period of years over which you take the mortgage and repay it.
Term Assurance
An insurance policy designed to repay the mortgage on the death of the
insured person. Level Term Assurance covers a principal sum throughout
the policy term and pays out the full amount on death. Reducing Term
Assurance is designed to repay the balance outstanding on a repayment
type mortgage upon death. Term Assurance may also pay out early on the
diagnosis of a terminal illness.
Underwriting
The process of evaluating a loan application to determine the risk
involved for the lender. This involves an analysis of the borrower's
creditworthinessand the quality of the property itself.
Unencumbered
Where the property is owned outright and no mortgages or loans are
secured against it.
Valuation
A simple check of the property in order to find out how much it is worth
and whether it is suitable to secure a mortgage against.
Valuation Fee
The fee paid by a borrower to cover the cost of the lender checking that
the property is suitable security for the mortgage.
Variable Rate
A type of interest rate the lender can charge. It goes up and down and
your repayments change accordingly.
Vendor
The person selling the property.
