GLOSSARY OF TERMS

Category: Info

Although we will always attempt to not use jargon, there are times when we need to use the correct or official terminology.

We gathered some of the most common terms and phrases into one handy guide.

When in doubt please do not hesitate to ask us.

A

Agreement in Principle

A document from your mortgage provider telling you how much they might be prepared to lend you. Also known as a Decision in Principle.

APR (Annual Percentage Rate)

The amount you pay each year to borrow money. This reflects the interest on your loan and all other charges.

Arrears

Money that is owed and should already have been paid.

B

Bank Base Rate

The interest rate set by the Bank of England (BBR – Bank Base Rate), which is used as the benchmark by other financial providers when they are setting their charges. This can have an impact on mortgage interest rates if the BBR moves up or down.

Balance Outstanding

The amount you still have to repay on your mortgage. This may differ to the settlement amount which would include any fees and early settlement charges etc.

Bridging Loan

A loan lent by your bank or another lender to cover the gap between two transactions, such as buying a property before your current home has been sold.

Broker (Mortgage)

A specialist who can give you professional advice on mortgages. There are three types:

  1. An adviser who only provides mortgages from one source e.g., a bank adviser
  2. An adviser who has a limited offering of mortgage products
  3. A “Whole of Market” adviser like Green Pea Mortgages, as the name implies, who has access to all lenders    

Building Survey

When buying a property, the buyer might want to arrange for a surveyor to inspect the building to identify any faults, structural problems, and any other potential issues. This is different from the survey carried out for a mortgage valuation, which is carried out by the lender which is known as a “Mortgage Valuation”.

Buildings Insurance

An insurance policy covering the cost of repairing or rebuilding your home if it suffers serious damage in a storm, fire, flood, or other disaster.

C

Collateral

An asset that can be used as a guarantee against a loan.

Completion

When the purchase has been completed and you have become the legal owner of the property. Also applies when a remortgage legally takes effect.

Completion Date

The date when the legal process of buying a house has been completed, the documents and funds have been distributed to the right people and the estate agent is told to give you the keys to the property.

Contents Insurance

An insurance policy covering items that are not attached to the property, such as furniture, appliances, and personal possessions, in case they’re accidentally damaged or stolen.

Contract

An agreement between the buyer and seller outlining the terms and conditions of the sale. This will be drawn up by your Conveyancer or Solicitor.

Conveyancing

The legal transfer of property from one owner to another.

D

Deeds

A legal document stating who owns a property.

Deposit

The amount of money a buyer is contributing to the purchase price. Usually, a mortgage covers the rest.

Disbursements

Extra charges that arise while you are buying a property, such as Land Registry fees, search fees, Land and Buildings Transaction Tax and stamp duty. This money will be given to your Conveyancer or Solicitor, and they will pay it to the relevant parties on your behalf.

Draft Contract

An early version of your contract, covering details such as the agreed sale price of the property, the address and the names of the seller and buyer.

E

Early Repayment Charge (ERC)

If you pay off your mortgage while you are still in the ERC period, you will have to pay an additional amount to your lender for the early repayment charge. The ERC usually applies for the initial product period e.g., for a 5-year fixed interest rate period. Some mortgage products have no ERC period.

Equity

The value of your property minus the amount that is outstanding on your mortgage.

Equity Release mortgage (Also known as a Lifetime Mortgage)

Available to borrowers aged 55 years and older. An Equity Release mortgage enables you borrow a proportion of your home’s value. They can also be used to purchase a property.

Exchange of Contracts

The point at which contracts are exchanged and you are legally committed to completing the purchase.

F

Freehold

An arrangement that gives you outright ownership of a property and the land it is standing on.

Financial Conduct Authority (FCA)

Are an independent public body who act as a conduct regulator for around 51,000 financial services firms and financial markets in the UK.

Fixed Rate Mortgage

A mortgage with a fixed interest rate for a specified period, usually 2,3 or 5 years.

Fixtures and Fittings

Fixtures are items that are fixed to the property, such as walls, and fittings are items that are not attached, such as furniture.

Full Structural Survey

A comprehensive report on the condition of a property, looking at everything from the roof and walls to the plumbing, electrical wiring, and drains. This could be crucial for anyone purchasing an older property.

