understanding the mortgage jargon

a to z jargon buster

understanding the mortgage jargon

a to z jargon buster

a

Absolute title

Generally means there are no limits on ownership

Additional borrowing

The term used when an individual increases their borrowing to release some of the equity available in their property

Agreement

An agreement between two or more people to enter into a legal arrangement

Agreement in Principle (AIP)

Same as a Decision in Principle – An agreement to lend based on initial assessment of your income and outgoings

Annual Percentage Rate (APR)

The interest payable on what you have borrowed is added up with all other fees, eg product fees and then expressed as an annual rate of charge

Annual Percentage Rate of Charge (APRC)

The standard interest rate calculation which reflects the total amount of interest that will be paid over the entire term of the loan

Applicant

A person who makes an application for a mortgage

Arrangement fee

The fee charged for the administration of the mortgage

Asking Price

This is the price the seller/vendor wants to get for sale of their property, this can be negotiable

Assured Shorthold Tenancy (AST)

A type of tenancy agreement which entitles the landlord to a possession order immediately after the initial agreed period

Attorney

A person who is given the responsibility to deal with someone else’s financial or other personal affairs through a legal document called a Power of Attorney

b

Balance sheet

It is a statement of a business’s assets and liabilities

Bank

A financial institution licensed to receive deposits and make loans

Bank of England Base rate

This is the variable interest rate set by the Bank of England monetary policy committee (MPC)

Bank rate

The rate at which bank of England lends to other financial institutions

Bankrupt

A person who is insolvent

Bankruptcy

This is a formal process for dealing with personal insolvency

Basic essential expenditure

Spending to meet day to day needs, eg food, heating

Basic quality of life expenditure

Things such as clothing, personal items

Binding Offer

This is a document issued by a lender with no requirements to be met

Booking fee

A non-refundable fee charged on some mortgages to secure a particular mortgage deal

Borrower

A person who takes a loan from a lender under an agreement with an intention to pay it back later typically with interest

Bridging finance / Loan

This is a short term loan taken out by a borrower against their current property to finance the purchase of a new property, can be useful when buying a new property and sale of a previous property will not complete in time

Broker fees

The fees a mortgage broker charges for their service to arrange a mortgage

Building insurance

This covers the cost of repairing damage to the structure of the property, the lender will always expect an individual to have building insurance before completing on the mortgage

Building Regulations

These are designed to set standards for the design and construction of buildings

Building Society

A building society is a financial institution owned by its members as a mutual organisation

Building Survey

This is a thorough and complete inspection of the property carried out by a qualified surveyor

Business Borrowers

Mortgages taken out by individuals for business purposes

Business partnership

This is an arrangement between self employed people to work together

Buyer

The person looking to buy the seller’s property

Buy-to-let

If you are planning to buy a property to rent out then you need a buy to let mortgage

c

Capital

Money that you have invested or borrowed to buy a house

Capital Gains Tax (CGT)

This is tax on the profit when you sell a property that has increased in value

Capital Repayment

Your monthly payment is made up of capital, which is the amount you have borrowed and interest, which is what the lender charges you on the amount you have borrowed

Capitalisation

Adding the arrears to the total amount owing on the mortgage, with repayments increased to reflect the additional amount owed

Cash purchase

Buying a property without any form of finance

Chancel Repair Liability

This requires landowners to pay for the repair of the part of the church containing the altar

Commercial borrower

A commercial mortgage secured on a commercial property, for eg on a factory instead of a residential property

Committed expenditure

These are generally credit agreements and other contractual commitments, eg loans, mortgage payments

Commonhold

A form of land tenure of a unit within a multi – occupancy building but with shared responsibilities for common services

Completion date

The solicitor ensures all monies have changed hands and let you know when you can move into that dream home

Completion fee

A fee for electronically transferring the mortgage funds to the acting solicitor, licensed conveyance or existing lender

Concessionary purchase

Its a process of buying a property under the market value

Condition report

This is a type of valuation which is focused mainly on the condition of the property, without providing a market value

Consumer Buy-to-Let (CBTL)

