Jargon Buster
Select A B C D E F G H I L M N O P R S T U V
Accident, Sickness and Unemployment (ASU)
Annually renewable, short term policy designed to cover your mortgage (or in some policies, rent) and associated costs (e.g. home insurance) in the event of being unable to work due to an accident or sickness or unemployment (through involuntary redundancy or involuntary winding up of business for self-employed). Cover can be taken out with some providers as unemployment only, accident/sickness only or a combination. Cover is also available on an individual or on a joint basis.
Agreement in Principle (AIP)
Agreement from the lender that the mortgage is approved subject to satisfactory references and a satisfactory valuation report being received. Also known as Decision in Principle (DIP)
Aggregator System
See mortgage sourcing system.
Annual Percentage Rate (APR)
The APR is the total charge for credit. It is the standard way (laid down by the Consumer Credit Act 1974) of working out the true interest rate. A way of comparing the cost of credit; includes the interest rate and other costs.
Arrangement/Administration (Completion) Fee
This is a fee that the lender charges an applicant when taking out a mortgage and is charged to cover the administration costs of setting up the loan. Lender’s usually allow this fee to be added to the loan.
Bankrupt
Person declared by a court to be unable to repay their debts. The bankruptcy is administered by a Trustee and discharged generally after three (sometimes two) years.
Bank of England Base Rate (BBR)
Interest rate set and reviewed by the Monetary Policy Committee on a regular basis. This rate influences the majority of the financial services interest rates.
Broker
An individual who assists in arranging funding or negotiating contracts for a client; but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.
BRT
Base Rate Tracker.
BPS
Base Points (i.e. 25 bps=0.25%).
Buy to Let
The borrower takes a loan secured on a property as an investment. The property is let out to a tenant who pays the borrower a rental income, making the borrower a landlord.
Capped Rate
This is a variable mortgage rate that provided protection against rising rates by setting a maximum payable rate (the cap) for a set period.
This means that you won’t pay more that the capped rate if interest rate increase(above the cap) but also means if the rates fall and your lenders standard variable rate drops below the cap, you will pay less.
Capped & Collar Rate
This is a variable mortgage rate that’s provides protection against rising rates (the Cap) but also protects the lender against falling rates (the Collar) for a set period.
This means that you won’t pay more than the capped rate if the interest rate increases, but also if the interest rate fall the lender will not drop below the collared rate.
Capital Raising
In respect of a re-mortgage, it is the amount being raised in addition to the repayment of the existing mortgage, secured loans and associated costs. This can be used for a variety of purposes, e.g. home improvements.
Chain
A chain is created where a buyer is also selling, i.e. there is more than one property involved in the transaction. Contracts between all parties should exchange at the same time in order for each of the purchases to complete.
CHAPS (Clearing House Automated Payment System)
Current method used to transfer the mortgage advance funds to the solicitor acting in the conveyancing transaction. May also be referred to as Telegraphic Transfer (T/T) which is an historical method of funds transfer.
Charge
The Legal Charge is the right to acquire the property. Generally, a mortgage lender has 1st Charge over the property. Other lenders may have a 2nd Charge over the same property. If the borrower defaults on the loan, the holder of the 1st Charge has priority on selling the property to discharge it’s debt.
Completion
This is when the mortgage funds have been released by the Lender, and your solicitor/ Licensed Conveyancer has received the signed legal documents, legal completion can then be said to have taken place.
Conveyancing
Legal term for the transfer of property ownership.
County Court Judgement (CCJ)
This is an adverse judgement that lasts for a fixed period.
Credit Scoring
A system used by some lenders to help evaluate the risk of giving a mortgage to a prospective borrower based upon historic and statistical information.
Credit Search
A credit check made by a lender on a prospective borrower. This involves searching the voter’s roll and ascertaining an individual’s credit history. Agencies used may be ‘Equifax’ or ‘Experian’, in most cases.
Decision in Principle (DIP)
Agreement from the lender that the mortgage is approved subject to satisfactory references and a satisfactory valuation report being received. Also known as Agreement in Principle (AIP)
Decree
Scottish equivalent of a County Court Judgement.
