A

Arrears

If you go into arrears it means that you have ‘defaulted’ at least once on your mortgage repayments. You will owe a sum of money ‘in arrears’ to your lender. If you find yourself in this situation you should contact your mortgage lender to seek help as soon as possible.

Agreement in Principle (AIP)

An AIP is a statement from a lender indicating how much they might be willing to lend you based on your financial situation. It is not a guarantee that a lender will lend you the amount stated, but it can be helpful when house hunting as it shows sellers you’re serious about buying. It can also help make the mortgage application process quicker when you put in an offer.

APR (Annual Percentage Rate)

APR is a broad measure of the total cost of borrowing money over a year. It not only factors in interest, but also any fees (such as administration or mortgage broker fees) and other charges you have to pay to secure the loan. It can help you see a true comparison of mortgages, incorporating all the costs – not just interest rates.

Arrangement Fee

This is a fee charged by lenders for setting up your mortgage. It can either be paid upfront or added to your mortgage balance. Please note that if it is added to your mortgage balance, you will pay interest on it.

 

B

Bank of England Base Rate

The official bank rate (also called the Bank of England base rate or BOEBR) is the interest rate that the Bank of England charges Banks for secured overnight lending. It is the British Government’s key interest rate for enacting monetary policy

Buy to let

A buy to let property is purchased with the sole intention of renting it out to a tenant as an investment. Some mortgage lenders offer special ‘buy to let’ mortgage deals for this purpose.

Booking Fee

This is charged by the mortgage lender for the administration and process or setting up your mortgage.

Broker

A mortgage specialist that will recommend (advice) a mortgage after assessing your personal circumstances. They will also complete the application and deal with the lender on your behalf.

C

Capital

The amount you have borrowed on the mortgage, on which interest will be charged.

Completion

Completion is the final stage of the homebuying process, where the property legally changes ownership. Your solicitor will have requested the funds from your mortgage lender ahead of this day, so they are available to complete the transaction.

Conveyancing

Conveyancing is the legal process of transferring property ownership from the seller to the buyer. It involves preparing and handling all the requisite legal documents and can be managed by a solicitor or licensed conveyancer.

Cashback Mortgage

A cashback mortgage gives the borrower a one-off lump sum payment usually paid on completion, although some lender may pay after completion.

County Court Judgement (CCJ)

If an individual, company, or organisation takes court action against you (saying you owe them money) and the court agrees, you might get a county court judgment (CCJ) that can stay on your credit history for 6 years, letting other lenders know that you have previously missed payments.

This could narrow down your choice of lenders , however, some lenders will accept CCJ’s.

Credit Score

Your credit score gives lenders an idea as to how well you manage money and the level of risk they are taking if they grant the mortgage. The lower your  credit score, the higher the risk lenders will consider you to be.

D

Defaulting

If you cannot meet your minimum required monthly mortgage repayment and go into arrears on your mortgage, this is known as ‘defaulting’. If this happens you should speak to your mortgage lender about how to remedy the situation and there are also Government schemes designed to help people whose homes are at risk from repossession.

Deposit

The deposit is the amount of money you put down upfront towards the purchase of a property. A higher deposit may result in a lower interest rate on your mortgage

Decision in Principle (DIP)

Also known as an Agreement in Principle. This is a document from your lender confirming that you can borrow a certain amount and can be used as proof that you can afford to buy a property.

Debt to income ratio (DTI)

Your DTI tells you how much debt you have in relation to your income and is calculated by dividing your total amount of recurring debt by your monthly income and then multiplying the answer by 100.

E

Early Repayment Charge (ERC)

An ERC is a penalty you might have to pay if you repay your mortgage earlier than agreed, typically during a fixed or discounted rate period. Some mortgages will allow you to overpay by a certain percentage without triggering the ERC (typically 10%), which can help reduce the amount of interest you pay and bring down your mortgage term.

Equity

The equity is the portion of the property’s value that you own outright, calculated as the difference between the property’s market value and the amount you still owe on your mortgage.

Exchange

When both parties swap and sign the contracts. The point where you as the buyer will be asked to put down your deposit. This is a crucial stage of buying a home. Once the contracts are signed, you will be legally bound to buy the home.

F

Fixed-Rate Mortgage

With a fixed-rate mortgage, your interest rate stays the same for a set period, usually between two to five years. This means your monthly payments remain stable, regardless of changes in Bank Rate. This gives homeowners welcome financial stability, but does mean they would miss out on lower payments if interest rates drop during the fixed period.

Freehold

You own both the property and the land it stands on.

First-time buyer

If you’ve never owned property before  you’re a first-time buyer. Some lenders will class you as a first-time buyer is you haven’t owned a property in the last 3 years for lending purposes only.

