A to D - E to I - L to N - O to S - T to Z

A

Accident, Sickness and Redundancy Insurance - See Accident, Sickness, and Unemployment Insurance

Accident, Sickness and Unemployment Insurance - The policy pays a percentage of the usual monthly mortgage payment including any insurance (occasionally an element of extra cover is allowed for household bills) if the borrower cannot work because of accident/sickness or unemployment/redundancy.Payments are made for limited periods of time - 6, 12 or 24 months or until the borrower returns to work.
N.B. The following would preclude the payment of benefit: Voluntary redundancy, summary dismissal for misconduct (the sack), self injury and injury arising from the misuse of alcohol or drugs.

Added To Loan - This phrase relates to the costs borrowers face when arranging a mortgage. Often these costs are added to the mortgage amount being borrowed hence the term. The costs may include items such as mortgage indemnity fees and/or arrangement fees and/or administration fees as examples.

Additional Security Fee - This is required when the mortgage exceeds a certain percentage of the value of the property (usually 75%). The form of additional security used is normally a Mortgage Indemnity Policy. Occasionally the lender may require a parent to be a guarantor or for other security such as shares or insurance policies to be pledged.

Administration Fee - Some lenders charge this fee to cover their costs of administration and sourcing funds. This fee is not refundable if the mortgage application does not proceed. Often the administration fee will form part of the valuation fee and this part will not be refunded by the lender if the valuation does not proceed.

Adverse Credit - This is a term used to describe credit problems the borrower may have suffered in the past. Such problems will encompass County Court Judgements and arrears on loans.

Annual Percentage Rate (APR) - This is a legal definition which is used to show what the cost of borrowing actually is. As it is a standard definition it enables a potential borrower to compare the costs of various types of mortgage.
Every mortgage quotation must show an APR figure.

Annuity Mortgage - A term used in other countries to describe a Capital and Interest repayment mortgage.

Applicant - Someone who applies for a mortgage.

APR - see annual percentage rate.

Arrangement Fee - Whilst some lenders charge an administration fee others may charge an arrangement fee. Again this fee is charged to cover administration and primarily reserving the funds for fixed rate and/or discounted rate mortgages. This fee may be paid separately added to the mortgage or in rarer cases taken from the mortgage loan.

Arrears - When mortgage payments have not been paid on time and/or are not made at the correct level. Borrowers with a history of mortgage arrears will find it harder to effect a further mortgage with their current lender or a new lender in the future. However, there are a number of lenders who will consider lending to credit impaired individuals. (Back to Top)

B

Bank - This is a financial institution authorised through the Bank of England. Banks now encompass the so-called traditional clearing banks and the newer banks which have recognised brand names from the insurance and retail sectors, eg supermarkets.

Bankrupt - This occurs when someone is unable to pay their debts and creditors move to secure what monies they can from any existing assets (property) held by that person. All property is then administered by the official receiver. A Bankrupt if able to still work will only receive an allowance to live on after payments are made to creditors.

Bankruptcy - Discharged From - After a period of time a Bankrupt Individual can be discharged from bankruptcy. This then releases them from their financial obligations. However, having been declared bankrupt, it will be many years before they may be able to borrow money or obtain a mortgagee, if ever.

Basic Earned Income - Usually this is an individual's basic salary. This is the guaranteed element and does not include bonuses, overtime and shift allowance.

Booking Fee - Another term to describe a fee which is payable upfront to either source or reserve funds for a mortgage. Usually applicable for fixed or capped rate mortgages.

Broker Fee - Usually a fee charged by an adviser to a borrower for locating the most appropriate mortgage for the borrower.

Buildings Insurance - All lenders require a property to be insured. It should be insured for the full rebuilding cost including professional fees and such insurance cover is normally a condition of the mortgage. N.B. The full rebuilding cost will normally differ from the mortgage valuation of the property.

Building Society - Building Societies are mutual organisations regulated by the Building Societies Act. This means that their members (those with an account or a mortgage which confers membership rights) actually own the organisation. Building Societies are only allowed to raise limited external funds and are generally stricter to whom they lend than Banks and other organisations. There has been much interest in mutual building societies because of the so-called 'windfall benefits' However, the window of opportunity to gain has largely been closed now.

Buy to Let - This term describes where a property is purchased for the purpose of letting it out to tenants, which will generate an income for the purchaser. A number of lenders will consider granting a mortgage for such a purchase. (Back to Top)

C

Capital - This refers to either the deposit put down on a property or the amount over and above the mortgage which would be available if the property were sold. Also known as equity.

Capital and Interest Mortgage - This is one of the most usual types of mortgage. The monthly repayment made by the borrower includes a repayment of capital borrowed and an amount for the interest charged. At the beginning of the mortgage most of the payment is used to cover the interest and only a small amount is paid towards reducing the mortgage. Over the term of the mortgage more and more of the monthly payment is comprised of paying back the capital borrowed. As long as the monthly payments of repayments are always made on time the mortgage is guaranteed to be paid off at the end of the term.

Capital Raising - This refers to remortgages which are used to allow a borrower to release equity (capital) from the property. As a result the new mortgage is for a larger sum.

Capped - This refers to a capped rate mortgage which is a cross between a fixed rate and a variable rate mortgage. The interest rate will never rise above a certain rate within what is known as the capped rate period. If the usual variable mortgage rate is less than the capped rate then the borrower is charged that variable rate. Such a mortgage is attractive as the borrower can benefit from falling interest rates but will not have to pay more than the capped rate.
Along with the term capped rate the phrase cap and collar mortgages is often encountered. The 'collar' is the minimum interest rate, whilst the maximum interest rate payable is known as the 'cap'. As these mortgages involve the lender having to source funds it is usual for early redemption penalties to be imposed if the mortgage is redeemed within a capped rate period.

