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To help you get the most from the information on this website we have included a ‘Jargon Buster’, jargon is listed in alphabetical order so please just click on the relevant letter.
Accident, Sickness and Unemployment Insurance (ASU)
Insurance cover arranged by a borrower to protect against a situation which means that you cannot meet your mortgage payments. The unemployment part actually only covers redundancy rather than resignation or getting sacked. Accident and sickness will also have major restrictions such as an act of self-harm or injury due to use of alcohol or drugs.
Annual Percentage Rate (APR)
The yearly rate charged for money borrowed shown as a percentage.
Arrangement Fee
A charge made by the lender to set up your mortgage.
Arrears
Missed payments, or any money that has not been paid on time: if a borrower has missed the last two mortgage payments they are ‘in arrears’. At Simply Mortgage, we are willing to accept mortgage applications even where mortgage defaults or arrears exist
Buildings Insurance
Insurance cover arranged by a borrower to protect against damage to their property, for example fire and flood. A home owner must have this particular insurance while they have a mortgage.
Capital & Interest
This can be known as a Repayment Mortgage, payments made by the borrower go towards the total borrowed and also the interest charged.
Capped Rate
A mortgage interest rate that has a limit (cap), for example the cap may be set at 6% for 2 years and this would mean that during the 2 years the cap was in place your mortgage interest rate would not go above 6%.
Chain
Houses involved in the buying and selling process. The first person in a chain does not have a property to sell and the last person will not be buying a house or will be buying an empty house. As you can tell there can be a lot of people involved in one chain.
Completion
The end of the buying process: when mortgage funds are transferred and legal ownership of a property changes from one person to another.
Contents Insurance
Insurance cover arranged by a borrower to protect against damage to items inside the home, for example furniture and clothes.
Conveyancing
The legal process of buying and selling property involving transfer of the title deed from the current owner to a buyer.
County Court Judgement (CCJ)
A court order against a borrower to pay money owed. County Court Judgements can affect your ability to obtain credit as they are recorded for up to 6 years on the Register of County Court Judgments.
Credit Reference
A report showing your recent credit applications, whether you have missed any payments and any potential credit problems will be obtained by a lender from one or more of the main Credit Reference Agencies in the UK to help assess your credit worthiness.
Decision in Principle
A lender can usually tell if your mortgage application will be successful using information provided by you. This is called a Decision in Principle; it is subject to references and other conditions.
Defaults
Missing repayments on borrowed money is sometimes known as defaulting. A default is recorded on a person’s credit file and can affect their ability to obtain credit.
At Simply Mortgage, we are willing to accept mortgage applications even where mortgage defaults or ‘arrears’ exist.
Deposit
A cash contribution toward the purchase of a property made by the borrower.
Discount Rate
A marked down rate of interest that is less than the lender’s Standard Variable Rate (SVR).
Early Repayment Charge (ERC)
A charge that can be made by the lender for paying off a mortgage in part or in full before the agreed time if you have a special rate, for example fixed or discounted. The charge can be a percentage of the loan or equivalent to a set number of monthly repayments.
Equity
The difference between what is owed on a mortgage and the property’s value on the market.
Exchange (of contracts)
When a mortgage offer is in place, all conveyancing is complete, a deposit has been paid and all people in the chain have agreed on a completion date contracts drawn up by a solicitor are signed by both the seller and the buyer. Once these contracts are exchanged the buyer is legally obliged to purchase the property.
First Time Buyer
Someone who has not purchased a property before and has no property to sell.
Fixed Rate
A mortgage interest rate that is fixed, for example it may be set at 6% for 2 years and this would mean that for 2 years the mortgage interest rate would be 6%
Freehold
Owning a freehold property would mean you own the property and the land it is built on.
FSA
The Financial Services Authority. The UK regulator for the mortgage industry.
Full Structural Survey
The most in depth (and expensive) property inspection available. The surveyor will examine the property in detail and will look at anything specific about the property and surrounding land on request. If something is missed in a Full Structural Survey that later becomes a problem legal action can be taken against the firm to recover any costs incurred.
Higher Lending Charge (HLC)
A charge that can be made if a borrower wants to borrow more than 75% of the property’s value to cover an insurance premium that protects the lender against losing money.
Homebuyer's Report or Homebuyer's Valuation
A more detailed home inspection than a basic valuation carried out by a surveyor. A report is given showing the condition of the house, its current market value and any urgent repairs that may need to be completed.
