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

O

Obligatory Insurance - Referred to as compulsory insurances or conditional insurances. See Conditional Insurances.

Occupational Pension - Pension scheme provided by an employer. The pension may be based on years of service or on contributions made.

Open Market Value - The normal value of a property assuming usual market conditions.

Other Income - Income over and above the basic salary.

Outgoings - see Existing Liabilities.

P

Part Capital and Interest Mortgage - This refers to a mortgage which is partly repaid on a capital and interest basis and also repaid by another method, hence the term 'part capital and interest mortgage'. Sometimes a mortgage may be part capital and interest and also repaid from the proceeds of an endowment.

Part Endowment Mortgage - This refers to a mortgage which is partly repaid on a part endowment basis and also repaid by another method, hence the term 'part endowment mortgage'. Sometimes a mortgage may be part endowment and also part capital and interest.

Part ISA Mortgage - This refers to a mortgage which will be repaid from the fund built up through an ISA and also from repayments made to perhaps a capital and interest mortgage.

Part PEP Mortgage - This refers to a mortgage which will be repaid from the fund built up through a PEP and also from repayments made to perhaps a capital and interest mortgage.

Payment Method - This is the way in which the mortgage is repaid at the end of the term. The repayment may be from an ISA, endowment or from a tax free cash sum from a personal pension. (Back to Top)

Payment Protection Insurance - see Accident, Sickness and Unemployment Insurance.

Pension Mortgage - This is an interest only mortgage and it is paid off from the proceeds of the tax free cash sum at maturity.

PEP Mortgage - This is an interest only mortgage and it is paid off from the proceeds of the PEP at the end of the mortgage term.

Permanent Health Insurance (PHI) - This is a policy which pays out regular sums of money to the insured after specified period during disability through sickness or accident and injury. The benefit is payable until the policy holder returns to work, dies, or the policy term expires, whichever is earlier. Such a policy is used to replace a percentage of full income and not just the monthly mortgage repayment. PHI is not an accident, sickness and unemployment and insurance policy which usually only give cover for up to two years. PHI pays an income until a return to work or normal retirement age. N.B. PHI does not cover unemployment.

Personal Pension Plan - Such plans are suitable for those who are self employed or employed in non-pensionable employment. Contributions made to a personal pension plan are exempt from tax at the individual's highest rate. This means that a higher rate tax payer can receive 40% relief on contributions made. Retirement age maybe between the ages of 50 to 75. Importantly up to 25% of the pension fund at retirement can be taken as a tax free cash sum. It is a percentage of this tax free cash sum which is used to repay a mortgage if a pension mortgage is the repayment vehicle.

Portable - This is an important area for borrowers to be aware of. It describes the facility to move a particular type of mortgage from one property to another if a property move is required. This would be important if a capped, cash back, discounted or fixed product has been used by a borrower and early redemption fees would be incurred if the mortgage was not portable.

Previous Lenders Reference - Often a new mortgage lender will ask for a reference from a previous lender to check that the borrower did make all due payments.

Principal - Other word for capital or the amount of mortgage.

Professional - This is a person who is a recognised professional. An accountant, actuary, doctor, solicitor, vet, etc., are all recognised as being members of a profession. In recent years the term has widened and takes in some senior managerial positions. Not all lenders go as far as this. Therefore, some high earners will be able to borrow more from certain lenders than others. (Back to Top)

Q

Qualifying Loan - This is a loan which is eligible for MIRAS. The interest on the first £30,000 borrowed to purchase the principal private residence is currently eligible for relief at 10%. As the years move on the MIRAS payment is now relatively small.

Qualifying Part - This is the part of a mortgage loan which is eligible for MIRAS..

Quotations - see Illustration.

R

Rate Type - This refers to the type of mortgage you are enquiring about. It may be fixed, discounted or capped and if you require further information just tab through this Glossary.

Redemption - This refers to repaying the mortgage when moving to another property or at the end of the mortgage term.

Redemption Charges - see also Early Redemption Fees and Higher Early Redemption Fee. This is a charge made by a lender if the mortgage is repaid within a set time period, normally in the early years of a mortgage these are now quite usual as many borrowers are opting for fixed rate and discounted rate mortgages. The penalties are usually in the form of a set number of months interest within the agreed early redemption period. As an example, if a borrower repays a mortgage within three years they may have to pay four months interest. When taking out a mortgage, borrowers should be aware of these penalties.

