A

Advance

Mortgage Loan.

Advice

A recommendation about the most suitable mortgage for you made by an adviser who is regulated by the Financial Conduct Authority (FCA).

Annual Percentage Rate of Charge (APRC)

Comprehensive metric used in mortgage agreements to represent the total annual cost of borrowing, including interest and additional fees.

Approved in Principle / Agreement in Principle

A certificate some lenders will give you showing the amount they will probably be prepared to lend you. This is not a guarantee but can be helpful when registering with estate agents.

Arrangement fee
The charge levied by the lender to cover the costs of administering and reserving the funds for mortgage. Can be paid separately or added to the loan amount.

Arrears
Falling behind on your mortgage payments means you are "in arrears".

Assignment
The transfer of ownership of an insurance policy or a lease.

B

Balance Outstanding

The amount of loan owed at a particular time

Base Rate

The interest rate set by the Bank of England is known as the Base Rate. This can change at any time.

Beneficiary

The individual(s) designated to receive the benefits from a policy.

Bridging Loan

A temporary loan advanced to help buy a new property before the existing one has been sold.

Broker/Intermediary
An independent adviser who can help you with mortgages and various other financial matters.

 Buildings Insurance

Insurance against the cost of repair or rebuilding a property from scratch following structural damage, for example by flood, fire or storm.

Building Regulations
The health and safety requirements that any new construction must meet.

C

Capital and Interest Payment

Your monthly payment covers the interest and also reduces the total balance outstanding.

 Cashback

Some lenders offer "cashback" on completion of your house purchase. This could be a fixed lump sum, or an agreed percentage of the mortgage loan. Remember to check whether there will be conditions attached.

CHAPS Fee
The fee to cover the cost of electronically transferring the mortgage funds to the borrower/solicitor.

Charge
An interest in the ownership of a property (usually a mortgage or some other debt secured against the property).

Completion
End of the purchase process. The seller moves out, the buyer moves in and ownership is transferred to the new buyer.

Contents Insurance
Insurance against accidental damage or theft of moveable contents, including furniture, appliances and soft furnishings.

Contract
A document that describes the agreement under which the property will change hands.

Conveyancing
Process of transferring property from one party to another which is usually managed by a solicitor.

Covenant
A condition, contained within the Title Deeds or lease, that the buyer must comply with, which is usually applied to all future owners of the property. A restrictive covenant is one that prohibits the owner from doing something.

Credit Scoring
Lenders often use a system called credit scoring to help them decide whether to lend to you. They ask a series of questions about you and your finances and score your answers. Depending on your score you will be accepted or declined.

 Critical Illness Cover

Pays out a lump sum if you are diagnosed with a specified critical illness.

Typical illnesses include:

• Alzheimer’s Disease (before age 60)

• Benign Brain Tumour

• Blindness

• Cancer

• Coma

• HIV - caught in the UK from a blood transfusion, physical assault or at work

• Heart Attack

• Kidney Failure

• Loss of sight

• Major Organ Transplant

• Motor Neurone Disease

• Multiple Sclerosis

• Parkinson’s Disease

• Stroke

• Third Degree Burns

• Total Permanent Disability

D

Death in service

Life insurance an employer provides that may be linked to a pension scheme. As cover ceases should you change jobs this is not normally suitable for mortgage protection.

Decision in Principle
A Decision in Principle (DIP) is another term used for what we have refered to as an 'Agreement in Principle' (AIP).

Decreasing term assurance

This provides a lump sum in the event of death during the policy term. The amount of cover (sum assured) decreases over the term of the plan. This type of cover is usually used as the basis of a Mortgage Life Insurance plan to protect the declining balance of loan.

Deeds
Title deeds are the legal documents which record the ownership of a property and any accompanying land.

Deferred period

A period of time that has to pass before benefit from a policy is claimed. Typically Income Protection policies will have a choice of deferred periods to suit any benefit you may be eligible for from your employer.

Deposit
The amount you need to pay towards the total purchase price of the property. This varies depending on the product and lender. 

Disbursements
Various costs for carrying out the legal work in relation to buying or remortgaging the property.

Discounted Variable Rate Mortgage

A set percentage discount below your lender's Standard Variable Rate for a predetermined length of time. Your monthly payments can still go up and down with this type of rate.

E

Early Repayment Charge

A charge made by the lender if the borrower terminates a mortgage in advance of the terms of the particular mortgage. Normally occurs when the borrower has benefited from reduced payments or cash back in the early period of a mortgage.

