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Bestmortgage4u

Bestmortgage4u

Jargon Buster

APR - Annual Percentage Rate

APR is the commonly used acronym for the Annual Percentage Rate of the total charge for credit: this is the standard way (as laid down by the Consumer Credit Act 1974 and the Financial Conduct Authority) of working out the true interest rate that will be charged over the lifetime of the loan.

All lenders are legally obliged to show the APR alongside quoted interest rates for each Mortgage Term. This enables you, the potential borrower, to accurately compare mortgages from different lenders. This will allow you to compare the true cost of borrowing over the term you have chosen

Arrangement Fees

These are charged on certain products when arranging a Mortgage.

Bank of England Base Rate

The Bank of England Base Rate is the interest rate the Bank of England charges Banks and Building Societies for secured overnight lending.  This base rate will in turn affect the interest rate that Banks and Building Societies charge their clients when offering mortgages.

Bridging Loan

This is a temporary loan that enables you to complete the purchase of your property before completing the sale of your existing home. A typical example of when you may need one would be if you wanted to buy a second property before you had sold your first.

Buy to Let

This is a type of mortgage used to buy property that will be used solely for the purposes of renting to a third party i.e. you as the owner never intend to live there.

Capital and Interest

This simply is another term used to describe Capital Repayment, which is described below.

Capital Repayment

This commonly means that each month’s mortgage repayment comprises paying back a portion of the capital together with paying interest on the outstanding mortgage.  As you repay more capital and provided interest rates do not increase, your mortgage repayment will remain the same but the ratio of capital and interest will change as the term progresses.  Therefore by the end of the mortgage term, assuming all mortgage repayments are made, you have paid off the balance in full and you therefore own your property outright.

Capped Rate Mortgage

This is a type of loan where a maximum rate of interest is set at the start of the mortgage term. During the capped rate period the interest rate can fall below the capped rate but will never rise above it. What this means for you as the borrower, is that you know how high the mortgage repayments could rise but are guaranteed the rate will not go any higher, therefore making home loan budgeting easier.

CAT Mortgage (Charges Access Terms)

This was a mortgage that complies with specific guidelines laid down by the Government who wanted to set out basic and transparent conditions for all mortgage products. Particularly in terms of the charges applied; the flexibility of the mortgage and the terms applicable to it. The aim was to make mortgages more straightforward and easier to understand, however these mortgages are currently not available.

Commercial Mortgage

This is a mortgage used by businesses for the purpose of purchasing their own business premises or for financing other commercial premises.

Completion

This is the point at which the money to buy your new property is released to the seller, ownership is then transferred to you and you become a proud home owner!

Conveyancing

This is the legal process involved when buying or selling property. Most people use a solicitor or a licensed conveyancer when buying or selling a property because there is quite a lot of detailed work to do when transferring ownership of a property. If you are obtaining a mortgage your lender will insist that you use a solicitor.

Credit Problems

These are mortgages specifically designed for those borrowers who have a history of adverse credit e.g CCJs, Defaults, Mortgage Arrears, Repossessions and Bankruptcy.

Decreasing Term Assurance

Decreasing Term Life Insurance (sometimes called Mortgage Protection Assurance) is where the sum assured decreases over the term of the policy. This type of policy is typically purchased by people who want to protect their repayment mortgage in the event of death. As the outstanding mortgage balance reduces every year, so does the level of insurance. The purpose of this type of plan is to repay any capital you owe if you died during the mortgage term.

Deposit

A deposit is the term used for the monies that you use as a down payment on a property that you intend to buy.

Disbursements

These are the fees your solicitor has to pay on your behalf (e.g. Stamp Duty Land Tax (SDLT), Land Registry Fees and Search Fees), which will be added to your conveyancing bill from the solicitor in respect of the buying and/or selling of a property.

Discounted Rate

A discounted rate mortgage offers you reduced repayments for a given term. This interest rate is discounted from the lender’s standard variable rate, for an agreed period from the start of the mortgage. What this means for you the borrower is that you are guaranteed to pay a set amount below the standard variable rate for the period of the discount. The standard rate can go up and down, but the discount amount remains fixed during the agreed period.

Early Repayment Charge

If you pay off your mortgage in full or make overpayments in excess of the amount agreed by your lender specified in your mortgage offer, you may be asked to pay an early repayment charge by your lender.

