Mortgage Terms Glossary
Here you will find the definitions of some of the mortgage related terminology used within this website and that you may hear when you speak to us over the phone. If you understand what everything means you will ensure you get the best possible help from us at Go Remortgage.
Advance
A pre-payment for goods or services.
Agreement in Principal
See also Mortgage Promise. A mortgage promise is the first step to getting a mortgage accepted by a lender. Basic information, such as name, address, date of birth, annual income, is taken and based on that information, the lender decides whether or not they are happy to lend and how much they are willing to lend to the potential borrower. A credit search is done by the lender at this point also.
APR
Annual Percentage Rate. The APR represents the actual cost of credit that borrowers pay, including the interest and fees.
Bank of England Bank Rate
The official bank lending rate regulated by the Bank of England. This is the interest rate that the Bank of England charges Banks for secured lending.
Also known as Dwellings, Buildings and Content Insurance. This covers the property used as a dwelling as well as its contents for damage. Building insurance is mandatory and required by all lenders.
Building Survey
Also known as a property valuation. A survey or valuation is the process by which a piece of land and property is measured and a value is ascertained. The valuation of the property is imperative to all lenders in assessing the security of the loan amount. This also determines the Loan to Value of the mortgage or loan.
Buy To Let
A Buy to Let is a property owned privately or by a company as an investment which is let out to paying tenants.
Capped Rate
A capped rate is one which has a ceiling and therefore can never exceed a certain percentage, known as its cap. It can fluctuate up and down below the cap but cannot go above it.
Cash back
Many lenders offer cash back options on completion of the loan. They will refund an amount of money to the borrower which can be a percentage of the loan or a flat figure.
Completion Date
This is the date when the mortgage or loan becomes final and the money is released either to the remortgage or the purchaser.
Contents Insurance
See Buildings Insurance also. Contents Insurance is insurance which pays for the damage or loss of an individual’s material possessions while they are located within the defined insured dwelling. These can include TV’s, stereos, furniture, fixtures and fittings. More expensive items such as jewellery or computers may require additional insurance.
Conveyancer
A solicitor who specialises in the legal aspects or buying, selling and remortgaging properties. Duties will include but are not limited to drawing of title deeds, transfers of equity, registering charges at the Land Registry.
Conveyancing
The legal work required in buying, selling or remortgaging a property. It is the legal process for the transfer of ownership of properties.
Credit Scoring
Part of the evaluation system used by lenders to determine the level of risk as it relates to borrowing money of a consumer or a business. The credit score is determined by the amount of credit outstanding and how the monthly payments have been kept, whether they have been paid on time, late, or completely missed (See Default). The two largest credit scoring agencies are Equifax and Experian.
Daily Interest
This is when the interest of the mortgage or loan is calculated on a daily basis as opposed to monthly or annually.
Default
The failure to make a payment in an agreed time period in a credit agreement. A default occurs and is recorded on one’s credit file when a debtor has not make a scheduled payment and has is therefore in breach of his or her legal obligations according to the debt contract.
Deposit
The amount of money a borrower must put down on a purchase. The rest of the money is typically found in the mortgage. For example, Mr and Mrs want to purchase a property for £100,000. They are able to borrow 85% (£85,000) and therefore must put down a deposit of their own funds of the remaining 15% (£15,000).
Disbursements
Money paid out or spent above and beyond services. In relation to arranging a mortgage or conveyancing, disbursements can include but are not limited to the fees incurred from sending out letters, stamps, Land Registry searches, valuations or surveys, VAT.
Discharge Fee
This fee is charged by a lender when closing an account. It covers lenders costs to finalise a customer’s existing account when the loan or mortgage is repaid and/or switched to another lender.
Early Repayment Charge
A charge incurred by the borrower when part or all of a loan is repaid within a specified time period, generally known as the Initial Product Period. This will be laid down in the terms and conditions of the loan.
Equity
Equity is the difference between the value of the property and the amount of loans secured on it. If a property has no mortgage (See Unencumbered) then the equity is the total value of the property. If a property is worth £100,000 and has a mortgage of £60,000, the equity in the property is £40,000.
Exchange of Contracts
This refers to the date and the contract between the buyer and seller of a property. The deposit is payable at this point and the contracts for buying and selling is legally binding.
Financial Services Authority (FSA)
The Financial Services Authority is an independent non-government body which authorises and regulates the financial services industry and companies within. It was introduced in 1997 to take over from the Securities Investment Board and the Self Regulating Organisations. The Financial Services Authority’s board is appointed by the Treasury.
