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Contractor Mortgages Jargon Buster

A

Additional borrowing – Sometimes called a further advance, this is when you increase your total mortgage amount and borrow more money against your property.

Advance – The money you are lent to purchase your home

Affordability check – A check carried out by the lender to determine how much you will be able to borrow. Different lenders will use different systems to determine this.

APR – Standing for Annual Percentage Rate, APR is the total cost of a mortgage expressed as an interest rate. APR takes into account the interest on the mortgage plus charges such as arrangement fees and product fees.

Arrangement fee – The fee charged for the administration involved with arranging your mortgage.

Arrears – Mortgage payments that have been missed

Assets – The things that you own (e.g. a house)

B

Balance – The remaining sum of money left to pay on your mortgage

Bank of England base rate – The basic rate of interest set by the Bank of England. This continuously moves up and down.

Booking fee – A non-refundable fee sometimes charged on mortgages to reserve a particular interest rate

Buildings insurance – An insurance policy for your home that covers the cost of it being rebuilt should it experience structural damage

Building survey – A technical report put together after an inspection of a property has been conducted. A building survey will give you a comprehensive guide to the condition of the property and will list any structural defects it may have

Buy to Let – A mortgage for those buying a property with the specific intention of renting it out


C

Capital – The amount of money you have borrowed

Capital and Interest Repayment Mortgage – A type of mortgage where part of your monthly repayment is used to repay the interest you owe and the rest is used to repay the mortgage balance

CHAPS payment – A form of electronic money transfer from one account to another

Change of parties – A request to change the names listed on your mortgage account. This will usually be requested due to a change in personal circumstances

Completion fee – The fee charged to cover the cost of electronically transferring the mortgage funds

Completion of the mortgage – When all paperwork has been completed and the mortgage funds have been released

Conclusive of missives – The Scottish equivalent of exchanging contracts

Conveyancer – the individual who specialises in the legal aspects of buying a house or remortgaging

Credit rating – The common system used by most banks and other lenders, this is a rating of your eligibility to obtain finance. Your credit rating is based on your credit history and your payment history for credit cards, loans and other credit agreements as well as details of any county court judgements and bankruptcies you may have had.

D

Debt – Money owed to a person or a company

Decision in principle – Sometimes also referred to as Application in Principle, this is an indication from a lender that they will be able to offer you a mortgage

Deposit – The money you put towards the cost of a property

Disbursements – Costs such as search fees which will be itemised on a conveyancer’s invoice for carrying out homebuying legal work

E

Early Repayment Charge (ERC) – A charge that may be incurred if you choose to repay all or part of your mortgage early, this includes if you move to a different product or move to a different lender

Equity – The difference between the amount you owe on your mortgage and the current value of your property

Estimated property value – The market value given to a property after a surveyor or valuer has conducted a survey or a valuation

Exchange of contracts – The swapping of contracts between a buyer’s and seller’s conveyancers. Known as a conclusive of missives in Scotland

Exit fee – This is an administration fee charged on some mortgages once the finance is fully repaid

Extended tie in period – An early repayment charge that is payable to some lender should the borrower move to another lender before a specific time

F

Final repayment charge – A charge that is applied by some lenders upon the complete repayment of a mortgage

First mortgage payment – The first monthly payment of your mortgage. This will usually be higher than the normal monthly payments as it will include interest from the day the money is sent to the conveyance to the end of that month

First time buyer – Someone who is buying a property for the first time. There are often deals offered by lenders for first time buyers

Fixed rate mortgage – A mortgage where the interest rate is agreed at the start of the term and stays the same for a set period

Freehold – A legal title which means you have outright ownership of the property and the land that it is on

Further advance – This is when you increase your total mortgage amount and borrow more money against your property. Sometimes known as additional borrowing

G

Gazumping – When a seller who has already accepted an offer but hasn’t exchanged contracts, then goes on to accept a higher offer

Gross – The full amount of money earned or paid before any deductions, e.g. tax

Guarantor – Someone who promises to pay a borrower’s debt should the borrower be unable to. Guarantors are used as a form of security for the lender when lending money to higher-risk borrowers

