MORTGAGE GLOSSARY & TERMINOLOGY

Glossary

When looking for a mortgage it is important that you understand the terminology used, we have put together a list of the most common mortgage terminology used.

A l B l C l D l E l F l G l H l I l J l K l L l M l N l O l P l Q l R l S l T l U l V l W l X l Y l Z

Annual Percentage Rate (APR)
This identifies the true cost of borrowing over the full term and provides the consumer with a method of comparing the cost of different types of loan.

Arrangement Fee
A fee charged by a lender for setting up the loan, normally payable on completion, but sometimes added to the loan.

Arrears
Mortgage payments that have not been made by the due dates.

Bank of England Rate
The Bank of England Monetary Policy Committee currently reviews this monthly. If the rate changes, the standard variable rate charged by lenders will usually change soon afterwards.

Bankruptcy
This is a person’s legal declaration that they cannot pay their debts. Creditors can attempt to obtain as much money as possible from any existing assets held by the person.

Booking Fee
Sometimes known as an Application Fee
A fee charged by a lender, payable at the time you apply for the mortgage. Normally applies only to special loan offers, such as fixed or capped rates.

Broker Fee
A fee charged by your adviser for advising on and arranging your mortgage.

Buy to Let
A mortgage arrangement for a property rented out solely to tenants, normally on an assured, shorthold tenancy agreement basis.

Completion
The point the legal formalities of a property purchase or mortgage end and sellers receives the money.
The buyer cannot take possession before completion.

Conveyancing
The act of transferring the legal ownership of land or prpoerty from one person to another.

County Court Judgement (CCJ)
Judgement for debt in the country court. A CCJ registered against an applicant could affect their ability to get a mortgage.

Credit Scoring
Method of assessment carried out by a lender which ‘scores’ the various answers given on a mortgage application. The total ‘scores’ provides the basis for the lending decision

Deeds Release Fee
A charge by the lender for release of the property deeds to the borrower or their solicitor on repayment of the mortgage.

Early Repayment Charge
Penalty charged by a lender for repaying a mortgage before a given date started in the mortgage conditions, usually because attractive terms applied, for example a fixed interest rate.

Equity
The property value, less the mortgage outstanding.

First Charge
Standard legal charge used to secure the main (first) mortgage property. It gives the lender the first call on any funds available from the sale of the property.

Financial Services Authority
An independent body that regulates the financial services industry in the UK.

Guarantor
Person, normally a friend or relative of the borrower, who guarantees to repay the mortgage if the borrower fails to make the repayments.

Higher Lending Charge
Sometimes known as Mortgage Indemnity Guarantee (MIG)
An extra charge made by the lender if your mortgage exceeds a certain proportion of the property value, for example 90%.

Initial Disclosure Document (IDD)
A document given to you by your lender or mortgage adviser that sets out the extent of the service they will provide in arranging your mortgage.

Joint Application
Mortgage application with more than one borrower up to a maximum of four.

Key Facts Illustration (KFI)
A detailed illustration provided by your lender or mortgage adviser before you apply for a regulated mortgage contract. It sets out the key facts including the repayments, fees and terms loan.

Loan-to-Value (LTV)
This is the ratio of the loan amount of the property value expressed as a percentage. For example, if a borrower is seeking a loan of £50,000 on a property with £100,00, it has a 50% loan-to-value. The higher the LTV the greater the risk to the lender, which can have an impact on the lender’s decision to lend. Loans above normal lending LTV ratios may require payment of a Higher Lending Charge.

Mortgage Offer
A Written offer from the lender to the borrower setting out details of the mortgage with a list of conditions. The mortgage Offer is usually valid for up to 6 months.

Mortgage Term
The period over which you repay the mortgage

Non-Conforming Jargon
The non-conforming sector can be very confusing as lenders tend to use a variety of labels to describe mortgages for people who have been refused credit.
Look out for the following terms:
Non-standard
Sub-prime
Adverse credit
Specialist
Impaired credit
Refused credit

Non-Regulated Mortgages
Mortgages not covered by the FSA’s regulations, for example buy-to-let, second charges and mortgages on overseas properties.

Remortgage
Arranging a loan on a property in which the borrower already resides. Normally this involves redeeming an existing loan on the property.

Right to Buy
Option for a council tenant to buy the property in which they live in, often at a discount to the open market value, that increases in proportion to how long they’ve lived in the property.

Search
Part of the legal process where the solicitor or licensed conveyancer searches against local authority records.

Second Charge
A legal charge that ranks behind a first charge, possibly to secure a second mortgage or other borrowings.

Secured Loan
A loan that enables homeowners to borrow capital using their property to guarantee the loan. This means that the lender can repossess your home if you fail to repay the loan.

Shared Ownership
Method of buying a property in partnership with a Housing Association, for people who otherwise could not become homeowners. The borrower buys part of the property and rents the remainder from the Housing Association. Under most arrangements, the minimum purchase amount is 25% of the property value, with the remainder available for purchase in blocks of 25%. also known as co-ownership.

Strucutral Survey
The widest form of inspection undertaken by a chartered surveyor. For properties where movement or subsidence has occurred, lenders may insist on a chartered building engineer carrying out a structural engineer’s report.

Survey (VALUATION)
Before granting a mortgage a lender will carry out an inspection, a survey of the property to check it is in good condition and represents reasonable security on which to lend the money. Your lender will use a qualified surveyor to provide a current valuation. The fee charged usually depends on the property value.

Total Cost of Credit (TCC)
Total amount payable under a loan, including all fees and other charges from the lender, after deducting the original loan amount.

Vendor
The seller of the property.

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If we haven't managed to answer your mortgage questions with the above call us free on 0800 037 8310 to speak to one of our mortgage specialists or click here to find out a bit more about mortgage terminology and meanings.