Regional Lenders - These are usually smaller local building societies who only lend within the regional location. There are also lenders who will not lend in Scotland or Northern Ireland because they do not have a branch presence in these countries.

Remortgage - When a borrower moves a mortgage from one lender to another this is known as a remortgage. The new mortgage will pay off the existing lender and sometimes the borrower may raise additional funds over and above the old mortgage amount. With a competitive mortgage market, remortgaging has greatly increased in popularity and many borrowers usually re-mortgage to secure a competitive interest rate. It should be noted that remortgages carry costs and the borrower should also be wary of any redemption charges when considering a re-mortgage.

Repayment Mortgage - see Capital and Interest Mortgage.

Retention - In some cases lenders will hold back monies until certain conditions of the mortgage have been met. Normally these are essential repairs or improvements which require to be made. (Back to Top)

Right to Buy - Sitting council tenants have an option to purchase the property in which they live in. Usually the property can be purchased at a discount based on the length of time they have been a tenant.

S

Sealing Fee - see Discharge Fee.

Second Charge - This is a legal charge which is used usually to secure a second mortgage or other borrowings. It will always rank behind a first charge.

Self Build - Property which has been constructed by the borrower. Mortgage loans on self build properties will usually only be paid in stages and are subject to lower loan to value limits. The lender will insist on a qualified architect drawing up plans and often for the builder to give an NHBC guarantee.

Self-Certification - With this mortgage the borrower provides a statement of his or her income and the lender may or may not check the accuracy of the information provided.

Self-employed - An individual who works for himself/herself. This will include partners in businesses and professional practices such as lawyers.

Shared Equity - This allows a borrower to purchase a new property in partnership with the builder. Often the builder will allow the borrower to purchase say 90 or 95% of the property now and pay the balance off say in 5 years time. The builder will register a second charge on the property until this balance has been paid. The 5 or 10% owing maybe interest free or interest may be allowed to roll up and added to the debt. Obviously this can benefit some borrowers but the consequences of not being able to take on the additional debt in the future are serious. Financial advice must be undertaken before proceeding with this type of mortgage.

Shared Ownership - A housing association tenant may have the opportunity to purchase a property. The scheme works by allowing the borrower to purchase part of the property and rent the other part from the housing association. This subsidises home ownership for people who would otherwise not be able to become home owners. (Back to Top)

Sitting Tenant - This is someone who has the right to occupy a property. This right remains even if the property changes hands. Properties with sitting tenants are much less marketable than those with vacant possession.

Sole Occupancy - This is a property occupied by the borrower and his or her family only. It contains no tenants.

Special Conditions - These are special terms or specific terms outlined on the mortgage offer letter. These maybe where the lender requires the borrower's solicitor to confirm that special conditions have been met or that areas of concern have been resolved.

Stamp duty - This is a Government tax which is levied when a property is purchased. The tax is paid by a property purchaser and is currently charged at the following rates:

1% - £60,000-£250,000
2% - £250,001-£500,000
3% - £500,001 and above

It should be noted that the rate is paid on the whole purchase price and not just on the slice, e.g. £500,001 requires stamp duty of £15,000 to be paid. This is 3% of £500,001.

Standard Construction - This refers to houses which are also known as traditionally built. These are constructed of brick with a tile or slate roof. Lenders will give lower loan to value mortgages on non-standard constructed properties.

Standard Property - This is the normal semi-detached, terraced house, bungalow or detached property.

Start Up Business - This is a business which does not have a set of accounts.

Structural Survey - This is the most expensive and detailed type of survey report carried out by a chartered surveyor. If the borrower requests a structural survey the lender will still need to have a mortgage valuation carried out. The borrower will then have to cover the costs of both. If the property has movement or is of unusual construction a lender may ask for a structural engineer's report. Such a survey is undertaken by a chartered building engineer and is a further step on from a structural survey. This survey will only be asked for on more rare occasions.

Studio Flat - This is a flat comprising of one room. It will usually have a bathroom and may have a separate kitchen. Lenders will only consider those in more desirable locations.

Survey Fee - The fee payable for a structural survey, home buyers report, or mortgage valuation. (Back to Top)