Stands for ‘Annual Percentage Rate’ which helps you compare the cost of different mortgage deals. It takes into account the amount of interest you will pay, the length of the term of the mortgage, and certain other charges such as any arrangement fee.
Lenders sometimes charge a fee to cover the work involved in setting up your mortgage or for certain mortgage rates.
Bank of England base rate
This is also known as the Bank of England’s repo rate. This is announced from time to time by the Bank of England’s Monetary Policy Committee.
What you must have to protect your mortgaged property against hazards such as fire, flood and subsidence.
This is a technical report following an inspection of the property. It will give you a comprehensive account of the condition of the property, describing any structural or other defects.
Capital and interest mortgage
Also known as a repayment mortgage. Your monthly payments gradually pay off the money (capital) you’ve borrowed, and also cover interest on the amount outstanding.
Your interest rate won’t go above a certain level – the ‘cap’ – during the capped rate period. This means that you can enjoy any rate reductions, yet have the comfort of knowing that your rate won’t go above the cap.
Certain mortgage products offer cashback, which means you get a cash lump sum when you enter into the mortgage to spend on anything you want.
CAT standard mortgages
The Government has laid down CAT standards – fair Charges, easy Access and decent Terms – to help people identify mortgages which meet minimum standards. If a mortgage is described as meeting the CAT standards it doesn’t mean that it is ‘Government approved’ or necessarily right for you.
The day on which a property becomes legally yours.
Conclusion of Missives
The Scottish equivalent of exchanging contracts.
Protection for items in your home, including furniture and personal possessions – in case they’re stolen, lost or damaged.
A legal practitioner who deals with the conveyancing of land.
The legal process involved in buying and selling a property.
Lenders will assess the suitability of your application using a technique known as credit scoring.
Current Account Mortgage
This is still a fairly new type of mortgage but it is becoming more common. Essentially, you have a mortgage account and a current account. Any positive balance in the current account is deducted from the mortgage balance, thus reducing the amount you owe. This is called offsetting and will reduce the interest charged on your mortgage.
With this method of calculating mortgage interest, it is charged on the amount of mortgage outstanding from day to day. This means lenders take into account any changes in the amount you owe on a day-to-day basis.
The money you pay on exchange of contracts as part of your initial contribution to the purchase of your home.
A mortgage you can arrange exclusively over the telephone or internet.
All the various costs itemised on your conveyancer’s invoice for carrying out your homebuying legal work.
You have to pay this to some lenders for releasing their hold over a property once you’ve paid off your loan.
This means interest is charged at the variable base rate that applies to the mortgage, less a discount for a set period. This means the rate, and your monthly payment, will vary – up or down – whenever the variable base rate changes, but will remain below the variable base rate during the discounted rate period.
The difference between the amount you owe on your mortgage and the current value of your property.
Exchange of contracts
The swapping of contracts between a buyer’s conveyancer and a seller’s conveyancer. Once you have exchanged contracts you are both legally bound to the transaction.
A form of legal title applicable only in Scotland.
Fast Track Voluntary Arrangements (FTVA)
An FTVA is a binding agreement with your creditors to pay all or part of the money you owe them. You can only enter into it after you have been made bankrupt.
Financial Conduct Authority
The UK regulator for mortgages
Most mortgage lenders lending money to enable someone to buy their home would require a first charge. This means the lender has first call on any funds available from the sale of the property to clear the outstanding mortgage debt.
A rate of interest guaranteed not to change over a fixed period of time.
A form of legal title to land which means you are the absolute owner of the property and the land it’s on.
When you borrow extra funds against the value of your home. The loan is added to your main mortgage and your payments recalculated.
Someone who guarantees to repay your mortgage if you can’t borrow enough to buy the home you want. Parents, for instance, may act as guarantors for their children when they buy their first home.
Higher Lending Charge
Also known as a mortgage indemnity guarantee policy (MIG). This is basically an insurance policy that the lender will set up if you borrow more than a set percentage of the property value.
Homebuyer’s Survey & Valuation Report
A property survey that includes a valuation and should reveal any major faults in the property.
A way of referring to both buildings and contents insurance.