G

Gazumping

When a seller accepts an offer from a buyer, but then accepts a higher offer from somebody else.

Guarantor

Somebody who guarantees to pay someone else’s loan or mortgage if they cannot afford to. For first-time buyers, this is often a parent.

H

Help To Buy – Equity Loan

A government scheme set up to help anyone struggling to save a deposit, such as first-time buyers who feel priced out of the housing market.

Higher Lending Charge

An amount charged by some mortgage providers if the amount borrowed is a high percentage of the property value.

Home Buyer’s Report

A report outlining the general condition of a property to identify if further reports are needed, e.g., electrical reports or damp report.

I

Instruction

When a seller appoints an estate agent to put their property on the market.

Interest Rate

This is the amount charged on the money borrowed, by a lender. The interest rate on a loan is typically noted on an annual basis known as the annual percentage rate (APR).

J

Joint Mortgage

A mortgage with more than one person named, such as a husband and wife.

L

Land Registry Fees

A fee to the Land Registry that must be paid when you register that you are the owner of a property.

Lease

A contract that means you can occupy a property for a specific period of time and will probably have to pay ground rent to the freeholder every year.

Lifetime mortgage (Also known as Equity Release Mortgage)

Available to borrowers aged 55 years and older. An Equity Release mortgage enables you borrow a proportion of your home’s value. They can also be used to purchase a property.

Loan-to-Value (LTV)

The ratio between the value of the loan you’ve taken out and how much the property is worth.

An application to the local authority for details on any issues that may affect buying or selling a property. This could include the property being situated in a conversation area, subject to a tree protection order or being a listed building.

Lump-sum Reduction

Where you pay off a large part of your mortgage early.

M

Mortgage

A type of loan that lets you borrow money from a lender to pay for a property. The loan is secured against your property, and you will need to make monthly payments to pay back the loan over the agreed term. If you cannot keep up with the scheduled repayments, the lender has the right to start repossession proceedings.

Mortgage Offer

The formal offer given by a mortgage provider detailing how much they will lend you.

Mortgage Valuation

An assessment carried out for the benefit of the mortgage lender to confirm the value of the property and is suitable security for a mortgage.

N

Negative Equity

If the value of your property falls to less than the amount you owe on your mortgage.

O

Offer

A non-binding bid made by someone who wants to buy a property.

Off-plan

A property that hasn’t yet been built, and only detailed plans for it currently exist.

Offset Mortgage

A mortgage linked to your savings, which are then are used to reduce the amount of mortgage interest you pay, or the monthly mortgage payment.

Overdue Payment

Where you trade the value of your current property against a new-build house.

P

Part Exchange

Where you trade the value of your current property against a new-build house.

R

Repossession

A mortgage lender can repossess your home if you do not maintain the repayments on your mortgage. However, this tends to be a last resort if you and your mortgage lender cannot come to an agreement to get back on track with your repayments.

Redemption

The process of paying off all or part of your mortgage, along with other related fees.

Repayments

The amount you must pay back each month to your mortgage provider.

S

Sale Agreed

The buyer has made an offer that is been accepted by the seller of the property, but this is only a verbal agreement and not contractually binding.

Searches

When your Solicitor or Conveyancer works with the local authority to find out any information that may be relevant to a new owner, such as local development plans.

Stamp Duty

A tax you must pay when you buy a property, the amount is set by the government and the amount paid is based on the purchase price.

Standard Variable Rate (SVR)

A lender’s SVR is the rate you usually move to once any initial fixed or tracker rate ends. We can advise you on the best options as your fixed or tracker rate is due to come to an end.

Subject to Contract

The property owner has accepted an offer made by a buyer, but it’s not yet legally binding as no paperwork has yet been completed.

Survey

An inspection of a property to ascertain, either one of or all of, it’s value, condition and saleability. See also Home Buyer’s Report and Full Structural Survey

T

Title Deeds

Legal documents that prove you are the owner of a property or piece of land.

Tracker Rate

A mortgage with a variable rate, which usually track the base rate set by the Bank of England.

V

Variable Interest Rate

An interest rate that can change over time. A lender can decide if it wants to increase or decrease its variable rate mortgage, and these sometimes come with an initial discount too. Alternative, a tracker rate mortgage moves with BBR, as outlined in the terms and conditions.

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