Endowment Assurance

This is a form of life assurance savings scheme that pays out a lump sum at the end of an agreed period. If the Endowment is linked to an interest only mortgage, the lump sum from the endowment policy is designed to repay the mortgage, subject to investment returns.

Endowment Mortgage

An endowment mortgage is a type of interest only mortgage designed to repay the mortgage, subject to investment returns. They usually have two parts: the first is a monthly interest payment to the mortgage lender and the second, a monthly payment into an endowment policy. What this means is that you are only paying interest on the loan during the term on the mortgage so the balance of your mortgage never changes. The mortgage is designed to be repaid at the end of the term with the proceeds of the endowment policy.  It is important to realise that there are no guarantees on these types of policies, as it is dependent on investment return.

Equity

This is the positive difference between the value of your property and the amount of any outstanding loans secured against it. For example if your home was worth £300,000 and the mortgage on your property was £100,000 your equity would be £200,000.

Exchange of Contracts

This is the stage in England, Wales and N.Ireland when both the buyer and seller have legally committed themselves to the sale and purchase of a property and are legally bound to complete the transfer.

First Time Buyer

This is the term used as a description of a person taking out their very first mortgage.

First Time Buyer Mortgage

There are mortgages available exclusively for first time buyers and can have some special features such as; assistance towards legal fees and free valuations.

Fixed Rate

This is a mortgage rate where the interest rate is agreed at the start of the mortgage and will not change during the term of the fixed rate. So you know exactly how much your repayment will be each month during the fixed rate period.

Freehold

When you have the freehold on a property this means that you solely own the property and the land it is situated on.

Gazumping

This rather unfortunate state of affairs occurs when another potential buyer puts in a higher offer for a property after your offer on the same property has been accepted. This means that your offer is then rejected. This can happen because under English law, the seller is not legally committed to go ahead with the sale until the point at which contracts are exchanged.

Higher Lending Charge

In some cases a Higher Lending Charge may be payable.  This charge acts like an insurance for the lender in the event of the property being repossessed and subsequently sold resulting in a shortfall of the outstanding balance of the mortgage.

Interest Charges

These are the charges made on a loan, calculated as a percentage of the total amount that you borrowed on your mortgage.

Interest Only

There are two types of mortgage, interest only or capital repayment. With an interest only mortgage the balance of your mortgage stays the same throughout the mortgage term. Interest and sometimes a premium in a suitable investment vehicle are paid monthly. At the end of the term, the proceeds from the investment vehicle are intended to repay the mortgage. This amount will depend on the performance of the investment vehicle. If you do choose an interest only mortgage you are responsible for ensuring that you have sufficient funds available to repay your mortgage at the end of the term.

Leasehold

This is a system used mainly in England where you own the property for a set period before handing back ownership to the freeholder. When you purchase a lease on a property you have the right to reside in the property until the expiry of the leasehold term.  On expiry of the term the property passes back to the freeholder. A lease document will set out the details of obligations of the leaseholder for repairs and maintenance of the property.

Legal Fees

These are the fees charged by a solicitor or other qualified individual to carry out the legal work associated with buying a property.

Level Term Assurance

This is a life assurance policy that could be used to repay your mortgage should you die during the term of the mortgage. The amount selected is the balance of your mortgage at the start of your mortgage and runs concurrently with the term of the mortgage. Should you survive, there will be no investment return. These policies are sometimes used to cover Interest Only Mortgages where the capital balance does not decrease.  They can also be used as a method of providing a lump sum for family protection purposes in the event of death.  This lump sum can then be invested to provide an income for the family after the death of the life assured.

MIRAS

This was a government scheme that was discontinued in April 2001 that allowed you to claim tax relief on the interest you paid on your mortgage.

Mortgage

This is the term used for the type of loan used to buy a property.

Mortgagee

This is the creditor or lender i.e. your bank or building society, that lends you the money for your mortgage.

Mortgagor

This is the person who borrows money, usually to buy a property.

Mortgage Rate

This is the prevailing interest rate that is charged to the borrower.

Negative Equity

This situation occurs when a mortgage is greater than the actual value of the property. This can occur due to a decline in the value of the property after it is purchased. For example, if the mortgage on the property is £300,000 but the value of the property is only £270,000 then a negative equity situation has occurred.