Cap and Collar - see Capped.

Car Allowance - This is a payment made by a company to an employee in lieu of a company car. Normally paid monthly through salary and is broadly equivalent to the leasing cost of the car.

Cash Back - With these schemes once a mortgage is completed a lender will pay a percentage of the mortgage as a lump sum to the borrower. The higher the percentage of cash paid the greater the amount of strings attached. These may be reflected in higher redemption penalties if the mortgage is redeemed in the early years and/or reflected in a less favourable rate of interest on the mortgage. It should be noted that if the cash back is large then this could result in a capital gains tax liability for the borrower.

Centralised Lender - This is a lender who does not have any branches and may operate from one location either through brokers or via the telephone.

Charge or Legal Charge - When an individual takes out a mortgage the bank take a charge or a legal charge over the property. This means that they are registering the interest in the property.

Completion - This is the last stage in the purchase of a property. The legal documentation is finalised and the lender has sent the mortgage funds to the purchaser's solicitor. Once the purchaser's solicitor forwards the funds to the seller's solicitor the property is now owned by the Purchaser

Compulsory Insurance's - see Conditional Insurance's.

Concrete Construction - Mainly local authority high rise blocks built in the 1960s and 1970s, which are regarded by some lenders as not as mortgageable as some properties.

Conditional Insurance's - This is where a lender insists that certain insurance products be taken out before a mortgage is granted . Very often a lender will insist that buildings and contents insurance is effected and/or accident, sickness and unemployment cover is in place before mortgage monies are released. This is usually encountered with capped, discounted or fixed rate products.

Contents Insurance - This is insurance which should be considered by all householders whether or not they have a mortgage. It covers items such as furniture; carpets, curtains; electrical goods and many policies also cover personal possessions, which may be removed from the home. This is separate to buildings insurance.

Contract Work - With the labour force becoming more flexible and employers having to meet different business needs, many workers are now employed on fixed term contracts. Fixed term contracts means that the individual is not employed directly by the company and is often not included in company benefit schemes, such as pensions and life assurance. As the company does not employ the individual they are not included in any redundancy schemes. Contract working has become popular as some individuals are paid a higher salary than those who are directly employed by companies to make up for the lack of company benefits. In some cases contract work is also suitable for those also who do not wish to be tied to one employer. Mortgage lenders will wish to see a consistent pattern of employment before they will lend.

Converted Flat - This is a flat, which has been created out of a larger house or property.

Conveyancing Fee - This is the fee charged by a solicitor or licensed conveyer after the legal paperwork for transferring a property has been completed. It should be remembered that as well as this fee, stamp duty, land registry fees and legal disbursement fees also require to be paid.

County Court Judgement (CCJ) - This is a judgement for debt lodged in a County Court. Such judgements are recorded and will be shown when a credit check is run. An individual with CCJ's will not easily be able to get a mortgage. Lenders will normally insist that such CCJ's are satisfied or have been satisfied for some time before a mortgage will be granted.

Credit Check - This is where the mortgage lender evaluates the credit history of an applicant by referring to one of the major credit agencies.

Credit Scoring - Assessing the ability of borrowers to be able to meet the mortgage payments from answers entered on a mortgage application form.

Criteria (Mortgage) - These are the standard terms and conditions of a lender.

Current Standard Variable Rate - This is the usual mortgage rate charged by a lender. This rate moves up and down in line with interest rates and the general movement in mortgage rates. (Back to Top)

D

Debt Consolidation - Borrowers with a number of different loans usually which are unsecured - (not secured on the property) may find that they can replace these loans with a single loan secured on the property. This can often reduce the borrowers monthly outgoings by paying only one loan which is secured on the property sometimes over a longer term. As the loan is secured, the interest rate may be considerably lower.

Deeds Release Fee - This is the fee charged by a lender when it has released its charge over the property deeds and returned them to the solicitor. It covers the administration carried out.

Deferred Interest Mortgage - This is a mortgage where not all of the interest due is paid in the early years. The interest not paid is added to the mortgage. As a result a borrower will end up owing more than the initial mortgage amount and the interest payments will be higher over the rest of the mortgage term. This type of mortgage is usually marketed to professionals whose salaries are expected to increase rapidly in order that they can meet the later interest payments over the rest of the mortgage term.

Deposit - This is another term for the equity put into a property by borrowers. The phrase may also refer to the amount paid upon exchange of contracts.

Disbursements - These are costs related to the conveyancing of a property. These costs usually encompass photocopying, postage, couriers and legal documentation.

Discharge Fee - Lenders charge this fee when releasing the charge over a property after a mortgage has been repaid.

Discharged Bankrupt - see Bankrupt and Bankruptcy - discharged from. This phrase refers to mortgages which have an interest rate lower than normal variable rate. The discounted rate is a fixed discount off the normal variable rate for a set period of time. It should be remembered that a discounted rate will move up and down with the normal variable rate but the rate paid will always be at a fixed percentage less for the discounted rate period, e.g. a rate may be 3% below the variable rate for 3 years.
If a Discounted Rate mortgage is redeemed during the early years it is likely that there will be early redemption penalties.

Draw Down Facility - This refers to mortgages, which have a facility allowing additional funds to be borrowed later on during the mortgage term. A borrower then knows that they have got the facility to access future funds without having to go through all the normal paperwork. (Back to Top)