Deed
A legal document, which affects the transfer of ownership of real estate from the seller to the buyer.
Default
The failure to make payments on a loan.
Deposit
The difference between the purchase price and the mortgage amount i.e. the capital that the borrower is putting towards the transaction.
Disbursements
Money spent by the solicitor on behalf of their client (seller/purchaser), in respect of land Registry Fees, Local Authority Searches, Stamp Duty etc.
Discounted Rates
The lender will give a discount of off their standard variable rate for a set period of time from completion OR until a set date. This means that if the lenders standard variable rate go down your pay rate will fall, but if the standard variable rate increases your pay rate will rise.
Drawdown
A flexible mortgage normally has the facility whereby not all of the advance must be taken at the time the loan completes. For example, the borrower has a £100,000 mortgage but only needs £90,000 at completion. This remaining £10,000 may be taken (drawdown) in accordance with the lenders terms & conditions.
Early Settlement Charge (ESC)
A fee charged by the lender if you pay off all or part of your mortgage before an agreed date or you move the loan to another lender. These charges usually apply on fixed, discounted, or cashback mortgages. Also known as Early Redemption Charge (ERC).
Endowment Mortgage
An interest only mortgage linked to an endowment policy designed to give a maturity value at the end of the mortgage term sufficient to repay the loan OR pay off the loan on earlier death. Whether there are sufficient funds at the end of the mortgage term to repay the mortgage depends on the investment performance of the endowment policy.
Equity
The difference between the value of a property and the loans secured on it.
Exchange of Contracts
Both buyer and seller are legally bound to proceed when contracts have been signed and exchanged between the solicitors of all parties (not in Scotland).
Feudal
The nearest Scottish equivalent to freehold, also known as feuhold.
First Time Buyer
Someone who is buying land and/or property for the first time. May also be described by a lender, as an applicant who last held a mortgage over a year ago.
Fixed Rate Mortgage
This guarantees a fixed rate of interest for a set period of time. After this period the rate will normally revert to the standard variable rate as determined by the lender.
Flexible Mortgage
This allows a customer to make under and overpayments on their mortgage account, also payment holidays provided certain criteria have been met.
Freehold
Outright ownership of land or property.
Freeholder
The person having outright ownership of land or property.
Full Status
Income stated on an application form must be proven by payslips, P60 and/or employers reference.
Guarantor
This is someone who promises to pay the borrower's debt if or when necessary.
Gifted Deposit
The deposit being used in the transaction is from funds given to the purchaser by a third party. This could be from family/friends and should not result in a 2nd Charge registered over the property being purchased.
Ground Rent
Rent paid to the Freeholder by the holder of a lease for the use of the land and/or buildings.
Higher Loan Fee (HLF) or High Percentage Advance (HPA)
This is a one off fee that the client pays the lender for higher risk mortgages (this can normally be added to the mortgage advance amount).
Also known as Mortgage Indemnity Guarantee (MIG)
Income Multiples
The amount by which income, after deduction of other significant commitments can be multiplied to calculate the maximum possible loan.
Independent Financial Adviser (IFA)
Independent Financial Adviser - an adviser committed to offering products from the full range of financial products offered in the market place.
Individual Voluntary Arrangement (IVA)
This is an arrangement (usually monthly) made by a debtor (person in debt) to his/her creditors (person(s) money owed to) for a set period of time. This arrangement is monitored by the Supervisor of the IVA.
Initial Interest Rate
The rate of interest used to calculate the client’s initial monthly mortgage payment.
Interest Only
When only the interest payments on the loan are paid during the term of the mortgage. No payments are made to reduce the capital balance outstanding.
Land Registry
The Land Registry holds the ownership records of all registered land and property. Also it holds all information on any mortgages, charges, cautions, restrictions or covenants on all registered land and property.
Land Registry Fee
A fee, which is incurred when the property is registered at the appropriate Land Registry (usually by a solicitor).
Lease
A contract by which a Landlord (Freeholder) gives a tenant the use of the land and/or buildings for a specified time at a specified cost.
