Mortgage Glossary

Additional Borrowing

This is the term used when you wish to borrow additional monies to be secured on your property with your existing lender, it is also sometimes called a ‘Further Advance’.

 

Affordability Check

This is the term used when a potential lender carries out an assessment to decide whether the mortgage amount will be affordable.

 

Agreement in Principle

This is the term used for a provisional offer to lend you an agreed amount of money for a mortgage. It usually comes in the form of a certificate, and you may need to evidence this to be able to view potential properties that you wish to purchase. It may also be known as a ‘Decision in Principle’.

 

APRC

This is the term used to refer to the annual interest rate which includes all costs of your mortgage, such as account fees and charges. This figure can be used to enable you to compare lenders deals / quotes from different lenders.

 

AVM

This term stands for ‘Automated Valuation Model’, this is a process used by some lenders to establish the value of a property, using local sold prices and property trends.

 

Bank of England Base Rate

This is the interest rate set by the Bank of England, this can go up and down from time to time and is announced by the Bank of England’s Monetary Policy Committee.

 

Booking Fee

This is a fee that may be charged by the lender for securing a specific interest rate on a mortgage deal. You will usually have the choice to either pay the fee upfront, or to add it to the loan amount.

 

Broker

This is the person / company who will help and advise you on the various mortgage deals available within the marketplace.

 

Buy to Let

This is the term used to describe a mortgage that is secured on a property which is let out and the owner receives rental income from the tenants.

 

Cashback

This is the term that is used when you received a one-off lump sum from your lender usually when you first join them as an incentive.

 

Completion Date

This is the day when the sale and purchase of a property completes, and the property legally becomes yours. In the case of a remortgage this is the day when your mortgage officially moves across to your new lender.

 

Conveyancing

This is the term used for the legal work carried out by either a solicitor, or a licenced conveyancer in relation to your property, when you are either purchasing a property, or carrying out a remortgage.

 

County Court Judgement (CCJ)

This is when a County Court rules against you for defaulting on a debt. This information is then listed on your credit file and will remain there for a period of 6 Years.  This can also impact on you being able to secure a mortgage in the future.

 

Credit Score

This is the term used by the lenders to describe a technique that they use to assess whether to lend you money, or not.

 

Deposit

This is the amount of lump sum money that a buyer has available to use to contribute to the purchase of a property.

 

Discounted Rate Mortgage

This is a mortgage deal where the interest rate is a set percentage below the lenders standard variable rate (SVR) for a given period of time. The monthly payment may go up and down depending on the movement of the lenders variable rate.

Early Repayment Charge (ERC)

This is the fee that is charged should you wish to exit an ‘Interest Rate Deal’ early or pay more than 10% per year off your outstanding mortgage balance.

 

Equity

The is the difference between the amount of money that you owe to your mortgage lender and the market value of your property. For example, if you owe £75,000 on your mortgage and your house is worth £100,000, you have £25,000 worth of equity in your property. This is the amount that is mortgage free.

 

Equity Release Scheme

This type of scheme is aimed at people aged 55 years plus and allows them is release monies from their property without having to sell their property.

 

Exchange of Contracts

This is the point at which when you are purchasing a property all the parties involved, for example the buyer and the seller become legally bound to commitment to the deal.

 

Financial Conduct Authority (FCA)

The Financial Conduct Authority is the regulating body for the financial services industry.

 

Fixed Rate

This is when you choose a deal at a set percentage rate for a given period of time, for example 2, or 5 years. The advantage of this type of deal is that regardless of changes in the Bank of England base rate your deal is fixed and your monthly mortgage payments will not alter for the period of time that you have chosen. If you wish to exit this deal you will have to pay an ‘early redemption fee’.

 

First Time Buyer

This is when you are purchasing your very first property.

 

Freehold

This is when you own both your property and the land on which it is built.

 

 

Ground Rent

This is the term for the payment that you make when your property is on a Leasehold Agreement, it is the amount made to the person / company who own the land.

 

Guarantor

This is a person who guarantees to make your monthly mortgage payment if you are unable to do so. This is usually a parent acting as a guarantor for their child.

 

Household Insurance

This is the term given to cover both ‘buildings insurance’ and ‘contents insurance’, which can be purchased on a joint basis, or separately. It will always be a condition of the mortgage lender that you have ‘buildings insurance’ in place whether you are purchasing a new property, or remortgaging an existing property.

 

Illustration

This is a document that gives you the details of the mortgage product and the associated costs.

 

Individual Voluntary Arrangement (IVA)

This is an agreement that is approved by a court, whereby an individual can agree to repay their outstanding debts over a set period of time.

 

Interest rate

This is the cost of borrowing the money from the lender expressed as a percentage.