Fixed Rate
A fixed interest rate that applies to a loan or mortgage for a specified time period.
First Time Buyer
A person purchasing a property as their main residence for the first time who has not previously owned a property anywhere in the world.
Freehold
In English law freehold is the absolute ownership of a real property and the land it is on. The charge and owners name is registered at the Land Registry Office.
Further Advance
An increase on an existing mortgage or loan given by the same lender.
Guarantor
A person who agrees to be responsible for the debt or obligation of another if the original borrower fails to make payments of the loan or mortgage. Guarantors can also be required for tenants and they are then responsible for any unpaid rent if the tenant fails to pay for any reason.
Higher Lending Charge
Not very common anymore, but the Higher Lending Charge (HLC) is a charge payable to the lender when the loan to value of the mortgage is higher than they are prepared to accept on their standard terms and conditions. It is a single premium normally payable on completion of the mortgage.
Home Information Pack (HIP)
Under the provisions of the Housing Act of 2004, HIPs are required to be provided before a property can be openly marketed for sale. The HIP is a group of documents all about the property and includes an Energy Performance Certificate, Property Information Questionnaire, local authority searches, title documents, any planning permissions, guarantees, and other such documentation. The seller is required to provide and pay for the HIP.
Household Insurance
See also Buildings and Content Insurance. An insurance policy required by all lenders to protect against the loss or damage to the property.
Initial Disclosure Document
A document issued at the very beginning stages detailing information about the scope and nature of services offered by a company. As it relates to the mortgage and financial services industry, the FSA requires that all customers receive an Initial Disclosure Document from a regulated and authorised firm within five days of initial contact. Ours can be found here.
Initial Product Period
The period at the beginning of a new mortgage in which the rate and terms are specified for a defined period of time usually within which there is an Early Repayment Charge if the loan is repaid in part or in full. For example, a 2 Year Fixed Rate mortgage at 4.55%. The mortgage is fixed at 4.55% for two years which represents the Initial Product Period.
Interest-only Mortgage
A mortgage or loan in which the borrower is only paying the interest charged by the lender. The loan or mortgage amount will never decrease and the full original amount of the loan or mortgage will be payable at the end of the term. Borrowers must rely on another Investment Vehicle such as savings in an ISA, traditionally an endowment, or the sale of the property to repay the loan or mortgage at the end of the specified term.
Investment Vehicle
This can be anywhere investors choose to put their money, for example savings account, stocks, bonds, mutual funds, pension, etc. As it relates to loans and mortgages, an investment vehicle is generally used to compliment an interest only loan or mortgage where only the interest of the mortgage is being serviced and a lump sum will be needed at the end of the term to repay the loan or mortgage.
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Key Facts Illustration
The Key Facts Illustration details all the important information regarding a mortgage and is required by the FSA to be provided to borrowers as soon as a mortgage product has been discussed and agreed or recommended. It is produced by the lender and must be clear, fair and not misleading. All costs, fees, and terms and conditions must be detailed in a standard way.
Land Registry
A government agency responsible for the registration of title to land. Land Registry is where all mortgages and other secured loans are registered on all properties and where all owners of properties are noted.
Land Registry Fee
This fee relates to the cost paid to the Land Registry in order to register a charge on a property or to register changes to the title such as new ownership. For example, Mr wants to remortgage in both his name and his wife’s who is not currently on the title deeds of the property. Land Registry Fees are due to add Mrs’ name onto the title and to register the interest the lender completing the mortgage has on the property.
Leasehold
A leasehold property is an estate where ownership is granted by the freeholder for a specified period of time. Current residential lenders generally require that at least 65 years are left on the lease before granting a mortgage to a leaseholder.
Life Assurance
An insurance policy which pays out on death of the policy holder to named beneficiaries. Many borrowers take this out when they take out a mortgage to help repay the outstanding balance in the event of death.
Loan to Value (LTV)
The ratio representing the percentage of a mortgage or secured loan as it relates to the total value of the property. For example, Mr and Mrs own a property worth £100,000 and their mortgage is £65,000. The Loan to Value is therefore 65%. Another example is Mr has a property worth £100,000, a mortgage of £35,000 and a secured loan of £10,000. His Loan to Value is 45%.
Local Authority Search
This is a search which includes a list of questions sent to the relevant Local Authority regarding a property and the area in which it is situated. The results of the search will details such information as whether the road serving the property is adopted and maintained by the council, any planning permissions or restrictions, any proposed developments, any outstanding enforcement or future development issues, etc.
