Mortgage Dictionary - Welcome to our Mortgage jargon buster

Below is our mortgage dictionary. This jargon buster will aid you in the mortgage process.

A

APR - Annual Percentage Rate. When comparing different mortgage rates it’s a good idea to check the APR as it will tell you the interest you’ll have to pay. The APR will also notify you how long your repayments will last for.

Arrangement fee - When you set up your mortgage sometimes the lender will charge you a fee in order to process your mortgage, this is known as an arrangement fee.

B

Bank of England base rate - An easy way to express this mortgage dictionary term is, for example, have you ever watched the news and the newsreader has said “the level of interest rates for October will be set at 2.5 %”, well, this is known as “the base rate”. Therefore, if you have a variable rate mortgage, the interest rate you are charged is pinned to this “base rate”. That is why when the interest rates change so do your mortgage repayments.

The difference between the Bank of England base rate and the rate you’re charged is basically the banks profit. For example if the base rate is set at 2.5 % and the bank – on the onset of your mortgage repayments – charge you an interest rate of 7 %, then they’ll make a profit of 4.5%. Therefore the reason why banks like to charge a variable rate is because they can pass on the risk of base rate fluctuations on to you, the borrower, thus ensuring they always have that 4.5% cushion.

Building survey - This is when you property is looked at by a qualified technician, the result of which is the building survey. It’s basically a report outlining the current state of the property.

Buy-to-let mortgage - This is a unique rate for property which will then be let to tenants.

C

Capped rate - This mortgage dictionary term can be described as a sort of safety valve that is put on your mortgage. The cap is placed on your mortgage for a set period of time, during which, it will protect you from rising interest rates whilst allowing you to benefit from falling interest rates.

Cashback - Although not all lenders offer this facility it is becoming more and more popular. It is where, under the terms of some mortgage agreements, you, the borrower will receive a cash lump sum, which you’ll be able to spend on anything you like.

CAT standard mortgagesThis mortgage glossary acronym stands for fair Charges, easy Access and decent Terms. These are standards which have been recently set up by the government in order to help people pinpoint mortgages which reach minimum standards. – For more information on these please click here

Completion - This is the term used when the property has finally been mad legally yours.

Conclusion of Missives - This mortgage glossary term is generally used in Scotland in basically is the exchanging of contracts.

Contents insurance - This is a policy which is taken out to insure the contents of your home from being damaged or stolen.

Conveyancer - This is the person who handles all the big and small details of the mortgage process and is usually undertaken by a solicitor or a qualified conveyancer.

Conveyancing - This mortgage dictionary term is basically the technical name given to the process of buying and selling your home.

Credit score/scoring - A credit score is a standard in which the lender attaches to you, to help them assess whether or not you are a suitable for mortgage.

The credit scoring part is the process of obtaining the credit score.

Current Account Mortgage - This mortgage glossary term refers to a mortgage which is flexible in nature where a bank account is attached to the mortgage account and on a daily basis the money in this account is offset against the mortgage.

D

Daily interest - This is a way of calculating and charging interest on a day-to-day basis. This means that the lender will take into accounts changes in the interest rates and therefore the amount you owe, daily.

Deposit - This mortgage glossary term refers to the money in which you have to raise and pay over to the lender as part of the initial contribution in buying your home.

Disbursements - This is a statement you’ll receive containing the breakdown of all the individual costs of the home buying process i.e. the conveyance fees.

Discharge fee - When you have finished paying of your mortgage some lenders will have to be paid one last fee before they will release the hold they have over the property.

E

Early repayment charge - This where you’ll have to pay a fee if certain conditions arise, which is a called an early payment fee. This may arise; if, for example you pay off part or your entire mortgage off early.

Equity - This piece of terminology is one of the key words when discussing mortgages. It basically refers to the difference between the amount you still have to pay on your mortgage and the current value of your property.

F

Fixed rate - This is where, over a stated period of time the interests rates have been fixed. This means the risk attached to rising interest rates is bi-passed. However if interests rates are lowered by the Bank of England then you won’t be able to take advantage of these lower rates.

Freehold - This is a legal term which means you own the property outright along with the land it stands on.

G

Guarantor - This mortgage glossary refers to a person who will have to repay the mortgage if for any reason you stop or fail to pay it.

H

Home insurance - it’s basically the umbrella under which buildings and contents insurance come.

I

Initial disclosure document - This is basically the outline of the service you’ll receive from the lender and is designed to help you make an informed choice of whether or not to use that lender.

Interest only mortgage - This is where you’ll pay the lender the interest only. No capital is paid off until the mortgage period ends. In order to ensure you have the money to do this it will be sometimes necessary to make payments into an ISA or an endowment policy, for example. Click here to calculate your interest only mortgage.

J

K

Key Facts Illustration - This outlines the terms under which the mortgage is going to be taken out. Every lender is required to lay this out in the same way in order that comparisons can be easily made.

L

Land registry fee - This is a fee paid on your behalf by the conveyancer in order to register your details with the Land Registry once who have bought your property.

Leasehold - This mortgage definition for a leasehold basically refers to an agreement where you own the property for a set period of time, after which the property is placed back in the hands of the freeholder.

Life Assurance - This is insurance placed on the life of an individual, and can run in conjunction with the mortgage. This means that the mortgage repayments die along with borrower i.e. the repayments will stop and the mortgage will be paid up in full by the Life Assurance providers.

Loan to value - This is a ratio between the value of the loan which is taken out and the value of the property. Therefore if the loan taken out is £75,000 and the value of your home is £100,000 the Loan to Value is 75%. This will help the lender decide whether or not a premium should be charged on the repayments and relates to the “higher lending charged” as outline above.

Local authority search - This is a study undertaken by the conveyancer, in which they’ll find out, on your behalf, about any changes which may affect your property, such as planning permission.

M

Mortgage deed - It’s the document which establishes the mortgage on your property.

Mortgage term - The period of time in which the mortgage will be paid back over.

N

Negative equity - This mortgage glossary term refers to the situation where the money you have left to repay is greater than the value of your home. This can sometimes happen if the value of your house depreciates for whatever reason.

O

P

Portability - This is a mortgage which is portable in nature. This type a mortgage is usually the norm these days and allows you to move house with out being penalized for transfer the mortgage to the new house.

Q

R

Re-mortgaging - This where you take out a mortgage with a different lender and use the money to pay off your original mortgage. This is normally done when you need to raise capital relatively quickly.

Repayment Administration Fee - This takes care of any administration cost which you incur when you close your mortgage account after you have made the final repayment on your mortgage.

Repayment mortgage - This is where the repayments you make on your mortgage not only cover the interest payable on your mortgage but pay back the mortgage too.

Retention - This mortgage glossary term refers to the freezing of the mortgage repayments until any repairs to your property have been completed.

S

Stamp Duty Land Tax - When you buy a house worth more than £125,000 you’ll have to pay the Government a tax based on the cost of the property.

T

Tracker rate - This term relates to the Bank of England base rate (see above). This means that any changes in the base rate are passed on to you.

U

V

W

X

Y

Z