Glossary

Added to loan
This phrase relates to the costs borrowers face when arranging a mortgage. Often these costs are added to the mortgage amount being borrowed hence the term. The costs may include items such as mortgage indemnity fees and/or arrangement fees and/or administration fees as examples.

Administration fee
A fee charged for any number of administration procedures.

Advance
The mortgage loan.

Adverse Credit
Poor credit record (also see Sub Prime)

Annual percentage rate (APR)
This is a legal definition used to show what the cost of borrowing actually is. As it is a standard definition, it enables a potential borrower to compare the costs of various types of mortgage. Every mortgage quotation must show an APR figure.

Applicant
Someone who applies for a mortgage.

APR
Annual Percentage Rate - this shows the overall cost of a loan each year, taking into account the term, interest rate and other costs.

Arrears
Arrears is used to describe missed, late or under paid mortgage repayments. Borrowers with a history of mortgage arrears will find it harder to obtain a further mortgage with their current lender or a new lender in the future.

BBR
Bank Base Rate - a rate set by the Bank of England.

BBA
British Bankers Association.

Bad Credit Rating
This is another term used to describe Credit Problems due to an adverse credit history. CCJ's, Mortgage Arrears and other credit debt repayment problems lead to a Bad Credit Rating.

Bailiff
An official representative of the courts, who as a last resort may be instructed by us, following a ruling by a judge, if you have not kept your loan repayments and fail to reach an agreement to amend your repayments.

Bankrupt
This occurs when a debtor is unable to pay their debts. The lender(s) or creditor(s) move to secure what monies they can from any existing assets (property) held by that person. All property is then administered by the official receiver.

Broker
Also known as an Intermediary or Introducer, who assists in arranging suitable financial products or policies for you. The broker may be independent or part of a network and often carries out the administration to do with processing the loan.

Buildings Insurance
All lenders require a property to be insured. It should be insured for the full rebuilding cost including professional fees and such insurance cover is normally a condition of the mortgage. N.B. The full rebuilding cost will normally differ from (and be substantially lower than) the mortgage valuation and or purchase price of the property.

Buy to let
Where a property is purchased for the purpose of letting it out to tenants.

Capital
The amount you borrow on the mortgage to help you buy your home, and on which interest is charged.

Capital and interest mortgage
This is one of the most usual types of mortgage. The monthly repayment made by the borrower includes a repayment of capital borrowed and an amount for the interest charged. At the beginning of the mortgage most of the payment is used to cover the interest and only a small amount is paid towards reducing the mortgage. Over the term of the mortgage more and more of the monthly payment is comprised of paying back the capital borrowed. As long as the monthly payments (which may alter due to changes in interest rates) are always made on time, the mortgage is guaranteed to be paid off at the end of the term.

Charge or legal charge
When an individual takes out a mortgage, the lender takes a legal charge over the property. This means that they are registering their interest in the property.

Completion (legal completion)
When you become the legal owner of the property.

Completion (GMAC-RFC mortgage)
The completion date on your mortgage with GMAC-RFC is the date on which funds are released.

Compound interest
The interest calculated on accumalated unpaid interest as well as the original loan.

Consumer Credit Act (CCA)
Act of legislation to define the rules relating to lending money and aimed at protecting the consumer when credit is agreed with a third party. Mortgages are regulated under the Financial Services and Markets Act (FSMA) and not the CCA.

Conveyancer
A solicitor or licensed conveyancer who does the legal work involved in selling and buying property.

Conveyancing
The legal work involved in selling and buying property.

County Court Judgement (CCJ)
This is a judgement for debt lodged in a County Court. Such judgements are recorded and will be shown when a credit check is carried out. If the debt is paid or satisfied and a satisfaction certificate obtained it will be noted on your credit file. Having unsatisfied CCJ's will seriously affect your credit rating and limit the lenders available to you.

Credit check
A credit check determines your credit history using the services of a Credit Reference Agency.

Credit Reference Agency
An organisation that keeps details of individuals and their credit histories. Lenders will check with a credit reference agency to see if someone applying for a mortgage has any known credit problems. Examples of credit reference agencies are Experian, Equifax and Creditcall.

Criteria (mortgage)
A standard ruling or test on which a judgement or decision can be based. These standards will vary depending on the mortgage product chosen.