Initial Interest
The first payment on a mortgage may be higher than future payments as it will include interest for the time between completion and the first payment date – ‘initial interest’. For example, if mortgage repayments are normally due on the 30th of each month and the loan completes on the 14th of March, the first monthly repayment may be due one month from 30th March, on 30th April and this payment will include the initial interest as well as the usual amount.
Interest only
Mortgage payments only cover interest on the loan and not the original loan itself. At the end of the term the original loan amount will still be outstanding.
Key Facts Illustration (KFI)
Mortgage Regulations state that all borrowers must be given a Key Facts Illustration to show the rate of interest, repayment values and any applicable charges.
Land Registry
All ownership and mortgages are recorded on a register at HM Land Registry.
Land Registry Fees
A solicitor will request Land Registry Fees as part of the conveyancing process. This covers the administration needed to change an entry for a change of ownership or a change of mortgage.
Leasehold
Owning a leasehold property would mean you can only use the land for a fixed period of time.
Lender
A company that will lend money to finance a mortgage or loan.
London Interbank Offered Rate (LIBOR)
The rate that banks use to buy and sell money to each other, this can vary from day to day.
Life Insurance
Insurance cover arranged by a borrower to cover the event of death.
Loan to Value (LTV)
The amount of a mortgage loan as a percentage of the overall value of the property, for example a property valued at £100,000 with a deposit of £10,000 means a loan of £90,000 will be needed: 90% of the value of the property.
Loan - Secured
A loan that uses the equity in a property to protect the lender against losing money if the borrower fails to make repayments; the property can be repossessed if payments are missed.
Loan – Unsecured
If a loan is for a relatively small amount or the borrower is in a financial position that means there is little risk to the lender then security is not required.
Mortgage
A secured loan to cover the purchase of a property, the property itself provides the security the lender needs to protect against losing money.
Mortgage Deed
A legal document outlining the mortgage terms that have been set out by the lender and agreed by the borrower.
Mortgage Term
The length of time that a mortgage is set to run, at the end of this time the loan must be completely repaid.
Negative Equity
When the value of a property is less than the amount owed on the mortgage used to purchase it.
No Credit History
If a potential borrower has not used any credit before (for example credit cards, store cards, loans etc) it is difficult for the lender to obtain a Credit Reference or assess credit worthiness as there is no previous behaviour to report.
Non Status
A loan is granted without the lender investigating the borrower’s credit history or income.
Open Market Value
The value of a property being sold on the open market based on having a willing buyer and seller.
Payment Schedule
A schedule showing the monthly payments that must be legally made when a loan starts.
Payment Protection Insurance.
Insurance cover arranged by a borrower to protect against a situation where you are unable to make mortgage payments.
Redemption / Redeeming your Mortgage
Paying off a mortgage in full – this can be at the end of the mortgage term or when selling a property.
Remortgage
When a new mortgage loan is taken on the same property – the existing mortgage is redeemed and a whole new loan is started. This could be due to moving mortgage lenders or to extend the borrowing with an existing lender.
Repayment Mortgage
Every payment made covers paying off the loan itself and also the interest charged on it. At the end of the term the loan will be completely paid off.
Right to Buy
Council Tenants have the Right to Buy their property with a discount of up to £26,000.
Self Certification / Self Certified Mortgage
This type of mortgage generally has a higher rate of interest. It is mainly suitable for those who are self employed or a contract worker as you cannot usually show evidence of a regular income in this situation. It is possible to tell certain lenders your income level on an application, some lenders will require a letter from an accountant or evidence of your income to show that you are able to afford repayments.
Stamp Duty
Stamp duty is a tax paid when buying land or property if the purchase price is more than £125,000 (as of 23 March 2006). It will be between 1 and 4% of the price paid.
Tracker Rate
A rate of interest that is linked to the Bank of England Base Rate – if the base rate increases you will pay more or if the rate decreases your payments will be less.
Total Amount Payable (TAP)
The amount payable to the lender in total, including all interest, charges and the original loan amount.
Typical APR
An example rate of interest that is used to give a borrower an idea of the costs involved in choosing a particular product.
Valuation
A brief inspection of a property organised by a lender to confirm its market value.
Valuation Fee
A fee that is charged by a lender to carry out a valuation of a property.
Variable Rate
A rate of interest that varies according to market conditions if the rate increases you will pay more or if the rate decreases your payments will be less.