First Homes Scheme

If you’re a first-time buyer, you may be able to buy a home for 30% to 50% less than its market value. The home must be your only or main residence.

This offer is called the First Homes scheme.

The home can be:

• a new home built by a developer
• a home you buy through an estate agent, which someone else bought before through the scheme

The First Homes scheme is only available in England. Councils may set local eligibility criteria.

G

Guarantor

A guarantor can guarantee the mortgage repayments for you if the lender determines you are at high risk of not making the payments.

Gifted Deposit

Where the deposit you’re using to purchase your property is not from your own sources but given to you by a relative or friend.

Ground Rent

This is usually charged to homeowners on a leasehold property, typically for flats or new-build properties which require maintenance to shared areas like lifts, car parks, and communal gardens. It’s payable by the leaseholder to the freeholder.

Home Buyers Report

A homebuyers report, also known as an RICS Level 2 survey, provides a detailed assessment of a property’s condition and may highlight potential issues that may need further investigation.

I

Index linked

Where the level of cover provided under a policy increases over time – this is often used to ‘inflation proof’ cover and often linked to the Retail Price Index.

Interest

The money you are charged for borrowing.

Interest-Only Mortgage

With an interest-only mortgage, you only pay back the interest on the loan each month. At the end of the term, you must repay the capital, often through savings or investments.

Intermediary

A mortgage adviser who can help you arrange a mortgage, also known as a mortgage broker. They have access to a wide range of lenders and search for the best suited to deal for the borrower.

Individual Voluntary Arrangement (IVA)

A  IVA is a court-approved agreement that requires you to repay your debt over an agreed period of time. This may be an alternative to bankruptcy.

J

Joint Life

Where a life insurance policy is covering two individuals.

Joint Life 1st Death

The sum assured is paid on the death of whichever of the two lives dies first. In this case, the two lives assured are normally also joint policy holders, and the sum assured would be paid direct to the policy holder.

L

Land Registry Fee

A fee paid to the Land Registry to register ownership of a property.

Life assured

The person on whose life or death the payment of the sum assured depends. The life assured is not always the same person as the policy holder.

Leasehold

This is where you own the property but not the land it is built on for a specific number of years.
Flats are usually owned on a leasehold basis.

Lender

A mortgage lender is the organisation that provides you with the monies for a mortgage. Usually this is a bank or a building society.

Loan-to-Value (LTV)

LTV is a percentage figure representing the size of your mortgage compared to the value of the property. For example, a £150,000 mortgage on a £200,000 property would have an LTV of 75%. Lower LTV ratios typically attract better mortgage rates.

Land Registry

The official body responsible for maintaining details of property ownership.

M

Mortgage Term

This is the length of time over which your mortgage is to be repaid. Terms typically range from 10 to 35 years, although 40-year terms are now becoming more common.

Mortgage deed

The legal agreement which gives the lender a legal right to the property.

Mortgage offer

The formal offer of a mortgage from a lender called a Mortgage Offer.

Market value

Market value is an opinion of what a property would sell for in a competitive market based on the features and benefits of that property (the value).

Monthly Repayments

The amount you pay your mortgage lender each month. If you’re on a repayment mortgage the payment will cover a percentage of your capital plus interest.

Mortgage Agreement in Principle (AIP)

A mortgage in principle is a conditional offer from a lender that states you may be accepted for an agreed amount of money on a mortgage.  this can also be known as a decision in Principle.

N

New Build

This is a building that has recently been built or is in the process of being built. Usually designed and sold by housing developers. The property will be classed a s a new build property if it has not been occupied before or if it has been occupied for 12 months or less.

O

Offset mortgages

Your main current account, savings account or both are linked to your mortgage. Each month, the amount in these accounts is offset against your outstanding mortgage before working out the interest you owe. You are unlikely to earn interest on your savings which are offset against your mortgage.

Overpayments

Overpayments are additional payments you can make towards your mortgage balance over and above the monthly payments stipulated in your mortgage contract. This can potentially reduce the term of your mortgage and save on interest.

P

Policy holder

The policy holder is the owner of the policy and responsible for paying the premiums. The sum assured will be paid to the policy holder unless other arrangements are made.

Porting

Porting allows you to transfer your existing mortgage to a new property without paying an early repayment charge, often retaining the same terms and conditions. It isn’t always possible to port your mortgage; we can look into it on your behalf and let you know whether it is an option for you.

R

Remortgaging

Remortgaging involves switching your mortgage to a new deal, either with your existing lender or a new one. It’s often done to get a better interest rate or to release cash from your property (for example, for home improvements).