Mortgage
A loan in which a property is used as the security. An interest is noted to the lender as security for the debt. The borrower maintains all rights and responsibilities of a property owner as long as the conditions of the mortgage are met. For information on mortgage options available for you, please complete our mortgage enquiry form on the right of this page for a call back.
Mortgage Account Fee
A single cost charged by the lender at the outset of the mortgage. The fee is charge upon completion of the mortgage to cover set up, maintenance and closing down costs and therefore the borrower is not responsible for exit fees when closing down the mortgage.
Mortgage Deed
A document issued by the lender to the borrower which the borrower must sign to complete the mortgage. Upon doing so the borrower agrees to the terms set out in the Mortgage Offer. The mortgage deed is sent to Land Registry who will then register the charge of the mortgage lender on the property.
Mortgage Term
The length of time over which a mortgage is to be repaid.
Also known as an Agreement In Principal by many lenders. A mortgage promise is the first step to getting a mortgage accepted by a lender. Basic information, such as name, address, date of birth, annual income, is taken and based on that information, the lender decides whether or not they are happy to lend and how much they are willing to lend to the potential borrower. A credit search is done by the lender at this point also.
Mortgage Calculator
A tool to calculate monthly mortgage payments. Click to view our mortgage calculator.
Mortgage Offer
A written offer setting out the terms and conditions in which a lender is prepared to lend money on a property. Generally a mortgage offer is valid for 6 months but this is not always the case.
Negative Equity
This occurs when the value of a property used to secure a loan has fallen to less than the loan amount. For example, Mr and Mrs took out a 95% mortgage in 2004 when they purchased their property for £100,000. The property values in their area have dropped and now their property is only worth £90,000. Since their mortgage is £95,000 and their property is worth less than that, they are in negative equity.
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Product Fee
Also known as arrangement or completion fee. The Product Fee is a cost payable by the borrower to the lender in order to secure a specific mortgage product such as a fixed or tracker rate. In many cases the lender may charge a higher product fee to a borrower for a more competitive rate of interest. For example, a lender may offer a range of choices based on the same mortgage product: a 2 year fixed rate at 3.99% with a product fee of £1,499, a 2 year fixed rate at 4.13% with a product fee of £995 and a 2 year fixed rate at 4.5% with no product fee.
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Remortgage
Also known as refinancing, is the process of paying off an existing mortgage and replacing it with another using the same property as security for the mortgage. Reason for remortgaging includes increasing the mortgage amount to release capital, to secure a better rate and possibly obtain lower monthly payments, to pay off a spouse or partner and remove them from the deeds and therefore current mortgage. For information on remortgage options available for you, please complete our remortgage enquiry form on the right of this page for a call back.
Remortgaging
See Remortgage.
Repayment Mortgage
A term used to describe a mortgage in which the monthly payments by the borrower contribute to paying the capital amount of the mortgage as well as the interest. Therefore, at the end of the term of the mortgage, the balance will be repaid in full and the borrower will then own the property out right.
Retention
A condition on which the lender agrees to complete a mortgage. The lender can hold back a defined amount of the mortgage until certain works or other requirements to the property are completed.
Stamp Duty Land Tax
Also known as simply Stamp Duty. A government tax payable by the purchaser of land or property which varies depending on the sale price and/or value of the land or property.
A report generated by a qualified surveyor for a lender to determine an accurate value of the property to be mortgaged.
Standard Variable Rate
The lenders’ own variable base rate. Usually linked to the Bank of England Base Rate or LIBOR, but is not required to be. Mortgages will revert to the Standard Variable Rate after their Initial Product Period comes to an end.
Tracker Rate
Tracker Rates are initial products offered by lenders which track the Bank of England Base Rate at a certain percentage above. For example, a lender may offer a 2 year tracker at 2.63%; the Bank of England Base Rate is 0.5% so the product will track it at a percentage of 2.13 above. If the Bank of England Base Rate goes up to 1%, the borrower will now have to pay an interest rate of 3.13%.
Unencumbered
A property free of liabilities, restrictions, or charges. An unencumbered property has no mortgage or other financial charges registered against it and the owner owns the property outright.
Valuation
See also Survey. A report generated by a qualified surveyor for a lender to determine an accurate value of the property to be mortgaged.
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Currently no entries under this category.
Currently no entries under this category.
Currently no entries under this category.
