IIf you have never taken out a mortgage UK before, or even if you have, it
is likely that you will come across words or phrases that are perplexing or incomprehensible.
Have a quick browse through our glossary and help to clear up some of those clouds
of confusion.
| Advance |
this term is used to refer to the amount
of money that the lender permits you to borrow for your mortgage. |
| Agreement in principle |
if your mortgage is agreed in principle
by a lender it means that they are prepared to lend to you provided certain requirements
are met. |
| Application fee |
a charge imposed by a lender in order
to process a loan or mortgage application. |
| Arrangement fee |
lenders often impose arrangement fees
on mortgages which are usually owed on completion of the mortgage. This is a particularly
common occurrence with mortgages that have low interest rates. |
| Arrears |
this term refers to payments owed that
have been neglected. |
| Balance outstanding |
this term refers to the amount of a
loan that has not yet been paid off. |
| Balloon mortgage |
with this type of mortgage the monthly
payments are not sufficiently large to pay off the mortgage in its entirety by
the end of the term. This type of mortgage therefore requires a balloon
payment at the end of the term which will pay off the outstanding balance
of the mortgage. |
| Bank of England base rate |
the rate of interest that is set by
the Bank of England that is followed by most lenders in the UK. |
| Broker |
an intermediary that specialises in
the arrangement of financial products such as insurance or credit. Intermediaries
can either be tied to a panel of providers, or completely independent. |
| Building survey |
see structural survey. |
| Bi-weekly mortgage |
this type of mortgage requires repayment
once every two weeks, as opposed to once every month, and helps to clear the outstanding
balance quicker than usual. |
| Blanket mortgage |
a type of mortgage that is designed
to cover more than one property that are owned by the same individual. |
| Buy to let mortgage |
this term is used to refer to a mortgage
that is taken out in order to buy a property that is bought with the intention
to be let. The rent received from the property’s tenants will help to repay
the mortgage. |
| Capped mortgage |
the interest rate of this type of mortgage
is guaranteed not to rise beyond a designated level for a certain period of time. |
| Cashback mortgage |
this type of mortgage provides the borrower with
a cash percentage or designated sum of the mortgage total, which is paid on completion. |
| Completion |
this term is used to refer to the last stage of
the mortgage process when either the conveyancer of solicitor dealing with the
mortgage can finally receive the mortgage funds through the lender. These funds
are then either used to cover the purchase price of the property or to repay the
existing mortgage (in the case of remortgaging). |
| Credit scoring |
carried out by credit reference agencies, credit
scoring is a means of determining the risks that a particular applicant represents.
By using a variety of different statistics the credit reference agency will produce
a credit report used by a lender in order make a decision on whether to grant
them credit. |
| Deed |
the mortgage deed details in full the mortgage agreement
between the lender and the borrower. |
| Deposit |
the mortgage deposit is the lump sum payment made by the
borrower that goes towards the total purchase cost of the property. It is usually
at least 5% of the total cost of the property, though this can vary considerably
from provider to provider. |
| First time buyer |
you are a first time buyer if your name has never
appeared on a property deed, regardless of whether the property was mortgaged
or not. |
| Fixed rate mortgage |
a fixed rate mortgage will guarantee the borrower
a pre-determined level of interest for a set period, after which the standard
variable rate will apply. |
| Guarantor |
if a borrower does not earn enough to cover their
own mortgage then in some cases a guarantor can be brought in. The guarantor is
a relative that agrees to undertake the borrower’s debts if it happens that
they are unable to repay the mortgage themselves. If you are considering becoming
a guarantor then it is vital that you understand your responsibilities thoroughly. |
| Interest only mortgage |
this type of mortgage is one in which only the interest
is paid on the amount borrowed during the term of the loan. The remainder of the
sum is then paid off at the end of the mortgage using the capital derived from
an investment arranged for that purpose. |
| Let to buy mortgage |
a type of mortgage designed to cater for those who
wish to let their present home and buy another. |
| Monthly payment |
the agreed mortgage repayment that the borrower
makes every month for the entire term of the mortgage. |
| Mortgage |
a mortgage is a loan taken out in order to purchase
a property. The loan is secured against the property that it funds. |
| Mortgage code |
a voluntary code adopted by mortgage lenders and
intermediaries in the UK. The Mortgage Code Compliance Board works towards making
sure that consumers have all the information that they need as well as the protection
that they require. |
| Negative equity |
negative equity can happen with a mortgage when
the outstanding balance is greater than the actual value of the property. This
can occur when a large amount is borrowed and house prices fall. |
| Net income |
this term is used to refer to the total income after
all outgoings have been deducted. |
| Overpayment |
this term is used to refer to the process of repaying
a mortgage earlier than the agreed term. Often lenders will impose a penalty in
the case of overpayment. |
| Redemption penalty |
this is becoming a less regular occurrence than
it once was, but is still applicable to many mortgage deals available today. The
redemption penalty is a fee that is sometimes levied if a borrower repays or switches
mortgage providers within a certain period of time. |
| Remortgage |
a mortgage procured for the purpose of paying back
a mortgage that has already been taken out with a previous lender. In other words,
you swap lenders but do not move house. A remortgage is useful is releasing equity from your home. |
| Repayment mortgage |
a mortgage where the monthly repayments work towards
paying off both the interest and capital parts of the mortgage. At the end of
the term, if all payments have been made as arranged, nothing will be owed on
the mortgage. |
| Right to buy |
this phrase is most often used in conjunction with
council tenants who have been renting a property for a particular length of time
and are therefore entitled to purchase that property at a discounted rate. A
right to buy mortgage is a mortgage procured for this purpose. |
| Self-build mortgage |
a type of mortgage that is designed to cater for
people who are planning to build their own property. Unlike regular mortgages,
this type of mortgage is usually delivered in instalments as the building process
advances. |
| Structural survey |
a structural survey is a report drawn up by a surveyor
for the prospective buyer of a property, outlining the structural condition and
quality of a building. |
| Term |
the amount of time over which you have agreed to
pay off the mortgage, usually about twenty-five years. |
| Tracker mortgage |
These types of mortgage rise and fall with the base
rate set by the Bank of England, and are pegged to it. Tracker mortgages will
accrue interest at a certain percentage above the base rate. |
| Variable rate |
an interest rate which is not fixed but instead
rises and falls in line with economy changes. |
