apr
Annual Percentage Rate of charge. The true rate of interest
charged on a loan taking into account the total cost of interest
and other charges e.g. brokers fees/legal fees. The calculation
is set out in statutory regulations.
(Life) Assurance
A Specific type of life insurance policy often linked with a
mortgage or loan. A portion of premium goes toward insuring
your life, and will pay off loan in the event of death. The
rest is invested and will pay a lump sum at the end of the term.
(Level Term) Assurance
Life assurance which pays out a lump sum if you die during the
term. Suitable for interest only loans as the amount owed on
the loan remains the same throughout the life of the loan.
Autoscore
The process of using specialised online credit search databases
to identify an applicants credit status.
(Mortgage/Finance) Broker
An intermediary who identifies, and places, customers requiring
a loan or mortgage etc. with a company (Lender) able to provide
it. The broker often carries out the administration to do with
processing the loan.
BSQ
BUILDING SOCIETY QUESTIONNAIRE: A questionnaire completed by
bank/building society or other lender providing details and
conduct of an applicant‘s mortgage account.
Cashback
A type of loan where the borrower is given back a sum of money
(usually a percentage of the loan). Used by lenders as an incentive
to promote their products.
CCJ
County Court Judgement. An order of a court against a debtor
to pay money owed.
Conveyancer
A person, used as an alternative to a solicitor, to carry out
the legal work involved in buying and/or selling a property.
Note: It should be checked that they are licensed to carry out
this function.
Discounted Rate
A discounted rate gives you a reduction of, for example, 2%
off the standard variable rate (SVR) for a specific period.
So, during this period should the SVR rise and fall, you will
still qualify for the discount and therefore pay a lower rate.
Double Insurance
Policies vary from lender to lender. Generally double insurance
offers protection against sickness, accident and redundancy
for the first and second wage earners. Cover is also available
for self employed borrowers and under certain circumstances
for non working partners. Details of the specific insurance
plan will accompany the lenders offer. We strongly recommend
that you consider some form of insurance protection, especially
in the case of secured loans and mortgages.
Exchange of Contracts
Agreement signed by house purchaser and vendor committing themselves
to the transaction. Once this has occurred a legally binding
contract is in existence and the purchaser must complete the
purchase within a specific period of time.
Emergency Home Assistance
An insurance policy that will provide a suitable tradesman to
effect a repair in the event of an unforeseen home emergency
e.g. a plumber for burst pipes, a roofer for lost tiles etc.
Endowment
A life assurance policy that is designed to produce a lump sum
to pay off an interest only mortgage. There are a number of
different kinds of endowment policies: 'with-profits', 'unit-linked'
etc.
Fixed Rate
The rate is fixed for a specific number of years, so you know
what your payments will be over that period. Following this
period, the rate will usually revert to the lender's standard
variable rate.
Flexible mortgages
A more recent innovation, these give various benefits which
usually include the ability to vary payments in line with your
circumstances. They may also allow you to take "payment
holidays" and to borrow back any overpayment you may have
made.
Freehold
Land / Property is owned outright by the Freeholder. Whether
the property is held on a lease or a freehold basis will be
identified in the deeds to the property.
IFA
Independent Financial Advisor.
(Term) Insurance
A life insurance policy often linked with a mortgage or loan.
The premium goes towards insuring your life, and will pay off
loan in the event of death. No benefits are received after the
policy expires.
Interest Only Mortgage
With this type of product, your monthly repayments will only
cover the interest element of the loan. You will typically set
up another repayment vehicle eg an endowment or ISA to repay
the capital element of the loan.
Income Replacement
An insurance policy that will provide an income in the event
of job loss or illness.
Leasehold
A leaseholder holds the title to land only for a finite term
i.e. the length of the lease upon payment of a consideration
e.g. rent.
Lender
The actual company that provides the finance to satisfy a loan
or mortgage request.
(Secured) Loan
A loan to be used for any purpose. The equity in the property
is put up as security against not paying the loan back.
(Unsecured) Loan
A loan to be used for any purpose. The credit rating or financial
position of the applicant is such that no security for the loan
is required.
LTV
Loan to value. This is the size of the loan or mortgage as a
percentage of the value of the property or price being paid
for the property e.g. A property valued at £50,000 with
a mortgage of £45,000 would have an LTV of 90%.
MCRI
Mortgage Code Register of Intermediaries. A register maintained
by the Council of Mortgage Lenders of the names of mortgage
brokers subscribing to the Mortgage Code.
MGI
Mortgage Guarantee Insurance. An insurance policy designed to
make good any shortfall between the amount owed on a mortgage
and the value of the mortgaged property. Provides a benefit
to the lender in the event of repossession resulting from non-payment.
MIG
Mortgage Indemnity Guarantee. See MGI
Mortgage
A loan to purchase a home where the property is used as security
in the event of non-payment of the mortgage.