This is where the purpose of arranging a mortgage is not wholly for business purposes, an eg of this could be someone who has tried to sell their property but has been unsuccessful so resorts to a buy to let arrangement

Contents insurance

This covers the cost of repairing or replacing objects within the property

Contract exchange

Final step in house buying, generally this is signed when the solicitor has carried out all necessary searches

Conveyancer

In simple terms this is an individual who carries out all necessary searches in the house buying process, for eg the local authority searches, environmental searches, etc

Conveyancing

The process to transfer a property from one owner to the other

Corporate borrower

Lending to a limited company either for residential or commercial purpose

County Court Judgment (CCJ)

This is a judgment that a county court issues when someone has failed to pay money they owe

Covenants

Restrictions or conditions placed by a landowner on those who subsequently buy or lease the land

Credit Assessment

Review of an individual credit profile by a lender using a number of sources, eg bank statements

Credit Bureau

An organisation with vast database of information on individuals relating to their credit history

Credit rating

This is used by lenders to decide whether to lend you money, how much to lend you, interest rate to charge, etc

Creditor

A person or company to whom money is owning

Critical illness Cover

Lump sum benefit payable if an individual is diagnosed with a specified illness or undergo a surgical procedure

Customer Due Diligence (CDD)

This is the regulatory term for the process of verifying a customer and their identity

d

Debt consolidation

Paying off debts

Debt Relief Order (DRO)

An order granted by the official receiver to an individual with debts less than £20,000 and limited assets who cannot repay their debts

Debtor

A person, country or organisation that owes money

Decision in Principle (DIP)

An agreement to lend based on initial assessment of your income and outgoings

Default

Failure to fulfil an obligation, in particular to repay a loan

Deposit

The amount of your own money available to support your home purchase, generally the more of this you have the less you borrow from the lender

Deputy (Power of Attorney)

Appointed by the Court of Protection to look after the affairs of someone who becomes mentally incapacitated

Designated Land

These are usually areas such as conservation areas, national parks, etc

Desktop Valuation

This is a type of valuation carried out internally by a lender using computer software and does not require an inspection of the property

Detached House

This is a standalone single dwelling house for residential purposes

Discount rate mortgage

The lender normally gives you a discount on your payments for a set period, following which your repayments are placed on another payment method, for example, no payments for first 6 months then variable rate payments for set period

Daily Interest

This is when interest charged takes into account any changes in the mortgage balance from a day to day basis

Disbursements

This is the distribution of various costs to all parties involved in the transaction

Discharge Fee

This is applicable in instances when you have to pay a lender to release their hold over a property once you have settled your mortgage balance in full

Donor (Power of Attorney)

The person granting the powers to their representative

e

Early Repayment Charge (ERC)

If you repay your mortgage before the end of the agreed term or make more than the agreed additional payments allowed then you incur an ERC

Easement

Is a right that one property has over the land of another, eg rights of way

Energy Performance Certificate (EPC)

Tells you how energy efficient a building is and gives it a rating (A being very efficient and G – inefficient)

Equity

This is the difference between how much your property is worth, the balance of your outstanding mortgage and any other debts secured on the property

Equity of Redemption

This is the borrower’s right to settle the mortgage debt in full at any time up to the point of sale

Equity release

A way of releasing extra money by borrowing against the equity in your home

Estate agent

A person, organisation whose role involves selling, renting, and sometimes managing buildings and land for its clients

European Standardised Information Sheet (ESIS)

This is an enhanced version of the Key Facts Illustration (KFI)

Exchanged contracts

This is the swapping of signed contracts between the seller and the buyer

Execution Only

This is where a firm acts on an individual specific instruction and the firm gives no advice

Exit fee

This is usually the closure administration fee payable to service providers when you fully repay your mortgage

Extended tie in period

This is when some lenders add a clause in the mortgage offer that the borrower keeps their mortgage with that lender for a period of time

Equity share

This enables the borrower to buy a share in the property with the remaining share held by the lender, developer or another provider

f

Fee Saver

This usually means no application, booking or completion fees are charged

Financial Exclusion

Describes the situation in which people are unable to access financial services because they are unable to produce a type of document required

