Mortgage Jargon Buster

Annual Percentage Rate (APR)

The APR is a figure that is used to compare different mortgages. Defined by law, it includes repayments on the loan plus any fees such as booking, arrangement or redemption fees. The APR shows the true cost of borrowing, and should appear on all mortgage illustrations and quotes.

Arrangement Fee

This is a charge levied by the lender to cover the costs of administering and reserving the funds for certain types of mortgage. It may be paid separately or added to the loan amount.

Base Rate

The rate of interest set by the Bank of England.

Broker's Fee

A fee charged by a broker for locating the most appropriate mortgage.

Capital

The amount of money either put into buying a property or the deposit placed on a property, also known as equity.

Completion

The completion date is the date on which your solicitor forwards the money from your lender to the solicitor of the vendor. It is the date that you become the legal owner of your new property.

Conveyancing

The legal procedure surrounding the transfer of ownership of a property between buyer and seller, typically carried out by a solicitor or licenced conveyancer.

Conveyancing Fee

The charge made by a solicitor or conveyancer for undertaking the legal procedures necessary for the transfer of ownership of a property.

Credit Check

The procedure by which a check is made on the credit history of a mortgage applicant, usually conducted by one of the large dedicated credit check agencies on behalf of a prospective lender. The check will include items such as credit card repayments, outstanding debts, arrears and County Court Judgements.

Credit History

A history of an individual's open and fully repaid debts. Checking a credit history helps a lender to assess the likelihood that a prospective borrower will maintain their mortgage repayments.

Credit Rating

An assessment of a person’s likelihood of keeping up - or otherwise - on the repayments on their loan. A credit rating is usually based on a person’s credit history.

Credit Reference Agency

A company that collects and stores financial and public records dealing with the payment history of a prospective borrower. Most lenders will employ a Credit Reference Agency to check your payment records as part of their assessment of your application.

Credit Report

A report prepared by a Credit Reference Agency and which details the credit history of an individual. The credit report will be used by a lender to help assess the applications of prospective borrowers.

Deed

The legal document that sets out your ownership or title to a property.

Early Redemption Fee

A charge levied by the lender as a penalty if a mortgage is paid off before the end of its term; also known as Early Redemption Penalty.

Equity

The amount of money either put into buying a property or the deposit placed on a property. Also known as capital.

Equity Release

The mortgage taken out on a home that is already fully owned, typically in order to make use of the capital tied up in it.

Exchange of contracts

The stage in the purchase process at which the buyer and seller confirm legally binding commitments to the sale, and agree on the terms and conditions of that sale.

Existing Liabilities

Your financial outgoings, such as loan repayments, regular fees or child maintenance before taking out a mortgage. Borrowers are obliged to disclose all such outgoings as part of the mortgage application process.

Independent Financial Advisor (IFA)

A person qualified and regulated to advise on financial products such as mortgages, insurance and investment vehicles.

Land Registration

The process of registering your title to an area of land with the Land Registry, typically handled by a solicitor.

Land Registry Fee

A charge levied by a solicitor to register ownership of an area of land with the Land Registry.

Loan to Value Ratio (LTV)

The proportion of the value of the property that the lender is prepared to loan. This can be up to 100 per cent.

Local Authority Search

A check carried out by a purchaser’s solicitor to ensure that the prospective property is not subject to any local authority issues such as road or town planning or any enforcement notices.

Mortgage Indemnity Guarantee (MIG)

An insurance policy taken out by a lender against any loss caused by a mortgage default. MIG is typically required for loans with an LTV of 90 per cent or higher. Also known as Mortgage Indemnity Fee and as Mortgage Indemnity Premium.

Rate

The annual rate, expressed as a percentage, of interest on a loan.

Redemption Penalty

A penalty levied by the lender when the borrower pays off a mortgage.

Remortgaging

The process whereby a new mortgage replaces an old one and both use the same property as security.

Repossession

The legal procedure by which a defaulting borrower is deprived of their interest in the mortgaged property, typically involving the forced sale of the property at public auction.

Self Certification

A mortgage intended for borrowers who are unable to categorically prove their income by conventional means such as payslips and fully audited accounts, but can provide alternative evidence and thereby demonstrate the level borrowing is affordable. Typically the lender will charge higher rates of interest, or require a larger deposit.

Shared Equity

A scheme whereby a borrower purchases part of a property and the other part is purchased by a third party, such as a housing corporation. A shared equity scheme differs from shared ownership in that no ongoing rent is paid to the third party. However, any future increases to a property’s value results in the third party’s share of equity in the property increasing proportionately. In other words, a borrower does not fully benefit from future increases in a property’s value.

Standard Variable Rate

The standard interest rate (SVR) set by lenders, and which is subject to increasing or decreasing at the discretion of the lender. The standard variable rate often applies at the end of any fixed, capped or discounted period.

Structural Survey

A survey of the condition of a property, undertaken by a qualified surveyor, and for which the surveyor is responsible. A structural survey is the most detailed - and most expensive - of the property reports available. Also known as a Building Survey.

Title Search

An investigation carried out by a conveyancer or solicitor, into the history of ownership of a property. The search will check for unpaid claims, restrictions or any other problems that may effect ownership.

Tracker

A type of mortgage whereby any changes in the rate of interest charged follow exactly (‘track’) another, specified, interest rate or index. Typically a tracker mortgage will track the Bank of England base rate.

Underpayment

Situation where repayments are reduced so that the mortgage is not repaid by the end of the agreed term. Some mortgages (flexible mortgages) allow for a specified level of underpayment.

Unencumbered

A property that has no loans or borrowings secured on it.

Valuation

A simple survey carried out on a property for the benefit of the lender. Because the report is carried out for the lender, if the surveyor makes a mistake you have no legal claim against him.

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