Defaults
If you have defaulted on a loan or mortgage it means that you have failed to meet your repayment date, this will be marked on your credit record. When considering your GMAC-RFC mortgage a loan defaults when you fail to make you payment in the month that it is due. 

Deposit
The amount of money you put into buying a home (not including the money you are borrowing). The phrase may also refer to the amount paid upon exchange of contracts.

Discharged Bankruptcy
After a period of time a Bankrupt Individual can be discharged from bankruptcy. This then releases them from their financial obligations. There are some lenders that will provide mortgages for ex-bankrupts.

Discount rate period
A set amount of time that a reduced interest rate applies for.

Early Repayment Charge (ERC)
A charge you have to pay if you pay back a mortgage early (including if you move to another lender).

 

Equity
The total value of your property, less the amount of the mortgage. For example, if your house is worth £60,000 and you have a mortgage of £50,000, you have equity of £10,000.

Exchange of contracts (England & Wales only)
At this stage of the property purchase, legally binding contracts are exchanged between the buyer and the seller.

Existing commitments
This phrase simply refers to all the other financial commitments, apart from the existing or proposed mortgage. Liabilities will include credit cards, bank loans, maintenance payments to ex-spouse and school fees etc. Lenders will take these items into account when evaluating the mortgage amount they are prepared to lend.

Financial Services Authority (FSA)
The Financial Services Authority (FSA) is the independent watchdog set up by the government to regulate financial services and protect your rights. The FSA has regulated mortgage sales since 31 October 2004. All lenders must be authorised by the FSA. This means that all firms must follow FSA rules when dealing with you. You can check that a mortgage firm is authorised by calling the FSA Consumer Helpline (0845 606 1234) or through the FSA website at www.moneymadeclear.fsa.gov.uk >>

First charge
A lender will always use this to secure the main mortgage, therefore a lender who has a first legal charge over a property will have the first call on any funds raised from the property sale.

First Time Buyer
Someone who is not currently a homeowner nor having redeemed a mortgage within the last 12 months.

Fixed rate mortgage
A mortgage where an interest rate is fixed/set for a number of months or years. After the fixed rate period has ended, the interest rate will revert to the normal variable mortgage rate. If the mortgage is redeemed during the fixed rate period there are usually early repayment charges (see Early Repayment Charges).

Freehold (England & Wales only)
This refers to land or property owned indefinitely, giving complete ownership of the land and all buildings on it. Leasehold property only gives the owner a right to hold for a limited period of time.

General conditions
These are the standard conditions applicable to a mortgage. These will be found in the mortgage conditions supplied to you at the time of completing your mortgage.

Ground rent
A fee leaseholders have to pay to the freeholder or landlord who owns the land the leasehold property is on.

Home Information Pack (HIP)
The Home Information Pack contains important information that buyers and sellers need to know. For more information on HIPs please visit www.homeinformationpacks.gov.uk >>

Income Multiples
The number by which a lender multiplies your earnings to find out how much you can borrow. The income multiple used by the lender will depend on your personal circumstances.

Initial interest
Initial interest is a payment covering the period between the 1st of the following month when the normal monthly payment is due.

Interest
The money you are charged for borrowing - it is the actual cost of borrowing the money.

Interest only mortgage
A mortgage where only the interest is paid each month to the lender and no capital is repaid. At the end of the mortgage term the full amount of the capital borrowed will need to be repaid. Usually the capital is repaid from an endowment policy, pension plan or PEP/ISA. If you are expecting to use one of these methods to repay the capital at the end of the mortgage term, it is your responsibility to ensure that it is on track to pay off the full amount of the capital outstanding.

Introducer
Also known as an Independent Financial Adviser, Introducer, Intermediary or Broker. This person helps you get a mortgage from their available range. Only FSA regulated firms and their agents should give advice about mortgages and these firms must follow the S+FSA standards when dealing with you. Check the FSA register to see if the adviser you are dealing with is regulated. Check now at www.moneymadeclear.fsa.gov.uk >>

Independent Financial Adviser (IFA)
Also known as an Independent Financial Adviser, Introducer, Intermediary and broker. This person helps you get a mortgage from their available range. Only FSA regulated firms and their agents should give advice about mortgages, and these firms must follow the S+FSA standards when dealing with you. Check the FSA register to see if the adviser you are dealing with is regulated. Check now at www.moneymadeclear.fsa.gov.uk >>

Key Facts Illustration (KFI)
All mortgage brokers and lenders are obliged to provide this document to you. The document explains the lenders services, costs and details of the mortgage you are interested in.