Leasehold
Possession of land and/or buildings through a Lease, for a pre-determined period of time, known as the Term, written into the contract.
Legal Fees
These are charged by a solicitor to their clients, for the work carried out in the conveyancing transaction.
Lender
May be a bank, building society or mortgage company offering to provide mortgage funding.
Let to Buy
A borrower lets out their current residential home to a tenant who pays them rental income, thus turning that into an investment property. The borrower then purchases another property as their residential home.
LIBOR (London Inter Banking Overnight Rate)
Some lenders choose to use this benchmark instead of the Bank of England’s base rate. Their products are then set up as LIBOR plus or minus their margin.
Loan to Value (LTV)
The ratio of the total mortgages/loans secured on the property against the lower of the purchase price or current market value e.g., if a property is worth £100,000 and has a £70,000 mortgage on it, the LTV is 70%.
Local Authority Search
A check carried out by the solicitor of Local Authority plans, to see if there are any developments taking place in the area which could affect the value and saleability of the property.
Margin
This relates to a product. The rate details will be stated in the Offer of Advance and may include a differential between the standard variable rate and the rate applicable to the specified product.
Mortgage Advance
The amount of money agreed to be lent to you by the mortgage lender.
Mortgage Arrears
Where payments are due to the lender, but have not been made.
Mortgage Deed
A legal document by which the lender has a Charge over the property. It is signed by the borrowers and held by the lender for the term of the mortgage with the Title Deeds (England, Northern Ireland and Wales).
Mortgage Indemnity Guarantee Premium (MIG)
This is a one off fee that the client pays the lender for higher risk mortgages (this can normally be added to the mortgage advance amount). This may also be called Higher Loan Fee (HLF) and High Percentage Advance (HPA).
Mortgage Payment Protection Insurance (MPPI)
Annually renewable, short term policy designed to cover your mortgage (or in some policies, rent) and associated costs (e.g. home insurance) in the event of being unable to work due to an accident or sickness or unemployment (through involuntary redundancy or involuntary winding up of business for self-employed). Cover can be taken out with some providers as unemployment only, accident/sickness only or a combination. Cover is also available on an individual or on a joint basis.
Mortgage Reference
Written payment history and conduct of account of a prospective borrower by their current lender.
Mortgage Sourcing System
An electronic platform that can be installed on to any computer and used to obtain mortgage product quotations and illustrations.
Mortgage Statement
Annual statement of account issued by the lender to their customers.
Mortgagee
The lender.
Mortgagor
The borrower.
Non Block Buildings Insurance
If a borrower arranges their own buildings insurance, a lender may charge an administration fee and then an annual charge for reviewing the policy.
Non-Conforming Lender
A company who lends money to borrowers who have a poor credit history/rating. The borrowers may be bankrupt and/or have county court judgements/decrees etc. Also known as sub-prime lending.
Non Status
Income not required to be declared on an application form by a lender.
Offer
Documentation issued by the lender upon receipt of a successful mortgage application; including a satisfactory valuation and references (if applicable).
Pay Rate
This is the rate that the lender provides to the borrower for payment of the mortgage, and will be provided for a set period.(e.g BBR + 1% Discount for 3 years or Fixed at 4.99% until 1/1/2010).
Procuration Fee
A fee paid by the lender to the Broker for the completion of a mortgage case.
Redemption Fees
A fee charged by the lender if you pay off all or part of your mortgage before an agreed date or you move the loan to another lender. These charges usually apply on fixed, discounted, or cashback mortgages.
Re-mortgage
Keeping the existing property but either changing lenders for a better rate and/or raise additional funds; or remaining with existing lender to raise additional funds, subject to enough equity.
Repayment Mortgage
Where the mortgage payments made to the lender on a monthly basis consist of capital and interest. The capital sum owing slowly decreases over the course of the term until there is a zero balance at the end of the term.
Retention
If essential works are still required to be carried out when completion takes place, a lender may retain some of the advance funds until the essential works have been completed; subject to a re-inspection and usually a fee.
Right to Buy
When tenants who are renting from the Local Authority are allowed to buy the property they live in at a discounted purchase price.