Easement
A legal right over land (e.g. The right to access a specified area of land, such as a right of way).

Equity
Is the difference between the current value of your property and the amount outstanding on your mortgage.

Exchange of contracts
The point at which both buying and selling parties sign their copies of the contract which are exchanged by their respective legal representatives and are legally binding. The buyer normally pays a deposit at this point and the date of completion is agreed.

Exit Fee
This is an administration fee payable to service providers when you fully repay your mortgage.

 F

FIMBRA

Financial Intermediaries Managers & Brokers Regulatory Authority.

Financial Conduct Authority (FCA)

The body that regulates the financial services industry in the UK.

Fixed Rate Mortgage

A fixed interest rate is applied to your mortgage for a predetermined time, during which your monthly repayments will stay the same.

Flexibility

Flexible features may apply to many types of mortgages. Features could include the facility to overpay or take payment breaks amongst others. Your Financial Consultant will be able to advise you about the different options available.

Freehold
You own both the property and the land it stands on.

Full Structural Survey
A full structural survey looks at all the main features of the property, including walls, roof, foundations, plumbing, joinery, electrical wiring, drains, and garden

Further Advance
An additional loan (from the current lender) to your existing mortgage taken after the main mortgage has completed which is also secured against the property.

 G

Guaranteed premium

Premiums will stay the same throughout the term of a policy.

Gazumping
Gazumping occurs when a seller accepts an oral offer (a promise to purchase) on the property from one potential buyer, but then accepts a higher offer from someone else. It can also refer to the seller raising the asking price or asking for more money at the last minute, after previously orally agreeing to a lower one. In either case, the original buyer is left in a bad situation, and either has to offer a higher price or lose the purchase.

Gazundering
A tactic whereby the buyer offers less than the agreed price just before exchange of contracts.

Ground Rent
The annual fee which a leaseholder pays to a freeholder.

Guarantor
A third party (e.g. parents) who agrees to meet the monthly mortgage repayment if you are unable to.

H

Higher Lending Charge

Required by some lenders if your loan is for more than a required percentage of the value of the house. Although the borrower pays the premium, the policy protects the lender not the borrower.

Home Buyers Report
This is an intermediate-level survey which is usually offered by the mortgage lender and prepared by their own surveyor. The homebuyer’s report comments on the structural condition of most parts of the property that are readily accessible, but it does not involve in-depth investigation or the testing of water, drainage or heating systems.

I

Initial Disclosure Document (IDD)
This is a document designed to assist you in comparing the services provided and the fees and charges made by lenders and intermediaries.

 IFA

Independent Financial Advisor.

IMRO

Investments Managers Regulatory Organisation. Regulates investment managers.

Income protection

Provides tax-free income in the event of you not being able to work due to ill health. Payments are usually paid monthly until you either return to work, the policy term expires, you retire or death occurs.

Interest Only Mortgage

You pay the interest on your mortgage to the lender each month until the end of the mortgage term. The capital borrowed does not reduce and it is your responsibility as a borrower to ensure that you have a method or means of repaying the capital at the end of the term.

J

Joint Mortgage

A mortgage where there is more than one individual named responsible for the mortgage.

Joint Tenants
A type of ownership frequently used by couples to ensure that when one dies, the property passes automatically to the other (alternative to Tenancy in Common).

K

Key Facts Illustration (KFI) or ESIS
Document containing key mortgage information which is designed to help you compare the costs and features of different mortgages from one or more lenders. It is designed to make it easy to compare mortgages at a glance.

L

LAUTRO

Life Assurance Unit Trust Regulatory Organization.

Leasehold
You own the property but not the land it is built on for a specific number of years. Flats are usually owned on a leasehold basis. You may find it hard to get a mortgage if there are fewer than 70 years left on the lease of the property you want to buy. Leases are renegotiable, but the shorter remaining terms, the more expensive it will usually be.

Lender's Arrangement Fee

This fee may be charged by the lender to cover their administration costs in setting up your mortgage.

Lender's Standard Variable Rate

The interest rate set by the lender and varies from lender to lender. If your mortgage is on this rate your payments will vary in line with lender rate charges.

Level term assurance

A policy that pays a fixed lump sum upon death during the policy term.

Local Authority Search
A search of the local area to highlight anything that may impact on the property or surrounding area, e.g. planned road building, planning permissions etc.