Repayment Mortgage

When you make your monthly repayments you pay off the mortgage interest and part of the capital of your loan each month. Unless you miss any repayments, you are guaranteed to have paid off the mortgage by the end of the term.

Redemption

Paying off a mortgage.

Renewable premiums

Where the premium is subject to review and potential increases over the term of the policy.

Renewable Term Assurance

A term assurance of life assurance policy that contains an option, which can be exercised at the end of term, to renew the policy for the same sum assured without further medical evidence.

Reservation fees

This is a ‘front end’ charge levied by several home lenders. The idea is you’re asked to pay the fee (typically £100 to £300) to secure the funds you are intending to borrow. It is sometimes described as an administration or booking fee.

Right to Buy

This was originally intended to enable tenants of council houses to buy the homes they lived in, but is now being opened up to housing association tenants too.

S

Stamp Duty

Stamp Duty Land Tax (SDLT) is a tax you pay when purchasing a property exceeding certain value in England and Northern Ireland. The Scottish and Welsh equivalents are Land and Buildings.

Shared ownership

Shared ownership schemes are designed to allow people who would otherwise be unable to get a foot on the property ladder to do so. The home buyer will enter into an agreement, usually with a local housing association, which sees them take out a mortgage on a share of the property and pay rent on the remainder. The portion that is owned will vary depending on the circumstances.

Subprime/non-conforming

A sub-prime mortgage, also known as a non-conforming mortgage, is geared towards those with a less than perfect credit history. This could be bankruptcy or county court judgements (CCJs), or you could have fallen into arrears in the past. These products, because of their circumstances, have higher rates, but mean that those who couldn’t otherwise obtain finance for their property purchase can do so. It is now much harder to get a mortgage if you have had credit problems than before the credit crunch.

Subject to survey and contract

Wording included in any agreement before the exchange of contracts. This wording allows the seller or buyer to withdraw from the property sale.

Service Charge

This is the fee paid to a managing agent for the ongoing maintenance of a leasehold property is usually higher for flats that have more shared areas like lifts, shared gardens, or hallways.

Standard Variable Rate (SVR)

The SVR is your lender’s default interest rate, to which your mortgage will revert once a fixed, tracker, or discount deal comes to an end. It can change at any time, usually following changes in Bank Rate and is typically higher than rates available through mortgage deals.

T

Terminal illness cover

An option included in life assurance policies whereby the life company will pay out if the policy holder is terminally ill – this should not be confused with Critical Illness Cover (CIC).

Tracker Mortgage

A tracker mortgage has an interest rate that usually follows the Bank of England’s Bank Rate, plus a set percentage. Your payments will increase or decrease in line with Bank Rate changes.

Trust

If a policy is written in trust, then you can help determine who should benefit from the policy when it is eventually paid.

U

Underwriter

The role of the underwriter is to look at individuals based on knowledge of that individual – e.g. medical history, hereditary illnesses, occupation, sporting activities. For the life assurance, they will assess the risk and decide whether to offer cover and if so at what price. For mortgages they will decide whether to lend.

V

Valuation Survey

A valuation survey can be carried out to ensure the property is worth the price you’re paying. It is different from a more detailed homebuyer’s report or structural survey; unlike these, a valuation survey will not provide insights on the property’s condition or structural integrity.

Variable-Rate Mortgage

The interest rate you’re charged on a variable rate mortgage can change (go up or down)  in line with inflation or changes to the BOE base rate.

Utmost good faith

Is a minimum standard that requires both the parties (life company and life assured) to act honestly towards each other and to not mislead or refrain from providing critical information to the other.

W

Waiver of premium (WOP)

Is an additional option that can be taken out with most forms for protection. The insurance company will pay the premiums due on a life assurance policy if the policy holder is unable to do so because they are unable to work due to accident or illness. The insurance company will pay the premiums for you until you are able to return to work.

Will

If you do not make a will then you will die Intestate and will lose control over the proceeds of your estate.

Finding a mortgage – how we can help

We search the market on your behalf and recommend the most suitable deal for  your circumstances, to fit your financial situation and property goals.

Independent advice – we provide unbiased advice on a range of mortgage
products from various lenders, ensuring you get the most suitable deal for your
individual circumstances. We also have access to deals you wouldn’t be able to find
on your own.

Market insight – we have in-depth knowledge of the mortgage market and can
help you understand the pros and cons of different mortgage types, such as fixedrate, variable-rate, and tracker mortgages. We are also able to adapt quickly as the
mortgage market changes.

Application support – our experience means we know which lenders are best
suited to your particular circumstances. We help you to prepare your mortgage
application, increasing your chances of approval by presenting your financial
situation in the best light.