Jargon Buster

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Additional Security Fee
An Additional Security Fee is paid to take out an insurance policy designed to indemnify the mortgagee (lender) against loss in the event of default on the mortgage repayment. It is normally taken out by the lender at the start of the mortgage and the mortgagor (borrower) is made to pay the premium! (Also known as MIG)
Advance
The mortgage loan.
Adverse Credit
This is the term used if the borrower has suffered a poor credit history. This could include previous mortgage or loan arrears, defaults, County Court Judgement’s (CCJ’s), or bankruptcy.
Agricultural Restriction
A Freehold covenant restricting the occupancy of a property to those engaged in agriculture.
Apportionment
The division of liability for property tax, water charges etc between the buyer and seller of a property.
APR
Annual percentage rate. A term defined in consumer credit legislation with the intention of providing a standard basis for comparing different forms of credit. It has had limited success and can be confusing. For example, case law has established that a lender can quote a mortgage APR based on a short-term fixed rate without including in the calculation the fact that, at the end of the fixed rate period, the rate will change. The allowable assumption is that the rate will continue throughout the mortgage term. The calculation must however include the 'total charge for credit' which includes such things as arrangement fees, valuation fees etc and so does have some merit.
Arrangement Fee
This is a fee you pay to your Lender in return for providing you with a mortgage. Usually paid on completion, these fees can normally be added on to the loan balance.
Assignment
Document transferring rights of ownership from one person to another, such as an endowment policy to the building society in connection with a mortgage. Can also be the document transferring the lease on a property.
Accident Sickness and Unemployment Insurance (ASU)
This insurance is designed to cover the borrowers mortgage payments in case of accident, sickness or involuntary unemployment, normally for a period of 1-2 years.
Auction
Public sale of a property to the highest bidder. The purchaser must immediately sign a binding contract and pay a 10% deposit and should ensure that all valuations, searches etc are carried out prior to the sale. Completion must usually take place within 28 days of the date of auction.
Authority to Inspect The Register
Document from registered proprietor of land allowing another party, such as the purchasers' solicitor, to be given information from the register of a property.
Bankers Draft
A cheque drawn on the Bank itself against deposit of cash. Normally required in property transactions.
Base Rate Tracker
The interest rate is variable but set at a premium (above or below) the Bank of England Base Rate for a fixed scheme period.
Booking Fee
A fee paid for the arrangement of a mortgage, usually at the time of application and often non-refundable if the purchase does not proceed.
Bridging Loan
Short term loan to facilitate the purchase of one property prior to the sale of another releasing funds that are required for the purchase. Professional advice should always be taken prior to considering any bridging finance as it can be a solution which is worse than the problem.
Brokers Fee
A fee charged by an intermediary or advisor for locating the most appropriate mortgage for the borrower and arranging it on their behalf.
Building Society
Mutual organisation specialising in lending money to individuals to purchase or remortgage residential properties. Most of this money comes from individual saving members who are paid interest. A proportion of building society funds are also raised on the commercial money markets.
Buy-to-Let Mortgage
This is a mortgage designed for people who wish to purchase a property to rent out. The ability to repay this type of mortgage is often based on the projected rental income from the property as opposed to the personal income of the borrowers.
Capital and Interest Mortagage (Repayment mortgage)
Monthly payments to the lender are a combination of part of the capital borrowed, and partly the interest on the loan.
Capped Rate
An interest rate charged on a mortgage where there is a guarantee from the mortgagee that the rate will not exceed a certain amount usually for a set scheme period, but which will reduce if the standard variable rate falls below the capped rate.
Cashback
A cash payment you receive when you take out a mortgage, normally made on completion.
CCJ
County Court Judgment. A decision reached in the County Court which can be for not paying debts. If you pay off the debt, the CCJ is satisfied and a note is put on your records to say this.
Charge
Any right or interest, especially a mortgage, to which a freehold or leasehold property may be held.
Charge Certificate
The certificate issued by HM Land Registry to the mortgagee of a property with registered title. Contains three parts - charges register, property register and proprietorship register. Contains details of restrictions, mortgages and other interests. Where there is no mortgage it is called the Land Certificate and issued to the registered proprietor.
Chattels
Moveable items such as furniture or personal possessions.
Completion
When the sale and purchase of the property are finalised and you become the owner of your new house.
Contract of Sale/Purchase
Legally binding agreement for sale. In two identical parts, one signed by seller and one by purchaser. When the two parts are exchanged (exchange of contracts) both parties are committed to the transaction.
Conveyance
The deed by which freehold, unregistered title changes hands. If the property is leasehold and unregistered it is called an assignment. If the title is registered the deed is called a transfer.
Conveyancing
The legal process involved in buying and selling property, carried out by conveyancers, special types of solicitors.
Covenant
A promise contained in a deed.
Credit Scoring
This is a way in which a lenders assess whether you are a good risk to offer a mortgage to by analysing your overall financial profile.
