A-Z Mortgage Terms

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Advance

  • The amount you borrow from the lender.
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Annual Percentage Rate (APR)

  • The total charge for the loan including fees and interest expressed as a percentage.
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Arrears

  • Mortgage payments which have not been paid as requested and have become overdue.
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Balance

  • The amount you owe, after taking payments (credits) and any debits into account.
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Bank of England

  • The Bank of England 'repurchase' or 'repo' rate which is main factor influencing interest rates charges by lenders.
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Buildings Insurance

  • Covers the house you are buying against damage - take it out from the day you exchange contracts.
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Buy-to-Let Mortgage

  • A buy to let mortgage is a loan used to purchase a second property with the intention of letting it out to tenants. Many people want to increase the size of their property portfolio to take advantage of rising house prices and rental rates
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Capital

  • The balance of your mortgage loan excluding costs and interest outstanding.
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Cash- Back Mortgage

  • Cashback mortgages offer an initial lump sum that can be used for costs such as legal fees, stamp duty, removals, new furniture or home repairs. Lenders normally offer up to one percent of the loan amount as an incentive.
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Collateral / Security

  • The property. The lender can take possession and sell it if the borrower does not keep up the mortgage payments.
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Completion

  1. The final legal transfer of ownership of the property - when the property becomes yours.
  2. The start of the mortgage also known as 'drawdown'.
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Contents Insurance

  • Cover for the contents of your home - including furniture, appliances and personal items - against damage and theft.
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Contract

  • The written agreement between the seller and the buyer of a property to transfer ownership.
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Conveyancer

  • Solicitor or licensed conveyancer who deals with the legal aspects of buying or selling land or property.
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Conveyancing

  • The legal work involved in the sale and purchase of land or property
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Daily Interest

  • Interest is calculated on the balance outstanding each day.
  • So, when you make a payment, interest is calculated on the new balance straightaway which is usually better than annual interest.
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Debt Consolidation Mortgage

  • When remortgaging your property some lenders will allow you to consolidate all your debts (credit cards, personal loans etc) into the mortgage loan.
  • A secured loan such as a mortgage usually offers lower interest rates than credit cards and unsecured loans, you can often save money by consolidating
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Deposits

Two deposits may be payable by the buyer:

  • A reservation charge. The buyer pays this as a sign of commitment when they initially agree to buy the property.
  • The deposit. A percentage of the price of the property, paid when contracts are exchanged
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Discounted Mortgage

  • Discounted mortgages are variable rate loans which offer a reduction in the lender’s standard variable rate for an agreed period of time.
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Drawdown date

  • Drawdown is the date when the mortgage starts.
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Equity

  • The difference between the value of the property and the amount of any loan secured against it.
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Early repayment charge (ERC)

  • A charge payable on certain types of loan if it is repaid or partly repaid within a certain period eg during a fixed-rate period or while a discount applies.
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Equity release mortgage

  • An equity release mortgage allows you to access the equity tied up in your property to fund the deposit or purchase of an additional property.
  • The amount of eqiuity depends on the difference between the value of the property and the amount of any loan secured against it.
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Essential repairs

  • Work required on the property before the mortgage loan can be issued.
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Exchange of contracts

  • In England and Wales (not Scotland), the point when both buyer and seller are legally bound to the transaction and at which point the buyer should take out buildings insurance on the property.
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Final reminder

  • A letter requesting payment and sent to a customer who is in arrears before legal proceedings start
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Freehold

  • Outright ownership of the property and the land on which it stands.
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Further advance

  • An additional loan by the lender to the borrower, which may be for any purpose and secured by the existing rtgagedeed.
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Ground rent

  • An annual charge payable by leaseholders to the freeholder
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Guarantor

  • A person who promises they will pay the borrower's debt, usually if the borrower fails to.
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Homebuyer's survey

A surveyor's report on a property which is less extensive than a building survey and is paid for by the purchaser.

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Interest only mortgage

  • You only repay the interest each month. The original capital balance will remain outstanding at the end of your mortgage term.
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International Currency Mortgage

  • The International Currency Mortgage (ICM) allows you to finance your property and take advantage of borrowing in currencies other than the base currency of where the property is located
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Land Registry Certificate

  • Provides details of the property including a plan and, if the property is leasehold, a copy of the lease.
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Land Registry fee

  • Land Registry fee A fee paid to the Land Registry to register ownership of a property.
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Land Registry fee

  • Land Registry fee A fee paid to the Land Registry to register ownership of a property.
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Leasehold

  • The right to possession, but not ownership, of a property for an agreed period of time. Ultimate ownership remains with the freeholder.
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Lender

  • The bank/building society where you have your mortgage.
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Lessee

  • The person to whom a lease is granted - the tenant.
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Lessor

  • The person who grants a lease - the landlord.
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Life assurance

  • An insurance policy that pays a lump sum on death. Often taken out with a mortgage to provide money for the loan to be repaid if the borrower dies during the term.
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Loan to Value (LTV)

  • The size of a mortgage as a percentage of the value of the property or its purchase price.
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Mortgage

  • Has a specific meaning in law but has come to mean a loan with property as security
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Mortgagee

  • The mortgagee is the lender who lends money in return for the mortgage granted by the borrower, who is the mortgagor.
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Mortgage Guarantee Charge

  • A payment to a lender for an insurance policy for the lender's benefit when they lend above a certain percentage of the property value.
  • The policy covers the risk of selling a repossessed property at a loss.
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Mortgage term

  • The term over which you agree to repay the loan.
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Negative equity

  • When the value of the property has fallen and is less than the loan secured on it.
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NHBC guarantee (UK)

  • A 10-year guarantee, provided by the National House Building Council, that the builder will put right serious defects on a newly-built property.
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Penalty period

  • The period of time you would need to remain on certain mortgage terms to avoid an early repayment charge.
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Principal

  • The amount of the loan on which interest is calculated.
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Repayment, Repayment Mortgage

  • When a mortgage is repaid or redeemed.
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Re-mortgage

  • Repaying one mortgage by taking out another secured on the same property, possibly to take advantage of a particular mortgage product or better interest rate from a different lender.
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Repayment Vehicle

  • An investment plan which can provide a lump sum to repay the capital of an interest only mortgage.
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Title deeds/title documents

  • The legal documents which provide proof of ownership of a property.
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Tracker Mortgage

  • A tracker rate mortgage is one which follows the bank base rate.
  • Your variable rate is normally set at an agreed percentage above the base rate for a set period. Some tracker mortgages last for the entire mortgage term but most have a specified period before returning to fixed or standard variable rates.
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Transfer deed

  • A form which provides details of the transfer of ownership to be entered on the Land Registry register.
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Valuation

  • An inspection of the property to ascertain its acceptability to the lender as security against the mortgage loan, for which the borrower may have to pay.
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Vendor

  • The person(s) you are buying your new home from.
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