Negative Equity
The situation where the amount owed on a mortgage exceeds the
value of the property.
No Insurance
Insurance is offered to provide peace of mind against life's
unexpected problems which invariably occur. Selecting "No
insurance" means that you are choosing not to protect your
proposed loan repayment in the event of you being unable to
work due to an accident, sickness or redundancy.
Offer of Advance
Sometimes informally known as a mortgage offer. This document
details the terms and conditions upon which the lender is prepared
to make a mortgage loan. The applicant must sign and return
a copy of the offer indicating their acceptance of the proposed
terms.
Office Copies
Copies of documents held at Land Registry showing ownership
and mortgages outstanding on a property.
Processing
The administration and paperwork related to a loan from the
time a completed application form is received through to completion
of the loan process.
(Capped) Rate
Usually for a set number of months/years where the interest
rate can go up and down but there is a maximum (capped) interest
rate which it can not go above.
(Variable) Rate
A rate of interest which may vary up or down during the lifetime
of a loan. The circumstances causing any change are outlined
in the loan conditions.
Remortgage
Loan taken out by a borrower to replace another one secured
on the same property. Typically taken out by borrowers switching
lenders to achieve a better rate.
Representatives
Local representatives (Reps) who are available, if required,
to pay home visits to help and advise in the completion of loan
applications.
Repayment Mortgage
With a repayment mortgage you pay part interest and part capital
repayments to the lender each month and in this way the capital
that you borrowed is reduced until the loan is repaid.
Retention
Sum of money retained from a mortgage pending completion of
improvements or repairs as stipulated by the Valuer.
RTB
A term associated with legislation that gives council house
tenants the Right to Buy their homes.
Redemption Penalties
When a loan is redeemed (paid off) early, either in full or
in part, many lenders will charge a fee. This particularly applies
to Fixed, Discounted or Capped rate loans or mortgages.
Sealing Fee
A charge made by lenders when a mortgage is paid off.
Second Charge
Mortgage ranking behind a first mortgage ie a second loan.
Second Mortgages
Company or building society who have registered a charge or
mortgage directly behind that of the first mortgages.
Secured Loan
Mortgage ranking behind a first mortgage ie a second loan.
Security
When a loan is taken out it is ‘secured‘ on a property,
the borrower agrees to the lender creating a charge over the
property; the deed makes reference to the rights and obligations
of both parties as detailed in the Legal Charge, Standard Security
or Loan Agreement. Thus the property is known as the ‘security‘.
Security Address
When taking a secured loan or mortgage, the security address
is the address of the property which is being offered as collateral
for the loan. Where property is offered as security in this
way, lenders are generally prepared to offer more flexible terms
and lower interest rates.
Self - Certified
Lenders that operate this type of scheme allow the applicant
to confirm how much they earn by "Self-certifying"
their income. Schemes are available to both employed and self
employed applicants. Typically for the employed, the schemes
are designed to help those applicants with incomes that incorporate
a large element of bonus or where they derive income from a
number of jobs. Where as for self employed there is no need
for full 3 years audited accounts to be provided.
Settlement Figure
The sum quoted in order for the loan to be repaid during the
contracted term.
Single Insurance
Policies vary from lender to lender. Generally single insurance
offers protection against sickness, accident and redundancy
for the main wage earner. Cover is also available for self employed
borrowers. Details of the specific insurance plan will accompany
the lenders offer. We strongly recommend that you consider some
form of insurance protection , especially in the case of secured
loans and mortgages.
Stamp Duty
A tax (currently 1%) paid on the purchase of properties costing
more than £60,000.
Standard Security
The equivalent of the Legal Charge in Scotland.
Status
The credit-worthiness or otherwise of a potential borrower.
Structural Survey
A detailed survey of the structure of a building carried out
by a Structural Engineer or Chartered Building Surveyor. Surveyors
are liable for negligence.
Sub-prime Mortgage
Mortgage granted to a person who is unable to borrow money secured
on a property from a normal lending source. The reasons the
applicant may not be granted a mortgage by a high street lender,
could fall into one of three categories:-
Adverse Credit information registered against them Existing
arrears on current mortgage facilities An inability to satisfactorily
prove the level of income required by a high street lender
Term
Period of a loan expressed in months or years.
Title Deeds
Set of documents relevant to present and past ownership of a
property. Details names of owners and details of institutions
that have registered a charge against the property. Held by
the first mortgagee lender whilst their charge remains in existence.
Underwriting
The process by which the ability of a prospective borrower to
repay a loan is assessed (also the name of the department that
undertakes this work). The process takes into account various
factors including employment history, financial status, previous
credit history and current earnings.
Unsecured Loan
A loan to be used for any purpose. The credit rating or financial
position of the applicant is such that no security for the loan
is required.
Valuation
A brief inspection of a property for mortgage purposes. Whilst
it is for the lenders use it is often paid for by the loan applicant.
