Glossary

APR

The Annual Percentage Rate is the total amount of interest that will be paid over the whole term of a loan. The rate quoted on loans and credit cards may only be the monthly or annual rate of interest you pay. Lenders are required by law to inform you of the APR before you sign an agreement.

Building Survey

Also known as a Full Structural survey - recommended for older buildings built before 1960 and unusual properties such as those with a thatched roof or timber frame, and should reveal most defects. Each visible element of the property is inspected and any necessary repairs and costs are identified.

Buy to Let

Buying a property with the intention of letting it out to tenants for rent.

Capital and Interest Mortgage

Also known as a Repayment mortgage where the monthly payments pay both the interest on the amount borrowed and the outstanding mortgage.

Capped Rate Mortgage

A mortgage arranged for a set period which will go up and down with the variable rate, but where the interest rate charged will not rise above a maximum (Capped) interest rate.

Cashback Mortgage

The borrower receives a cash lump sum on completion, or after the first monthly payment. It can be a fixed amount or a percentage of the mortgage. This can help with the extra expenses of buying a house, such as: surveys, solicitor's fees and removal costs, and is popular with first-time buyers.

Commercial Mortgage

A mortgage on a non residential building occupied by a business.

Completion

The date that the seller receives the money from the sale of the property and legal ownership passes to the buyer.

Conveyancing

The legal work involved in the transfer of ownership of a property or land, usually carried out by a solicitor or licensed conveyancer.

Discount Rate Mortgage

A mortgage where the rate fluctuates with the base interest rate, but at a lower discount level for a set period.

Early Repayment Charge

Some mortgage contracts contain a charge if you repay the mortgage early, such as during the period of a fixed or discounted rate - also known as Early Redemption Fee

Endowment Mortgage

An interest only mortgage where the capital at the end of the mortgage term is repaid by the proceeds of an endowment assurance policy. There are risks involved as there is no guarantee that the endowment will earn enough to pay off the mortgage at the end of term.

Exchange

The signed contracts from the buyer and seller are exchanged and a completion date set. The buyer pays the deposit on the property. The exchange makes a binding contract.

First time buyers

Borrowers who are purchasing a property for the first time, they are usually offered special offers - discounts, cash back and fixed rates. Mortgage lenders are most competitive with first time borrowers as they hope to interest them in subsequent mortgages.

Fixed rate Mortgage

The mortgage rate is fixed for a set period. Generally, the shorter the period is then the lower the rate.

Flexible Mortgage

A combined mortgage and current account that allows you to vary your monthly payments by overpaying, underpaying or taking a payment holiday. Any monthly savings earn the mortgage rate, which is generally a high, tax-free rate of return. There should be no early repayment charge.

Freehold

If you buy the freehold of a property you own it and the land it stands on.

FSA

The Financial Services Authority (FSA) is an independent non-governmental body that regulates the UK financial services industry, including: mortgage lending, mortgage advice and general insurance advice. If the required standards are not met, then the FSA can take action against firms.

Full Structural survey

An extensive property survey - known as a Building Survey - this is recommended for older buildings built before 1960, and should reveal most defects. Each visible element of the property is inspected and any necessary repairs and costs are identified.

Higher Lending Charge

Formerly known as a Mortgage Indemnity Guarantee, this is the sum required by the lender when the amount borrowed exceeds a given percentage of the value of the property. The charge is used to buy an insurance policy against you defaulting on the mortgage loan.

Homebuyer's Survey and Valuation

This survey is more detailed than a basic Valuation and includes significant matters such as subsidence or settlement and urgent repairs for which the client should obtain quotations prior to exchange of contracts. This is usually recommended for conventional, unmodified properties and generally those built after 1960's.

Home Information Packs (HIPS)

Since 14 December 2007 every home put on the market, no matter what size, must have a Home Information Pack. It brings together valuable information at the start of the process - such as a sale statement, local searches and evidence of title - which could save you money, time and stress. The Pack also includes an Energy Performance Certificate that contains advice on how to cut CO2 emissions and fuel bills.

Interest only mortgage

A mortgage where the monthly payments only meet the interest on the capital amount borrowed. The capital amount remains outstanding and the borrower has to make provision for repaying this amount at the end of the mortgage term. Most borrowers use the proceeds of an investment, such as a long-term savings plan, an ISA or endowment policy run alongside the mortgage to repay the debt.

ISA Mortgage

This is taking out an interest-only mortgage and running an ISA investment alongside in order to repay the capital sum borrowed. There are risks involved as with any stock market investment, but there is the advantage of tax savings in that any savings you make are free from Capital Gains and income tax. Most lenders also require life insurance to cover the amount borrowed.

Joint Tenancy

This is the owning of land or property by two or more people. The joint tenants both pay the mortgage and get an equal share when the property is sold. If one of the joint tenants dies, the ownership of the property passes to the survivor/s, in contrast to property held by 'tenants in common'.

Key Worker Living Programme

A government-led initiative helping key workers - including such professions as: nurses, teachers, firefighters, police officers, social workers, prison staff, probations staff, who live in London, the South East and the East of England - to buy a home, upgrade to a larger family property or rent a home at an affordable price. The scheme offers eligible key workers interest-free loans of up to £50,000. The Housing Corporation gets back paid when you sell the property, and if you cease your job as a key worker you'll be required to pay the money back within two years. This programme is mainly aimed at first- time buyers.

Land Registry

The government body responsible for maintaining and updating the register of all properties in England and Wales - records and transfers land ownership. Since February 2005 for just a £2 fee online you can discover : who owns a specific property, how much it cost them, the name of their mortgage provider and the length of any lease on it.

Leasehold

This gives you the right of possession of a property, but not the ownership for an agreed period of time. Many flats in the UK are leasehold.