Credit Search
A check the lender makes with a specialist company to find out whether you have any adverse credit including defaults, CCJs, mortgage arrears or missed payments.
Debt Consolidation
This is a means to repay high interest debts (such as credit cards and personal loans) by incorporating them into a new single piece of debt, normally a mortgage. It provides the benefit of lower interest rates and lower monthly repayments.
Deed
A legal document which is 'signed, sealed and delivered' not just signed. This has special significance in law. Title to both freehold and leasehold property can only be transferred by deed.
Default
Where a payment is not made to a creditor.
Deposit
The amount of money you put towards buying your property, made up to the total purchase price by the mortgage.
Disbursements
A solicitors expenses for example: land registry fees, searches, faxes etc.
Discount Interest Rate<>
An interest rate which is set at a set margin below the lenders' own standard variable rate usually for a fixed number of years.
Early Redemption Penalties
This a fee charged by a lender if you redeem part or all of your mortgage before the agreed date. These charges mainly apply to fixed rate, discounted rate and tracker mortgages during the particular scheme period.
Easement
A right, such as a right of way, which the owner of one property has over an adjoining property.
Endowment Policy
A life assurance policy with investment element designed to produce a lump sum to pay off an interest-only mortgage upon death or at the end of the term.
Equity
The amount of value in a property that isn't secured against a mortgage or loan. To work out, take the market value and subtract the outstanding balance of any mortgages and secured loans.
Equity Release
The process of releasing equity in your home in order enhance your income in retirement.
Exchange of Contracts
This is the point at which you and the person selling the property sign and swap identical contracts that show the price and which fixtures and fittings are being sold, as well as the completion date. When contracts are signed, everything becomes legally binding and if you or the seller pull out before completion you or they will have to pay compensation.
Fixed Interest Rate
The interest rate charged on a mortgage is set for an agreed period.
Fixtures and Fittings<.dt>
Any item that is attached to a property and so legally is part of the property.
Flexible Mortgage
Flexible mortgages allow you to make overpayments, borrow back money previously overpaid and take payment holidays where overpayments have already been made.
Freehold
This is where you own the property and the land that it is on.
Gazumping
This is when the person selling the property accepts an offer and then accepts a new, higher offer from another buyer before exchange of contracts.
Ground rent
A fee that a leaseholder has to pay the freeholder every year.
Guarantor
This is the person liable for the repayment of a mortgage if a borrower fails to maintain their mortgage payments. This is usually a parent or close family relative.
Higher Lending Charge
See MIG
Home Buyers Report
This is a property survey which lies between a mortgage valuation and a full structural survey, arranged by the lender in addition to the mortgage valuation. It is a multi-page report which gives the buyer some piece of mind about the property they are purchasing.
Income Multiples/multipliers
The size of the mortgage that the lender will offer can be worked out by multiplying your income by a set figure, normally 4 x single income or 3 x joint income. However more latterly lenders tend to use an affordability calculator.
Income protection insurance
This covers accident, sickness and unemployment. It provides a monthly payment if you cannot work for an extended period due to an accident, sickness or unemployment.
Income reference
This is confirmation from your employer that you earn the amount you stated when you made your mortgage application. If you are self employed, the lender may require confirmation from your accountant.
Interest Only Mortgage
With this type of mortgage, the borrower is only required to pay interest on the amount borrowed during the mortgage term. It is the borrowers responsibility to ensure that enough funds will exist (either through an investment policy or other means) to repay the mortgage at the end of the term.
Intermediary
A mortgage broker or advisor who locates the most appropriate mortgage for borrowers and arranges the mortgage on their behalf.
ISA’s
This is a tax free way to own shares or unit trusts. You can also use ISA’s as a way to repay an interest only mortgage with some lenders.
Land Registry Fee
This is the fee paid to the Land Registry to register ownership of an area of land.
Leasehold
If you buy a leasehold property, you own the property for a set number of years but not the land on which the property is built, as opposed to freehold where you own both the property and the land indefinitely.
Lifetime Mortgages<.dt>
You take a new, larger mortgage, or increase a mortgage you already have and use some or all of the extra money you have raised for home improvements, holidays and so on.
Local Authority Search
A check carried out by the buyer's solicitor to check that there are no proposed developments in the area of the property such as roads, railways or other buildings. The check also includes details of the planning permission for the property and whether the council has served any enforcement notices on the property. A fee is charged for this service.
LTV
Loan to Value. This refers to the size of the mortgage as a percentage of the value of the property i.e. A £90,000 mortgage on a house valued at £100,000 would mean that the LTV would be 90%.
Mortgage Indemnity Guarantee (MIG)
This is insurance that covers the lender in case your property is repossessed and the lender cannot get back their money. Although this insurance protects the lender, you have to foot the bill. Some lenders will add the MIG on completion of the mortgage, whilst others will deduct the relevant amount at completion. This usually applies to high percentage mortgages of over 75% loan to value. (Also known as "higher lending charge".)
Mortgage
A loan to buy a property where the property acts as security for the loan.
Mortgagee
The Company or Organisation that lends you the money.