First charge mortgage

This is the first legal charge secure against the value of the property

First time buyer

An individual who has never owned a property

Fittings

Are items that the vendor would take with them on sale, example, curtains

Fixed Rate mortgage

The payments you make each month are fixed until a particular time and do not change in line with interest rate fluctuations

fixed until

This is normally the date when a fixed rate come to an end

Fixtures

These are generally permanent additions to the fabric of the property, example, fitted kitchen

Flat

This is a residential unit in a high rise building

Flying freehold

The term used when part of a freehold property extends above or below another person’s property but is not next to or touching the ground

Foreclosure

This is the legal process a lender takes control of a property, evicts the homeowner and sells the home after the home owner is unable to make full capital and interest payments on their mortgage

Foreign Currency Mortgage

This is one where the borrower’s income is in a different currency from that applying to the mortgage

Former Feuhold (Scotland)

This is a term used to describe the ownership of both the property and land that it is built on

Fraud

This occurs when a person deliberately sets out to obtain funds from another person or organisation by dishonest means

Freehold

This is an exclusive right to enjoy the possession and use of a parcel of land for an indefinite period

Further Advance

This is a top up to an existing mortgage normally over the remaining term of the existing loan

Financial Conduct Authority

This body regulates the financial services in the UK

g

Gazanging

This happens when a seller pulls out of a property transaction and decides to stay put having already accepted an offer

Gazumping

When an individual makes a higher offer on a house than (someone whose offer has already been accepted by the seller) and in doing so is able to acquire the house

Gazundering

Lowering the amount of an offer that one has made to the seller of a property just before exchange of contracts

Gifted-Equity

This is a sale of a property to a family member at a price below market value and this difference between the full market value and the reduce purchase price is used as the deposit for the purchase

Gifted-Deposit

This is when a borrower’s deposit for a property purchase comes from usually a family member by way of a gift which is non refundable, and the family member has no financial interest in the property to be purchased

Gross Yield

This is expressed as rent as a percentage of purchase price

Guarantee

A formal agreement to accept legal responsibility for the repayment of a loan if the borrower cannot

Guarantor

An individual, company or partnership that provides a guarantee

Ground Rent (mostly on Leasehold Properties)

This is rent paid under the terms of a lease by the owner of a building to the owner of the land on which it is built

h

Heave

This is a situation when underground forces cause the land below the property to rise unevenly

Help to buy

A UK government initiative to help first time buyers get on the property ladder

Help to Buy Equity Loan

This is a home buying scheme where an applicant with minimum 5% deposit can purchase a new build property up to £600,000 and the government provide a further equity loan to help with the purchase

Home Buyers Report

A type of valuation where the professional surveyor carries out a thorough inspection and detailed breakdown of the property condition

Home Information Packs (HIPs)

This is a set of documents that provides the buyer with key information on the property and must be provided by the seller or agent

Home Mover

Moving from one property to another

Home Purchase plan

An arrangement where one person buys a qualifying interest in land

Home Report (Scotland)

This is a report arranged by a seller of a property in Scotland and must be made available to prospective buyers on request

House-Price Inflation

This is increases in the price of houses over a period of time

Houses In Multiple Occupation (HMO)

These are generally properties with a minimum of 3 unconnected tenants sharing parts of a property such as kitchen, bathroom and toilet facilities

Hybrid Mortgage

These are mortgage products containing two difference products, eg part interest only and part repayment

i

In possession

Immediate entitlement to occupation, nobody else has prior claim

Individual Voluntary Arrangement (IVA)

A formal agreement between a debtor and their creditors to make reduced payments towards their total debts over an agreed period of time

Insolvency

Where a person’s liabilities exceed their assets

Interest - Only payment

Your monthly payment only pays the interest you owe. You will still have to pay the capital (the amount you have borrowed) at the end of the mortgage

Interest calculated daily

This is the interest chargeable on the outstanding mortgage balance each day

Interest rate

The rate at which you pay back interest which is generally shown as a percentage of the amount borrowed