LTV

Loan-to-value ratio - this is the difference between the loan amount and the house's market value. A loan of £80,000 on a £100,000 home gives a loan-to-value ratio of 80%. The bigger the difference is between the loan and the value of the house, then the smaller the LTV. This difference is known as the equity.

Mortgage

A loan to buy a house, where the property is the security for paying back the loan. The lender has the authority to sell the property if repayments are not maintained. Mortgage repayments are usually made monthly over a long period, usually 25 years. There are many different mortgage options : repayment, flexible, tracker, capped, discount, self certification.

Mortgage-in-principle

Lenders can agree to a mortgage in principle even before you find the right property. This is subject to further conditions being met, such as, credit checks and a property valuation.

Mortgage Offer

The document issued by the mortgage lender to the borrower following approval, setting out the conditions and terms.

Mortgage Protection

Usually taken out with aRepayment mortgage this policy provides life assurance that reduces in line with the decreasing mortgage debt. The policy pays out a lump sum in the event of death, which is used to repay the mortgage. There are no savings with a mortgage protection policy, it purely provides life insurance.

Negative Equity

This is where the amount of money owed on the property exceeds the property's market value. So, if you sold your house you would not get enough money to pay off your mortgage loan.

NHBC Warranty

if you are buying a new house you should receive a NHBC (The National House Building Council) warranty. Providing the builder is registered and the property meets standards the NHBC will issue a Buildmark Warranty. This offers insurance protection against any structural or building faults for 10 years.

Non-Status Mortgage

If you do not have a credit record or any proof of income or a mortgage history then you are termed by lenders as 'no status'. It is still often possible to arrange a non status mortgage even if you have been turned down before and have a poor credit history - CCJ's, mortgage arrears, repossession, Discharged Bankruptcy. Generally the maximum loan to value is around 85% and the rates are usually higher.

Overpayment

This is when you pay more than the required monthly repayment to your mortgage lender. A flexible mortgage allows overpayment and underpayment. As long as there is no early repayment charge you should be able to overpay as much as you can afford and cut down your mortgage term and interest paid.

Pension mortgage

You can link your personal pension plan with your mortgage loan,so that at the end of the mortgage term part of the tax-free proceeds of the pension fund repays the outstanding mortgage loan. You receive tax relief on your pension plan contributions, but are left with less for your retirement.

Portable Mortgage

This is where a borrower can transfer their existing mortgage to a new property without incurring the penalty of early repayment charges. Most mortgages are now portable mortgages, meaning that if you decide to move you take your mortgage on the same terms and conditions to your new property. Mortgage portability can be advantageous, if for example you have secured a good fixed rate, a capped, cash back or discounted product originally and the market has since changed, leaving no comparable deals.

Property Chain

This is when a number of property transactions are dependant on others - when a seller needs the sale of their house before they can complete the purchase of another property. The chain can break if one buyer is unable to sell their home and a link breaks. A first-time buyer has no chain which is an attractive prospect for a seller.

Remortgage

The arranging of a new mortgage for your property without moving. The reasons for remortgaging are usually to get a better mortgage rate or to release equity for improvements.

Repayment Mortgage

You pay the mortgage along with the interest monthly. This is the most popular mortgage plan and the safest. A Mortgage protection policy is recommended with this mortgage plan, so if the policy holder dies the debt can be paid by the heirs. Also known as a Capital and Interest mortgage.

Search

This is usually carried out by the solicitor as part of the conveyancing process on your proposed property. The search checks for any plans with the Local authorities which might affect the property, such as: new roads, proposed building developments or public rights of way. Most searches take around a fortnight, but they can take up to six weeks. It is usually possible if you need to act quickly to pay extra for a faster 'personal search'.

Second Mortgage

This additional mortgage on a mortgaged property is also known as a secured loan. The first mortgage takes legal priority, so the second mortgage is considered more of a risk for the lender, so the rates are likely to be higher.

Self Certification mortgage

This mortgage allows borrowers to certify their own earnings without having to supply documentation, such as wage slips. This option often suits the self-employed, seasonal wage earners, or anyone with irregular earnings such as, a contract worker or commission-based employee, or those in salaried employment with a supplementary source of income, an unsalaried company director, or varying other circumstances. A specialist mortgage lender can often be more flexible than the high street lenders with Self cert mortgages.

Shared Ownership

This government scheme enables you to buy property jointly with a Housing Association, a housing society or a non-profit making housing company, who will pay between 25 and 75 per cent of the cost. This scheme was developed to help those who could not afford to buy a home outright, and allows you to buy a share of the property and pay a rent on the remaining share. Up to four people can become joint owners, but all joint applicants must individually and jointly meet the eligibility criteria. The share you purchase is funded by a mortgage. It is possible to buy further shares and eventually own the property.

Stamp Duty

This tax imposes a percentage charge on the price of a property over £125,000 : up to £250,000 - 1%, up to £500,000 - 3%, £500,000 + - 4%

Tenants in Common

This is where two or more people own a property, but if one of the owners dies their share of the property passes to their next of kin not the other owner/s, unless there is a will stipulating otherwise. The terms are defined by the percentage of the property that each person owns.

Tracker Mortgage

The interest rate reflects the changes made by the Bank of England. It can be for only a few years or for the duration of the mortgage.

Title Deeds

The legal documents for a property that detail the owner, any restrictions on the use and rights of way.

Valuation

This basic survey is carried out by the mortgage lender and assesses whether the property is good security for the proposed mortgage loan. The buyer usually pays for this and receives a copy. Some lenders do not charge. This survey is suitable for a new house, but for any other property it is recommended you commission your own survey, such as the Homebuyer's survey & valuation