Mortgage Jargon

Accident, Sickness, Unemployment Insurance (ASU)
This policy pays a percentage of the monthly mortgage payment if you cannot work because of one or more of the instances. It only covers specific incidents and will be paid for a pre-defined period.

Adverse Credit (Also Impaired Credit)
A term used to describe someone with a history of poor credit transactions. This could include late payments, County Court Judgements (CCJ’S), adverse credit remortgages arrears or bankruptcy.

Annual Percentage Rate (APR)
The interest rate used for comparison between mortgages that includes mortgage repayments and any other associated fees charged, such as application, redemption or legal fees.

Arrears
Usually measured in months or £’s. This is the measure by which mortgage payments are behind schedule.

Bankrupt
A person or company that is relieved from the payment of all debts by a court order after the surrender of all assets.

Bankruptcy
The court proceedings that relieve a debtor who owes more than his/her assets by transferring his/her assets to a trustee appointed by the court.

Basic Income
Gross pay before tax is deducted.

Broker (Also Intermediary)
A person who brings parties together and assists in negotiating terms.

Buildings Insurance
A policy which pays the cost of rebuilding or repairing your house if it is damaged or destroyed.

Commitments
Charges which a person has committed to pay, which could include mortgage payments, maintenance payments, car loans or any other loans or credit payments.

Early Redemption Charge
A charge applied to repay a mortgage within a specified period, normally shown as a number of month’s payments or %.

Equity
An owner’s financial stake in a property. It is the difference between the value of the property and the outstanding loan amount.

First Charge
If more than one loan is secured on the property, the lender with the first charge has the first call on the property if the borrower defaults on the loan.

First Time Buyer (FTB)
A person that has never previously owned a property.

Freehold
A property where you own both the property and the land on which it is built.

Further Advance
Where another mortgage is given on a property by an existing lender.

Higher Lending Charge
If the loan to value on the property (LTV) is above a certain value, this fee is payable, normally on completion of the mortgage.

Home Buyers Report
A type of property survey, which is more detailed than a mortgage valuation, but less detailed than a structural survey.

Income Multiples
Lenders will use a multiplier against a borrowers income by taking references against his/her employer or accountant.

Interest Only
A mortgage where the borrower is only required to pay the interest due on the principle mortgage amount during the specified term. The principle loan must be repaid at the end of the term.

Intermediary (Or Introducer)
A person who brings parties together (borrowers and lenders in particular) and assists in negotiating terms.

Individual Voluntary Arrangement (IVA)
Normally an alternative to bankruptcy proceedings, where someone makes a voluntary arrangement with their creditors through the law courts for the settlements of debts. The payments normally work out around 0.80 pence in every pound owed, and results in a compulsory remortgage in the 4th year of the 5 year agreement.

Joint Income
The total income of two people sharing the repayment of a mortgage.

Landlords Reference
A record of prospective borrowers payment history prepared by his/her previous landlord.

Legal Charge
A document held by the land registry documenting who has a claim on your property.

Life Assurance
A policy, which pays a lump sum on the death of the policy holder.

Loan to Value (LTV)
The ratio of the loan amount to the value of your property. Example: £80,000 against a property value of £100,000 would be 80% LTV.

Length of Employment
Most lenders will want to see at least the last 12 months employment history, employed or self – employed.

Local Authority Search
A check carried out by the buyer’s solicitor to check there are no proposed developments in the area, for example new roads or buildings.

London Inter Bank Offered Rate (LIBOR)
Is the rate at which banks in London can borrow in the financial markets.

Main Residence
If a person owns more than one property, this is the one in which they spend most time.

Maintenance
Payments made to an ex partner to cover the costs of bringing up children of the relationship.

Maisonette
A self-contained unit with 2 or more floors, which only occupies a part of the building.

Minimum Valuation
Most lenders require a minimum property valuation of £25,000 for acceptance of a mortgage application.

Mortgage
A legal document that secures a loan against a property.

Mortgage Valuation
The assessed market value of a property according to a qualified surveyor to enable the lender to assess the amount of the mortgage loan they are prepared to offer.

Mortgagee
The mortgage lender.

Mortgagor
The borrower.

Net Profit
The income of a self employed person or company after running costs and taxes have been deducted.

Other Income
The amount earned over and above basic salary (second jobs, working family tax credit, pensions etc, may be taken into account, depending on the lender in question).

Previous Lenders Reference
A record of your repayment record with previous lenders.

Principle Decision
A mortgage offer in principle based solely on the information given by the client. Any information not given may change the scheme and repayments offered.

Quotation
An illustration showing the approximate monthly costs of a mortgage and other terms and conditions that may apply.

Redemption
The process of paying off a mortgage completely.

Remortgage
The process of paying off one mortgage with the proceeds from a new mortgage using the same property as security.

Repayment Method
How you choose to pay back a mortgage, either Interest Only (endowment) or Capital and Interest (repayment).

Repayment Mortgage
Mortgages where monthly payments are made up of part interest and part capital repayment.

Repossession
The legal process by which a borrower is deprived of his/her interest in the property as a result of default. This usually involves the eventual sale of the property.

Retention
A sum of money held back from the original loan amount pending completion of outstanding repairs or improvements.

Right To Buy
A tenant in a council owned property may purchase the property at a discounted purchase price depending on the length of the tenancy.

Second Charge
If more than one loan is secured against a property, the lender with the first charge has the first call on the property in event of default. Second charges and loans from subsequent lenders basically get the remains of the equity.

Self Employed
A person who operates as a sole trader or as part of a partnership.

Self Certification
If it is difficult to provide substantiated confirmation of your income, you can choose to self certify your income by signing a declaration stating your income and that you can afford the loan repayments.

Sitting Tennant
A person who currently rents and occupies a property who is currently protected by the law, from being removed.

Special Conditions
Requirements on the mortgage offer that must be met before completion (explanation of arrears, CCJ’s etc.).

Stamp Duty
A tax payable on the property depending on the purchase price.

Standard Construction
A building built using normally accepted techniques and traditional materials, for example, bricks and mortar with a lead tiled roof.

Structural Survey
A thorough examination of a property by a qualified surveyor.

Studio Flat
A one roomed flat, normally with a bathroom and a separate kitchen.

Timber Framed Property
A building that has been constructed using wooden parts as structural members and does not have a cavity wall.

Title Insurance
A policy that protects you in the event of loss resulting from defects in the title specific to the property.

Unencumbered
A property without any loans or borrowing on it.

Valuation
See mortgage valuation.

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