Interest type

This may be standard variable or fixed

j

Joint tenancy

A type of property ownership where each joint owner owns 100% of the property

k

Key Facts Illustration (KFI)

This sets out all the details of all associates fees and costs for a mortgage product

Key Worker Mortgages

These are mortgages available to civil servants with a certain annual income threshold

l

Land and Buildings Transaction Tax

This is a tax to be paid if you buy or property or land worth over £145,000 in Scotland

Land and Property Services (Northern Ireland Only)

This is the department that registers ownership of land in Northern Ireland

Land Registry (England & Wales Only)

This is a department that registers the ownership of land in England and Wales

Land Title

This is a bundle of rights in a piece of property in which a party may own either a legal interest or equitable interest

Landlord

A person who rents our land, a building or accommodation

Leasehold

A form of land tenure where a person has rights over a land for a specific period only

Lender

An organization or company that lends money, for example a bank, building society

Lender fees

The fees a lender normally charges in arranging a mortgage for an applicant

Lending /Financing

This can be defined as the temporary giving of money or property to another person with the expectation that it will be repaid

Lending Into Retirement (LIR)

This is when the term of the borrowing exceeds an individual’s retirement age

Life cover

A lump sum benefit payable upon death or upon earlier diagnosis of a terminal illness

Lifetime mortgage

Enable older homeowners over a certain age to release some of the equity in their property

Limited Liability Partnership (LLP)

A form of partnership where the business is a separate legal entity from the partners who act as agents of the partnership

Listed Buildings

These are properties that are of significant architectural or historical value

Loan purpose

What the money being borrowed will be used for

Loan to Value (LTV)

It is the amount you need to borrow in relation to the value of your property. For example, if you are borrowing £80,000 to buy a property worth £100,000 then your LTV is 80%

Location

This is generally an area a lender will lend, for some lenders lend in all UK including Scotland & Northern Ireland, whilst other only lend in England & Wales

London Interbank Offered Rate (LIBOR)

The rate at which banks lend to each other

Lump sum payment

This is when an individual makes an agreed one-off payment to reduce the outstanding balance of their mortgage

Local Authority Searches Fees

This is applicable when a local authority charges for answering your conveyancer’s questions about the property you want to buy

m

Maisonette

This is a set of rooms for living in which are usually on two storeys of a larger building and have separate entrances

Maximum age

The highest age a lender will consider when lending

Maximum term

The highest term a lender will lend to, for eg some lenders will lend for a maximum of 25years, others 30years, and some 35

Minimum age

The lowest age you have to be in order to get a mortgage from a lender

Minimum term

The lowest term a lender will lend to, for eg some lenders will lend for a minimum of 5, 8, 10 years, etc

Minor

A person under the age of 18 years

Monthly repayment

This is indication of the monthly mortgage payments at the current stated interest rate

Mortgage

Is a loan taken out to buy a property or a land. The loan is secured against the value of your home until the loan is paid off

Mortgage adviser

A specialist with in-depth knowledge of the market who is able to look through a range of products to meet your needs

Mortgage broker / intermediary

A person, organisation or company that arranges a mortgage between a borrower and a lender

Mortgage calculator

A tool used by lenders to provide an illustration of how much loan you can borrow based on your income, expenditure, number of dependents, etc

Mortgage deed

A legal document which once signed confirms you are happy with the terms of the mortgage offer from the lender

Mortgage offer

Formal document issued by a lender to a borrower that confirms the lender is happy to lend the amount you want to borrow

Mortgage packager

In effect this is a middleman who operate between the lender, the intermediary or customer

Mortgage Packager

These are companies who process mortgage applications on behalf of brokers for submission to a lender

Mortgage term

This is the length of time over which a mortgage is taken

Mortgagee

Sometimes known as the lender

Mortgagor

Sometimes known as the borrower

n

National House Building Council (NHBC)

Provides warranties and insurance protection for new homes in the UK

Negative equity

This is a situation in which the market value of a property falls below the amount of mortgage loan secured on it