Sealing
The legal process of removing a Charge at the Land Registry.
Security
The land and/or building that is subject to a Deed as a result of money lent during the conveyancing transaction.
Self Certification
Income that is stated on an application form but not proven by a borrower; it may be verified by a lender. Non verification would be true self certification.
Service Charge
This usually applies when purchasing a flat. It is an annual maintenance charge for the upkeep of shared property, e.g. stairs and the exterior of the building.
Shared Appreciation Mortgage (SAM)
A mortgage where part of what the borrower pays for the loan is linked to the value of their property. The borrower agrees to share part of the growth in the value of their property from the time that completion takes place.
Shared Ownership
An applicant purchasing a share of a property (min. usually 25%), where rent and a mortgage payment is paid on a monthly basis.
Staircasing
Relating to shared ownership mortgages. This is the repayment of another lender’s existing mortgage and the lending of additional monies to allow the borrower to purchase a further/final share.
Stamp Duty
A government tax based on your property value which the purchaser pays via his solicitor on completion of the mortgage.
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Purchase price/lease premium or transfer value
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SDLT rate
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SDLT rate for
first-time buyers
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Up to £125,000
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Zero
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Zero
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Over £125,000 to £250,000
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1%
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Zero
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Over £250,000 to £500,000
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3%
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3%
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Over £500,000
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4%
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4%
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First time buyers stamp duty rates :
The first time buyer’s £250,000 threshold applies from 25 March 2010 up to 24 March 2012 inclusive.
Standard Security
A legal document (used in Scotland) by which the lender has a Charge over the property. It is signed by the borrowers and held by the lender for the term of the mortgage with the Title Deeds.
Standard Variable Rate (SVR)
Most lenders have their own standard interest rate, which is normally influenced by the Bank of England’s base rate. The SVR can fall and rise from time to time.
Subject to Contract
The period before the exchange of contract once a mutual agreement has been reached by the buyer and seller over the purchase of a property. This is not legally binding and either parties can still pull out of the transaction at this stage.
Sub-Prime Lender
A company who lends money to borrowers who have a poor credit history/rating. The borrowers may be bankrupt and/or have county court judgements/decrees, arrears etc. Also known as non-conforming lending.
Swap Rates
A Swap rates are the rates that lenders borrow money at, so when you suddenly hear that lenders are putting their rates up (or equally down) but nothing has happened to the Bank of England Base Rate, this is because the swap rates have become unstable and either dropped significantly, or as it is at the moment, risen significantly. The swap rates change on a daily basis so you would expect some movement without it affecting most lenders rates, but if they rise for a period of time (and again equally drop) then the rates that are currently on offer are unsustainable (or uncompetitively high if the rates drop)
Tariff of Charges
A list of all fees and payments due during the mortgage term.
Telegraphic Transfer (T/T)
Historical method used to transfer the mortgage advance funds to the solicitor acting in the conveyancing transaction; now known as CHAPS payment.
Term
Length of time over which a mortgage or contract runs.
Title Deeds
History of ownership of land and/or buildings; including any Deeds, Leases, sketch plans etc.
Title Insurance
Insurance against loss resulting from defects of the Title Deeds i.e. missing Landlord/Freeholder, uncertainty over ownership of land and/or buildings etc.
Total Amount Payable
The total of all fees and payments due during the mortgage term.
Tracker
A mortgage product that tracks/follows the Bank of England Base Rate (BBR). The rate charged may be either BBR plus or minus a given amount.
Undertaking
A promise made to ensure that a stated matter will be carried out. A solicitor’s undertaking is made in writing and is legally binding.
Valuation
A valuer gives a written report to assess if the property is a suitable risk for mortgage purposes which is for use by the lender only. There are two other types of report which the applicant can request at their own cost; a homebuyers report, or a building survey (formerly structural survey).
Vendors Deposit
The seller (vendor) agrees to sell the property to the buyer for a certain amount. Part of the agreement includes a separate “discount” on the purchase price shown in the contract. This means that the seller is “paying” the deposit. Some lenders view this as a reduction in purchase price.