Mortgagor
The person taking out the mortgage.
Mortgage Payment Protection Insurance (MPPI)
This insurance is designed to cover the borrowers mortgage payments in case of accident, sickness or disability with cover lasting the full term of the policy.
Negative Equity
This is where the money you owe on the mortgage is greater than the value of your property.
Non-Status
This is where a lender may not require proof of income from you and a loan would be made on the basis of a good credit history and affordability checks and normally a low loan to value (LTV). (Also known as Non-Verification)
Overpayments
Overpayments can be made on some mortgages such that additional funds are paid back to the lender to reduce the outstanding capital balance. Flexible mortgages allow overpayments to be made without penalty allowing significant interest savings over the mortgage term.
Payment Holiday
A period during which the borrower makes no mortgage payments. Normally only available to borrowers with a flexible mortgage who have previously overpaid their monthly repayments.
Personal Pension
This is a structured savings and investment plan to provide for your financial needs after you retire. You can use some or all of the proceeds from a personal pension to pay of an interest only mortgage.
Portable
A term used to describe a mortgage that can be transferred between properties when you move house - a process known as "porting".
Redemption
The process of paying off your mortgage either when moving house, remortgaging or at the end of the mortgage term.
Redemption Penalties (Early redemption penalties)
Penalties levied by the lender when a borrower pays off the mortgage during an agreed scheme period normally found on fixed, tracker or discounted rate mortgages.
Remittance Fee
A charge made by the lender for sending mortgage funds to your solicitor just before the purchase is completed, also know as telegraphic transfer fees.
Remortgage
The process of paying off one mortgage with the proceeds from a new mortgage using the same property as security.
Repayment
Your monthly payments are partly to repay the amount you borrowed and partly to pay the interest on the outstanding mortgage. This is also known as a capital and interest mortgage.
Repossession
The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt and any other loans secured against it.
Right to Buy
A tenant in a council owned property may purchase the property at a discount off the market valuation depending on length of their tenancy.
Sealing Fee
This is a charge made by lenders when you repay a mortgage in full, often referred to as an exit fee.
Searches
These are checks carried out during the conveyancing process. These checks are made with local authorities and other official organisations to check planning proposals and other matters that may affect the value of the property and it's saleability in the future before making a loan.
Self Certification
Normally when a borrower applies for a mortgage he or she will be asked to provide payslips or company accounts to prove their income. If it is difficult or extremely inconvenient for you to provide this documentation, you can choose to self-certify your income. This involves signing a declaration which states your income sources and amounts, but you don't have to provide evidence. Lenders will normally charge you higher interest rates and set up fees than average and offer you a more limited range of mortgages if you choose to self-certify your income.
Shared Equity
A scheme operated by a developer where the developer retains a percentage equity of around 10% in the property. Thus the developer holds a second charge over the property. The 10% owing may be interest free or may incur interest and be added to the total amount owing on the property.
Shared Ownership
A scheme operated by a housing association where a person owns part of the property and pays a mortgage on this, while the housing association owns the rest of the property and the person pays rent on this. There is often an option to purchase the full amount at a later date - called "staircasing".
Stamp Duty
This is a tax payable on the purchase of a property by the purchaser. For properties with a purchase price of up to £125,000, no stamp duty is charged. For properties between £125,000 and £250,000, 1% stamp duty is payable on the purchase price. For properties between £250,000 and £500,000 it is 3% and for properties over £500,000 it is 4%. The Government have waived stamp duty up to certain levels in some inner city areas to encourage area regeneration.
Structural survey
This is the most comprehensive review of the property available and is normally carried out by professional surveyor. This has to be arranged by the purchaser and will be in addition to the valuation carried out by the lender.
SVR
Standard Variable Rate. This is the interest rate that the lender charges. The lender can change the rate and your repayments are adjusted accordingly.
Term
The number of years over which you take the mortgage.
Term Assurance
This is an insurance policy designed to repay the mortgage on the death of the insured person. Level Term Assurance covers a principal sum throughout the policy term and pays out the full amount on death. Decreasing Term Assurance is designed to repay the outstanding mortgage balance of a repayment mortgage upon death. Term Assurance may also pay out early on the diagnosis of a terminal illness, and other benefits can be added, such as critical illness cover.
Tie-in period
The period of time during which there are early redemption penalties should you redeem the mortgage in part or full.
Title Deeds
Documents that show proof of who owns the freehold and leasehold of the property.
Transfer deed
This is a document that, once you sign it, transfers the ownership of a property to you.
Unencumbered
This is where the property is owned outright and no mortgages or loans are secured against it.
Valuation
A simple check of the property made by the lender in order to find out how much it is worth and whether it is suitable to lend a mortgage on.
Valuation Fee
A fee paid by a borrower to cover the cost of the lender checking how much the property is worth and to make sure it is a suitable security for the mortgage loan.
Variable Rate
An interest rate that goes up and down and your repayments change accordingly.
Vendor
The person selling the property.

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