Net Yield

Rent minus running costs as a percentage of the purchase price

New build property

This is a property that is yet to be occupied for the first time

Non-Banding Offer

This is a document issued by a lender which sets out certain requirements to be met

Number of applicants

The number of people making the application for the mortgage

o

Offer Price

The price you as a buyer offers to buy the sellers property

Offset mortgage

A type of mortgage where your savings and current account balances are linked to your mortgage

Ordinary Power of Attorney

Enables the attorney to carry out activities relating to the donor’s financial and property affairs

Original House

The house as it was originally built

Outstanding balance

This is the outstanding amount owed to a lender under a mortgage

Overage Deed

This is used to describe a sum of money in addition to the original sale price a seller of a land may be entitled to receive if the buyer complies with certain agreed conditions

Overpayments

You can make additional payments on top of your normal monthly payments without incurring a charge, for example most lenders will allow an additional payment equivalent to 10% of the mortgage balance each year

Part & Part

A combination of both interest only mortgage and a repayment mortgage where you choose the amount of the initial mortgage you would like to be on interest only and the remainder to be repaid over the mortgage term as capital and repayment

Pay Day Loans

Short –term high interest lending designed to be paid off on the borrower’s next pay day

Payment Holiday

A period of one or more months when you don’t make repayments on your mortgage, even though interest continues to accrue during this time

Personal representatives

They act in managing the estate of a deceased person

Planning Permission

This is a permission sought from the local council to extend or build a property according to certain building regulations

Portability

The ability to transfer the existing mortgage to another property

Prefabricated Housing

Using precast concrete panels attached to a steel or timber frame

Prime lending

This is lending to borrowers who meet a lender’s standard criteria and present normal risk

Private borrower

A person who is borrowing to purchase a home for themselves and/or their families

Professional Customer

An individual who has worked in the home finance sector for at least one year

Proof of address (POA)

Generally evidence of where you have lived in the last three years, this can be in the form of original utility bills received in the post

Proof of Identity (POI)

Evidence of who you say you are, for eg a driving licence, passport, etc

Proof of income

Evidence of your income, for eg by way on payslips, bank statements, signed company accounts, etc

Property value

This is the value of a property in the current market conditions

r

Radon Gas

This is a radioactive gas we can’t smell, see, or taste and its present in high concentrations in certain parts of the UK

Rate Period (Buy-To-Let)

This is the period at which a fixed or tracker rate applies

Rate Period (Residential)

The period during which the fixed, tracker, or discounted rate applies

Reflection period

This generally refers to the period the lender provides to an individual to consider the contents of a mortgage offer

Registers of Scotland (Scotland Only)

This is a department that registers ownership of land in Scotland

Reinstatement Value

This is the valuer’s estimate of the cost of rebuilding the property from scratch in the event of destruction by fire or another catastrophe

Reinsurance

This is a process by which an insurer passes on some of the risk to another insurer or company in return for a premium

Remortgage

When a person uses a new mortgage to repay an existing mortgage and transfer from another lender

Rental Cover Ratio

This is the proportion of the mortgage payment covered by the anticipated rental income

Rental income

The rent payments you receive from a tenant when you rent out a property

Rent to Buy

This is a government scheme that has been set up to help individuals own their first home, even if you can’t afford a deposit in current time

Repossession

This is the process in which a lender takes possession of your property when you default on your mortgage payments

Residential

An area primarily used for housing

Retention

This is a situation where a portion of the loan is held back by the lender until the buyer provides evidence that certain repairs have been completed

Right to Buy

This is not a mortgage scheme but gives the tenants of a social housing in the UK the right to buy the property they are renting

Right of way

An example of this could be needing a right of way across someone else’s land in order to access your own property

Right to Acquire

This gives tenants of housing associations the right to buy the existing property they are renting or an alternative property

s

Sasines Register (Scotland)

This is a chronological list of land deeds which contain written descriptions of properties

Second – charge Loan

This is a loan secured on a property but registered after a mortgage (first charge)

Second Charge Mortgage

This is a loan that allows an individual to use any equity they have in their property as security, and always ranks behind a first charge mortgage