Key Facts Illustration (KFI)
The KFI is a mortgage quotation detailing all of the costs and payments for the mortgage you are applying for. Each broker or lender must use the same basic format for KFI’s.
The way lenders work out how much you can borrow, usually by multiplying your gross annual salary. Usually up to 5 times salary or 4times combined salaries if buying jointly.
Independent Mortgage Broker
A mortgage broker who is authorised and regulated by the Financial Services Authority to conduct mortgage business. Mortgages must be sourced from the whole mortgage market, not a preferred list. You must be given a choice of paying a fee only for your mortgage advice.
You only pay interest to your lender throughout the mortgage term and your mortgage balance doesn’t reduce. At the same time, you put money into a separate investment which should grow and pay off the mortgage as scheduled. You must make sure you keep premiums up to date on any mortgage investment products.
Individual Savings Account. A tax efficient shelter for investments in stocks and shares, life assurance and cash. Can be used as a way of repaying an interest-only mortgage.
Land Registry Fee
Your conveyancer pays this on your behalf to register your details in the Land Registry records once you’ve bought a property or changed your mortgage lender.
This means you own a property for a set number of years. When the lease expires, the property returns to the freeholder. Flats are commonly sold as leasehold.
A form of insurance by which someone’s life is insured. Life assurance policies can run parallel with a repayment mortgage, so the mortgage will be repaid if you die before the end of the term.
Local authority search
Part of the conveyancing process when you buy a property, carried out by your conveyancer. It gives details of any matters which, from the local council’s point of view, affect the property. It reveals any proposed changes to the local area, such as road improvements, and details any planning permission given for the property.
Loan to value is the proportion of the value or price of the property (whichever is the lower), that you borrow on a mortgage. For example, a £90,000 mortgage on a house valued at £100,000 would mean a LTV of 90%.
A legal document establishing a mortgage on a property.
A document issued by a lender confirming how much they will lend including the terms and conditions for the mortgage.
The length of time over which you agree to pay back your mortgage – usually 25 years, but it can be longer or shorter.
This is when the amount you owe on your mortgage is greater than the value of your property. It particularly becomes a problem if you want to move house.
When you’re allowed to pay more than your normal monthly payment, so you can pay off your mortgage earlier if you want and save on interest charges.
You can stop making mortgage payments altogether for a limited period agreed with the lender.
An interest-only mortgage where you use a personal pension plan to not only provide for your retirement, but also to repay your mortgage on maturity.
Amount you pay on a regular basis, usually for an insurance policy.
When you arrange a new mortgage on your home, with a different lender and use the new mortgage to pay off the old one.
Repayment fees / Redemption penalties
With some mortgages you have to pay a repayment fee or early repayment charge if certain things happen. For example, if you pay off some or all of your mortgage, or you transfer to a different mortgage product.
Your monthly payments gradually pay off your mortgage as well as the interest. See capital and interest mortgage.
See the Bank of England base rate.
A fee charged by the lender for sealing your deeds.
Second charge mortgage
Also known as a secured mortgage or secured personal loan. Essentially a loan that is secured on your property as well as the main mortgage.
Government tax you have to pay on the purchase price of a property.
A specialist report from a structural engineer on the condition of a property.
The amount paid out on the death of a policy holder.
Tracker rates vary in line with changes to the Bank of England base rate. During the tracker rate period, any changes to the Bank of England base rate are passed on to you in full.
You can under pay up to any previous over payments. You can pay less than your normal monthly mortgage payments for a limited period, but you have to build up a fund of overpayments first.
Arranged by your lender to find out if the property is worth the amount you’ve agreed to pay, and therefore suitable to lend a mortgage on.
Variable base rate
The variable base rate is the basic rate of interest charged on a mortgage. This may change in reaction to market conditions, so your monthly payments can go
Whole of market mortgage broker
A mortgage broker who is authorised and regulated by the Financial Conduct Authority to conduct mortgage business. Mortgages must be sourced from the whole mortgage market. Broker may charge and fee and/or be paid commission from the lender.
This list is intended as a guide only and is not an exhaustive list of all the aspects of a mortgage. Please contact us if you have a question which is not listed here.