Mortgage Glossary

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

APR: Annual Percentage Rate is the total cost of a mortgage, loan, credit card or overdraft. It is usually shown in brackets and is required to be made clear to borrowers.

Arrears: When someone fails to make their agreed payments on time their account will be in arrears. However people who pay late in the month may finding they are in arrears until it’s paid because payment is due on the 1st of every month.

Admin Fee: When applying for a mortgage people may need to pay an admin fee to the lender, mortgage broker or other third parties involved. It’s usually a percentage of the overall mortgage loan.

Adjustable rate: When the interest isn’t fixed it’s normally an adjustable rate, which means it changes with either the Bank of England base rate or LIBOR rate.

B

Base Rate: The Bank of England set this rate and it’s used by financial organisations as at guide to follow when setting their interest rates for financial products such as mortgages.

Buy To Let: A type of mortgage created for people who wish to let out the property but it generally works out slightly more extensive than a standard mortgage because of the greater risk. The cost of repossessing a property which has been let out is higher and this reflects in the cost of the mortgage.

Borrower: The person getting a loan, mortgage or anything which will be return or repaid. In terms of a mortgage it’s the person recieving the mortgage will the promise of repaying.

C

Capital: Simply the amount borrowed for the property, minus any charges, fees or interest.

Capped Rate: The lender agrees to never increase the interest rate over a specified amount, no matter what happens with the base rate or the lenders standard variable rate.

Closing Statement: A statement everyone should receive when they have successfully paid off their mortgage

D

Deposit: When applying for a mortgage a buyer will be required to pay a percentage of the mortgage upfront, usually between 10% – 20%. Prior to the financial collapse some financial organisations offered up 110% mortgages, this meant no deposit was required and the lender gave more money than the property value. These types of mortgage have since come under a lot of criticism for “reckless lending”.

Deeds sealing fee: A fee a borrower pays to their lender to close down the mortgage account, once fully paid and have title deeds posted to them.

Deferred interest: When interest is added to the mortgage loan because payments aren’t sufficient to cover the monthly payment.

E

Equity: The difference between the value of the property and the remaining amount to be paid on the mortgage is called equity. When the mortgage value is greater than the property value this is called negative equity and can stop people from selling.

Estate agent: When someone wants to buy or sell a house they will contact an estate agent to either help sell their property or find them one.

Equity Loan:  A loan given by the government under the Help to Buy scheme which helps people purchase a newly built property.

F

Fixed-Rate: An agreement between the lender and borrower for the interest rate to remain fixed for a set period of time. Most mortgages will be fixed for the first 3 -4 years before moving to the standard variable rate. While this offers peace of mind that interest rates won’t fix within the agreed period of time, if the base rate falls they will pay more than the standard rate.

Financial Conduct Authority (FCA): The regulatory body which is charged with governing the finance industry and any company involved in it. The FCA are responsible for making sure the financial market is fair and competitive.

G

Guarantor: If someone doesn’t qualify for a mortgage on their own or if the lenders believes the borrower is a greater risk, they may require a guarantor. The borrower will be able to nominate the person they wish to act as guarantor, who will be responsible to repay the loan if the borrower fails to keep up payments.

H

Home Information Pack (HIP): A pack of documents which can be offered by sellers to potential buyers in England and Wales while Scotland has separate legislation. Although the HIP pack is no longer required, the Energy Performance Certificate is still required.

I

Interest Only: Instead of repaying both the interest and capital for a mortgage, the borrower can pay just the interest and have the initial loan remain outstanding. This can be a good repayment method for anyone who is expected to come into money before the end of their mortgage term.

J

Joint Mortgage: A mortgage with two borrowers, both of whom are liable for payment to be made on time. If one borrower fails to make payments or goes into a debt solution, such as bankruptcy, the other is responsible to keep up payments. Each borrower is entitled to 50% of any equity in the property.

K

Key Facts Illustration: Outlines the facts of each mortgage a borrower may be interested in before they apply and shows how it compares to other lenders mortgages.

L

Loan to Value (LTV): The difference between the outstanding mortgage and the value of the property, also know as equity.

M

Mortgage Deed: The official document showing the terms of agreement between the lender and the borrower, outlining rights and responsibilities of both parties.

N

Negative Equity: When the value of a property is less than the outstanding mortgage and/or other loans secured against the property. The housing market collapse in 2008 led to a lot of people having negative equity due to house prices falling so fast.

O

Offset Mortgage: When a borrowers savings or bank accounts are linked to their mortgage and will determine the amount of be repaid each month. The greater amount of money in these accounts, the less to be paid on the mortgage each month.

P

Pension Mortgage: A link between a borrower’s pension and their mortgage which allows them to clear the remaining capital at the end of the term using tax free proceeds from their pension.

Payment Calculator: A mortgage payment calculator is useful when trying to asses a number of factors before applying for a mortgage. It can tell you how much your monthly payments will be, the maximum interest rate affordable and much more. try our mortgage payment calculator and see how your payments and mortgage balance will look throughout the term of your mortgage.

Q

N.A

R

Remortgage: If someone wishes to get a better mortgage deal, release equity in their property or change their terms of mortgage they would get a remortgage. A mortgage term may last for 25 years on average but people can move their other lenders at any time.

S

Standard Variable Rate: The default interest rate set by mortgage lenders. Often when people come to the end of their fixed rate period they will be put on the standard variable rate

T

Tracker Mortgage: Mortgage lenders will track the Bank of England base rate as a guide to setting their interest rate, which is usually just above or below it.

U

N.A

V

Variable Rate Mortgage: A borrower’s interest rate can increase or decrease depending on the the lenders standard variable rate.

W

N.A

X

N.A

Y

N.A

Z

N/A

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