Offer of Loan

This is the formal document stating the terms of the mortgage product the lender has agreed to offer after application.

Pension Plan Mortgage

This is a type of interest only mortgage where the loan is designed to be repaid by a lump sum from a pension plan on retirement. If you have a personal pension you can link your mortgage loan to a pension plan. At the end of the mortgage term, part of the tax-free proceeds (the tax free lump sum) of the pension fund is used to repay the capital outstanding. It is worth noting however, that a pension plan mortgage will reduce the amount available to you as a pension in retirement. Having paid off your mortgage with your pension fund, the remainder of your pot of money could then be used to provide you with retirement income.  These have proved attractive in the past because tax relief has been available on your pension plan contributions.

Remortgaging

This is the term used when moving your mortgage from one lender to another without actually moving house. You may do this to save money. This might be possible by switching to another mortgage product with the same lender or by switching your mortgage to a competitor. But remember, if you move lenders the saving you make on the interest rate you pay may be partially or wholly eaten up by the transaction charges associated with moving your loan. So, if you are thinking about remortgaging it is advisable to do your sums carefully and take good advice from a mortgage adviser. If you do not do your homework properly you could face the equivalent of several months’ mortgage repayments which would effectively wipe out any of the benefits of remortgaging.

Right to Buy Mortgages

These are mortgages specifically tailored for public sector tenants who qualify to buy their home under the Government’s Right to Buy Scheme. You may be eligible to buy your council home if you are a secure tenant of either: a London Borough Council; a district council; a non-charitable housing association; or a housing action trust. Discounted rates are usually offered to council tenants for their homes. So if you are a council tenant wanting to buy your home, the rate you will pay will depend upon how long you have lived there. The amount of discount you will receive is roughly in proportion to the number of years you have been paying rent.

Searches

These are the enquiries made, usually by your solicitor at the Land Registry, the Land Charges Register and Local Authorities to ensure there is nothing to cause concern about the title to the land and the property you intend to buy.

Self Build Scheme

This is a package for people looking to build their home themselves.

Stamp Duty

You pay Stamp Duty Land Tax (SDLT) on increasing portions of the property price above £125,000 when you buy residential property.

The following table explains the levels payable:

Up to £125,000 Nil
The next £125,000 (the portion from £125,001 to £250,000)  2 %
The next £675,000 (the portion from £250,001 to £925,000) 5 %
The next £575,000 (the portion from £925,001 to £1.5 million) 10 %
The remaining amount (the portion above £1.5 million) 12 %

Subject To Contract

This is the provisional agreement made between the buyer and the seller, before contracts on a property are actually exchanged. This allows either side to back out of the agreed sale without any financial penalty.

Survey

This is an evaluation of the condition and value of a property, carried out by an approved surveyor and paid for by the buyer.

Term

This is the length of time over which your mortgage loan is repaid.

Title

This is the legal right to the ownership of your property.

Title Deeds

These are the legal documents showing the ownership of your property.

Tracker Mortgage

This is a variable rate mortgage where the interest rate is linked directly to the Bank of England Base Rate. Any upward or downward movement in the Base Rate will result in your tracker mortgage repayments increasing or decreasing accordingly.

Transfer Deed

This is the legal document which transfers ownership of registered land from the seller to the buyer.

Valuation

This is an independent assessment of the value of a property carried out by an approved surveyor and paid for by you, the client. All lenders insist that a valuation is carried out on a property. The valuation is used by the bank or building society to decide how much they are willing to lend you.  There are more detailed surveys that can be conducted and advice should be sought as to the best type of survey for the property being purchased.

Variable Rate

This rate can go down as well as up during the course of your mortgage and is usually based on The Bank of England Base Rate.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

 

A fee of £100 may be payable after an initial assessment in order to source you an appropriate mortgage. A fee of £200 is payable when we submit an application to a lender on your behalf. We will receive commission from the lender in addition to the fee you pay. We will obtain your agreement to proceed before any fees are payable. All fees are non-refundable.


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Intelligence, which is authorised and regulated by the Financial Conduct Authority under number 305330 in
respect of mortgage, insurance and consumer credit mediation activities only.


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