H

Higher lending charge – A fee charged by some lenders if the mortgage you require represents a high percentage of your property’s value (usually over 80%)

Homebuyer’s survey – A surveyor’s report on a property that is being purchased


I

Initial disclosure document – A document that you will receive from a lender when you first enquire about a mortgage. This will inform you about the service you will receive and the charges you will pay

Initial rate period – The period of time that a fixed or tracker rate of interest applies to a new mortgage

Initial interest – The amount of interest that is charged on your mortgage from the day the money is sent to your conveyancer to the end of that month

Interest – The money that you pay for borrowing money

Interest only mortgage – A type of mortgage where you only repay the interest each month. With this type of mortgage you will need to make arrangements to repay the balance at the end of the mortgage term

J

K

Key facts illustration – A document that sets out the key details of a mortgage and all of its associated rates and fees. All lenders are required to set out their key facts illustration in the same format so it is easier to compare different mortgage details

L

Land Registry fee – A fee paid by your conveyancer on your behalf to register your details in the Land Registry records once you have bought a property

Leasehold – The right to possession but not ownership of a property for an agreed amount of time

Loan to Value (LTV) – The size of a mortgage as a percentage of the price of the property

Lump sum payment – One-off payments that are made to reduce the outstanding balance on a mortgage

M

Monthly mortgage payment – The amount you will pay to your lender each month

Mortgage deed – A legal document that establishes a mortgage on a property

Mortgage offer – The document you will receive from a lender when your mortgage application has been accepted

Mortgage term – The length of time you agree to pay back your mortgage


N

Negative equity – When the amount you owe on your mortgage is greater than the value of your property

New build property – A property that has just been built or a property that has been built up to a year previously but has yet to be occupied


O

Offset mortgages – A type of mortgage where your mortgage and savings accounts are combined so that your savings and the interest made on them are counted towards your repayments

Outstanding balance – The current amount left to payback on your mortgage

Overpayment – A payment larger than your normal monthly mortgage repayment that is made to pay off more of your mortgage

P

Payment holiday – If agreed with your lender, this is a period of 1 month or more where you don’t pay the repayments on your mortgage; however interest still continues to be charged on your mortgage balance

Porting – The term used to describe the process of taking your mortgage with you and keeping the same rate when you move home

Product fee – A fee that is sometimes charged by lenders to cover the work involved in setting up your mortgage

Property assessment – A procedure that is carried out to determine whether a property provides adequate security for a remortgage

R

Redemption – The term for when you have fully paid off your mortgage

Redemption administration fee – A fee that is chargeable by some lenders when you fully repay your mortgage or when you switch your mortgage to another lender

Redemption statement – A statement from your mortgage lender that shows how much you have left to pay off before you can close your mortgage

Referral – When additional information is required before a lender decides whether or not to offer a mortgage

Retention – When a mortgage is held back until repairs to a property are completed to a satisfactory standard

S

Secured loan – A loan that is secured against a property or another form of asset. A mortgage is a type of secured loan

Stamp duty land tax – The government tax that you will be required to pay if you purchase a property worth £125,001 or more

Standard variable rate – The interest rate that is set by a lender and you will start to pay once you come to the end of a fixed or tracker rate period

T

Term – The period of time over which a loan is scheduled to be repaid. This is commonly 25 years. A longer term will mean lower monthly payments but will require you to pay more out in the long run

Tracker rate – The rate of interest that is paid back on a tracker mortgage. This usually worked out by using the Bank of England base rate plus a set percentage

Title deeds – The documents that provide evidence of property ownership

Transfer of equity – The transfer of a share of ownership in a property

U

Underpayment – A mortgage payment that is less than you would normally pay each month

Underwriting – The process that is used by lenders to determine if someone is eligible for a mortgage

V

Valuation – An inspection of a property that is carried out by a surveyor or valuer to estimate its value

Variable rate mortgage – A type of mortgage where the interest rate rises and falls according to a specific index such as the Bank of England base rate

Vendor – The person you are buying a property from

 

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