 

Interest Only Mortgage

This is when the monthly payments that you make to the lender are to cover the interest element on your mortgage and do not include a repayment element.

 

Land Registry Fees

These are the fees that you pay to Land Registry Office for searches on the property register. They also charge a fee to register the owner of the property and their lender. If you are remortgaging your property, you will also be charged for changing the lender details on the register.

 

 

Leasehold

A leasehold property is one where you own the property itself but not the land on which it is built. With this type of property, a Leasehold agreement will be in place which can range from between 90 to 999 years. The person / company who own the land will then charge you ground rent for the use of their land.

 

Loan to Value (LTV)

This is the term used to describe the difference between the amount of money that is owed on your property against the value expressed as a percentage. For example, if you currently have a mortgage of £75,000 on a property worth £100,000 your LTV would be 75%.

 

Local Authority Search Fees

These are the fees charged by your local authority to answer questions from your conveyancer about your proposed new property.

 

Market Value

This is the amount that your property would potentially sell for if you where to put it on the open market for sale.

 

Monthly Repayment

This is your monthly mortgage payment that you pay to your lender each month.

 

Mortgage Deed

This is a legal document that details the owners of a property and is used to transfer the ownership when a property changes hands. The mortgage lender will also record their details on this document showing that they have an interest in the property.

 

Mortgage Offer

This is a document issued by the lender setting out the details of the terms and conditions on which they are prepared to offer you the mortgage.

 

Mortgage Term

This is the number of years that you take your mortgage over.  This can typically range from 10 to 40 years depending on the lender.

 

Negative Equity

This is when the value of your home is less than the amount that you currently owe on your mortgage balance.

 

New Build

This is the term used when you are purchasing a property that as only just been built, or is in the processing of being built.

 

Offset Mortgage

This is a mortgage where you can offset your savings / current account balance against the interest that you will be charged each month. You usually have to hold the monies in an account with your chosen lender for this to take place.

 

Over Payment

This is when you are allowed to make extra payments on your mortgage up to 10% of the total outstanding balance each year to reduce your overall mortgage balance without incurring a penalty.

 

Premium

This is the term given to your monthly mortgage payment.

 

Porting a Mortgage

This is when your current lender will allow you to move your existing mortgage deal to a new property. This is used predominantly when clients are currently tied into an existing mortgage deal, and it means they can move their existing mortgage deal without incurring early redemption charges.

 

Product Transfer

This is the term used when you are looking to stay with your existing lender and simply change to a new deal.

 

Remortgage

This is the term that is used when you decide to change mortgage provider on your existing property. This usually happens when your existing mortgage deal comes to and end and you are looking to secure a new deal.

 

Repayment Mortgage

This is where your monthly mortgage payment includes an element of both capital and interest each month. If you continue to make your payments each month on time, then your mortgage will be repaid in full when you come to the end of your mortgage term.

 

Retention

This is the term used when a lender holds back part of your mortgage advance until repairs, or improvements have been carried out. Once these have been completed and satisfactory evidence has been received by the lender the monies will then be released.

 

Right to Buy Scheme

These are schemes that are run by the local council and housing associations to enable their tenants to buy their properties.

 

Service Charge

This is a fee that is paid to the management company who take care of the ongoing maintenance of leasehold properties.

 

Shared Ownership

This is a scheme which allows a purchaser to buy a percentage share of a property and to pay rent for the remaining share. You will usually have the option to buy an additional percentage share in the future.

 

Stamp Duty Land Tax

This is the term used to describe the tax that becomes payable by the buyer when they purchase a property. The amount payable may vary depending on whether you are a first-time buyer, purchasing your main home, or purchasing a property to let out to generate income and the purchase price of the property.

 

Standard Variable Rate (SVR)

This is the mortgage interest rate that your lender will charge you once your initial mortgage deal period comes to an end. All lenders have their own ‘Standard Variable Rate’ and they can vary slightly from lender to lender.

 

 

 

Structural Engineers Report

This is a specialist report that has been carried out by a Structural Engineer on the condition of a property.

 

Tie-in Period

This is the period during which you are ‘tied-in’ to your chosen mortgage deal. If you wish to exit the deal you will need to pay an early repayment charge to your current lender during this period.

 

Tracker Rate

This is where your mortgage rate tracks the Bank of England base rate by an agreed percentage.

 

Valuation Survey

Lenders always carry out a valuation survey to check whether the property is approximately worth the amount you are paying for it. We would always advise you to have a more in-depth survey carried out as well especially when you are purchasing a property to check for structural problems.

Want to know more?

Call us for a friendly chat on 01772 879459 or email: info@crowleymortgages.co.uk