Securitization

A financial practice where financial institutions sell on sub-prime and prime debts to other institutions to raise capital

Security

The security for the mortgage debt stated in the mortgage offer document which will be first legal charge over the security

Semi-Detached House

This is a single family dwelling home built as one of a pair that share a common wall

Sequestration (Scotland)

This is the formal term of a bankruptcy in Scotland

Shared Ownership (England)

Its an affordable home ownership scheme where the buyer purchases a share in a property and pays rent normally to a housing association for the remaining share

Solicitor

A member of the legal profession to deal with the legal matters of the home buying process

Special Purpose Vehicle (SPV)

This is a way of holding business property through a limited company rather than the individual holding the property in their own names

Staircasing

This is the process where a buyer owning a percentage of a property under the shared ownership scheme purchases additional shares in the property

Stamp Duty Land Tax (SDLT)

The tax you have to pay if you purchase a property or land in England and Wales which is worth over £125,000

Standard Valuation report

Professionally prepared to give an inspection of the property and a market value

Standard Variable rate (SVR) mortgage

The payments you make you each month may go up or down as the lender increases or decreases its own interest rates

Stress Testing

This is a process where lenders increase interest rate on a mortgage product by a certain percentage to determine if an individual will be able to afford the mortgage payments if interest rates did rise in the future

Structural Survey

This is the same as a Building Survey – see Building Survey

Sub-Prime Lending

Lending to borrowers who represent a higher risk than normal

Subsidence

This is a situation where land below a building drops unevenly causing it to shift

Switching

When an individual moves to a new mortgage with the same lender, for example, when their fixed rate period ends and they move onto a variable rate mortgage

Service charge (mostly on Leasehold properties)

These are charges payable by a leaseholder to the landlord for the services the landlord is obliged to provide under the terms of the lease

Solicitors Fees

Paid on completion to cover the legal work carried out during the purchase or home moving process

t

Telegraphic Transfer Fee (TTF)

This is a fee which covers the cost of electronically transferring the mortgage funds to the borrower, solicitor, or conveyance

Tenancy In Common

A type of property ownership where each joint owner owns a set share of the property

Tenant (Buy–to-let)

An individual who rents a property

Tenure

Describes the way in which title to a property is held

Terraced House

This is one of a row of similar houses joined together by their side walls

Title burdens (in Scotland)

These are usually conditions attached to owning the property ranging from how the property can be used or altered

Tracker rate mortgage

Similar to the standard variable rate mortgage, but your monthly payments fluctuate in line with increases or decreases in the bank of England base rate

Trustee (s)

This Is/are individual (s) who are appointed in a document called a trust deed to hold specific asset, or assets on behalf of others call the beneficiaries, and to act for the beneficiaries according to the terms set out in the deed

u

Undertaking

This is a formal agreement that the buyer will undertake specific remedial work within a specific period of time after taking possessing of the property

Unencumbered Property

This is when you own a property with no mortgage secured on it

Unregistered land

Land which has not been legally transferred since the introduction of compulsory registration

v

Valuation

The process a professional surveyor assesses a property in its current condition against market conditions to give an indicative value of the property

Valuation fees

This is a fees charged by the mortgage lender to instruct a professional surveyor to value a property

Vendor/Seller

The person who is looking to sell their property

Vulnerable customer

Someone who is susceptible to detriment as a result of personal circumstances

w

Coming soon

x

Coming soon

y

Coming soon

z

Coming soon

About Us

Mortwiki has been set up as a way for us to share our knowledge and experience of working in the mortgage industry.
 
Our aim is to ensure everyone understands the terms/words associated with mortgages. We aim to break down all the jargons so that when an individual sees LTV they will know this means Loan to Value.
 
Mortwiki is a free to use website. All definitions are our own, are not exhaustive and is subject to change.

Disclaimer
Please note the content of this website is a guide and for information only and mortwiki.com does not offer loans, broker loans or recommend lenders. We are not mortgage advisers and you will need to consult a qualified professional in that area. Please note these definitions are our own, are not exhaustive and is subject to change.