Loan to Value (LTV)
LTV means Loan to Value. The size of your mortgage as a percentage of the value of your property. for instance, if you have £100,000 mortgage and your home is worth £200,000, your LTV is 50%.

M

Maturity Date
The date the mortgage must be repaid in full, or by which a new agreement needs to be taken out.

 Monthly Interest
A method of calculating mortgage interest on a monthly basis.

 Monthly Repayment
The amount you pay to your lender for your mortgage each month.

 Mortgage Deed
A legal document relating to the mortgage lender’s interest in the property

 Mortgage life insurance

A decreasing term life insurance plan that’s designed to help protect a repayment mortgage by paying a lump sum in the event of death during the policy term. These are usually flexible plans with options available to pay insurance premiums and mortgage payments in the event of you becoming incapacitated by illness or injury.

Mortgage Offer
This is your guaranteed offer of the mortgage. Once your mortgage is approved you'll get a formal offer setting out the terms and conditions.

Mortgage Term

This is the period of time over which your mortgage is proposed to run. Remember the longer your mortgage runs, the more interest you are charged overall so care needs to be taken to ensure that the term chosen is suitable.

N

Negative Equity

When the value of a property is less than the outstanding sum owed on a mortgage.

NHBC
National House Building Council. A warranty scheme for new properties providing cover against major structural defects for 10 years.

O

Overpayment
This is when you pay extra, over and above your monthly mortgage payment. You could choose to make a one-off lump sum overpayment or overpay a regular amount with your normal mortgage payment. Overpayments save you interest and will shorten your mortgage term.

 P

Portability
Where an existing mortgage can be transferred between properties when you move house.

 Premium

Premium Payments to the insurance company to purchase cover.

Premium protection

Covers the cost of policy premiums during periods of unemployment due to illness or injury. Also known as waiver of premium.

Product Fee
This is a set-up fee for your mortgage. Different lenders will charge different product fees.

 R

Remortgage
The process of moving your mortgage without moving home. You take a new mortgage with a different lender or your existing lender to pay off your old mortgage.

 Repayment Mortgage

Monthly interest combined with capital repayment against the original sum borrowed.

Repossession

When loans are in default the mortgage lender can repossess the property and sell it so they can repay the debt.

Retention

Holding back part of a mortgage loan until repairs to the property are satisfactorily completed.

Reviewable premium

Premiums are very likely to change over the term of the policy, an insurer may choose to review premiums at set intervals such as every five years.

S

Stamp Duty
This is a tax you pay when you buy a property. This amount differs based on the purchase price of a property and what type of purchaser you are (i.e. A First Time Buyer or someone buying another property). 

 Standard Variable Rate (SVR)

The interest rate set by the lender and varies from lender to lender. Your monthly payments will vary in line with lender rate changes.

Subject to Conclusion of Missives

Words used to indicate that an agreement is not yet legally binding.

Subject to Contract
Words to indicate that an agreement is not yet legally binding.

Sum assured

The amount of money you are insured for from outset of a policy.

Survey
A report on the condition of the property you are planning to buy.

 T

Terminal illness benefit

The sum assured from a life assurance plan becomes payable if you are diagnosed with a terminal illness where life expectancy is considered to be less than 12 months.

Title
The record of ownership of a property, the evidence of which is found in the title deeds.

Tracker Rate Mortgage

This type of rate is usually defined as a percentage amount above, below or equal to the Bank of England's Base Rate. As the Bank of England can change rates at any time your monthly payment can vary as your rate follows or "tracks" this base rate.

Transfer Deeds
The Land Registry document that transfers legal ownership from seller to buyer.

Trust

By placing the benefits of a policy “in trust” you can ensure that the correct person receives the proceeds. Assets owned in a trust do not form part of an estate of a deceased person.

U

Underwriter

A person who assesses and classifies the degree of risk that a proposed insurance represents.

V

Valuation Fee

Normally charged by the lender to carry out a basic inspection of the property. The resulting valuation report is solely for the lender's benefit and is used to assess mortgage suitability.

Variable Interest Rate

Rate of interest payment that fluctuates over time inline with general interest rates.

Vendor
The seller of a property or piece of land.

W

Waiver of premium

Covers the cost of policy premiums during periods of unemployment due to illness or injury. Also known as Premium Protection

Y

Yield

The amount of money a landlord receives from in rent as a proportion of the amount of money invested in the property.