Lease
A legal contract, which gives the ownership of a leasehold property to the buyer for a fixed period of time.

Leasehold (England and Wales only)
If a property has a tenure, which is Leasehold, it only gives the owner a right to hold for a certain fixed period of time. The land is not owned by the property purchaser.

Leaseholder
Someone who owns a property, but not the land it stands on, for a fixed period of time.

Let to Buy
A property owned that is let out to enable the purchase of a residential property.

LIBOR
London Inter-Bank Offered Rate.

Loan to value (LTV)
The amount of money you want to borrow compared (as a percentage) to the value of the property, e.g. a mortgage of £75,000 on a property valued at £100,000 would have an LTV of 75%.

Local authority search
This is carried out by the purchaser's solicitor to check the status of the property. This search reveals whether any proposed changes in the area are taking place, details of planning permission for the property and whether enforcement notices have been served by the Local Authority on the property.

Main residence
Sometimes referred to as the principal private residence. This is the home where someone spends most of their time.

Mainstream
A mortgage product offered to a person who has a good credit record.

Mortgage
A loan to buy a property. The property acts as security for the loan and so can be repossessed and sold if the mortgage repayments are not made.

Mortgage Adviser
Also known as an Independent Financial Adviser, Introducer, Intermediary or Broker. This person helps you get a mortgage from their available range. Only FSA regulated firms and their agents should give advice about mortgages, and these firms must follow the S+FSA standards when dealing with you. Check the FSA register to see if the adviser you are dealing with is regulated. Check now at www.moneymadeclear.fsa.gov.uk

Mortgage Deed
The legal agreement, giving the lender a legal charge over a property until the mortgage is repaid in full.

Mortgage Lender
The company you take out your mortgage with.

Mortgage Term
The length of time over which the mortgage will be repaid.

Negative equity
This occurs when the property value has fallen below the amount of mortgage still owing, i.e. your property is worth less than the amount you owe for it.

Part and Part mortgage
This refers to a mortgage, which is partly repaid on a capital and interest basis and also repaid by another method, hence the term 'part capital and interest mortgage'.

Part Redemption
Part redemption occurs when you make a lump sum capital repayment in part settlement of the mortgage.

Redemption
This refers to repaying the mortgage when moving to another property or at the end of the mortgage term.

Remortgage
When a borrower moves a mortgage from one lender to another without moving home. The new mortgage will pay off the existing lender and sometimes the borrower may raise additional funds over and above the old mortgage amount.

Right to Buy (RTB)
Sitting tenants in some Housing association, MOD or council properties, have an option to purchase the property in which they live in. Usually the property can be purchased at a discount based on the length of time they have been a tenant.

Repayment Mortgage
A mortgage where you pay off both the loan and the interest at the same time.

Second charge
This is a legal charge, which is usually used to secure a second mortgage or other borrowings. It will always rank behind a first charge. See also Secured loan.

Secured Loan
This is a Personal Loan that uses equity in your home for security to allow better interest rates than being an Unsecured Loan. However, your home is at risk if you fail to keep up repayments secured on it.

Security
The property, for which the mortgage is being used to buy, is the lender's 'security' for the loan. This means that the lender has rights over the property. If the mortgage repayments are not kept up to date, the lender can repossess the property and sell it to recover the debt.

Self Certification
Where a person declares their earnings, which is then not verified by the lender.

SVR (Standard Variable Rate)
The lenders normal rate i.e. without any discounts or deals.

Sub Prime
A sub prime mortgage is also known as a Non Status Mortgage, a Non Standard Mortgage, an Adverse Credit Mortgage, a Poor Credit Mortgage, a Bad Credit Mortgage or Non-Conforming mortgage. Put simply, it is a mortgage for people who require a non-conventional mortgage.

Term
The length of your mortgage. Normally expressed in years.

Title deeds
The legal documents, which set out the ownership of a property.

Variable rate
This rate moves up and down in line with interest rates and the general movement in mortgage rates.