Added to Loan
As part of your mortgage application certain fees may become payable like arrangement fees and higher lending charges. Some lenders will allow you to ad these fees to the balance of the loan, so you don’t have to find the money for them up front. However it is worth knowing that this will increase the amount you borrow and subsequently how much interest you pay back.
Administration/Arrangement Fee
The lender may charge a fee for administering your mortgage. If needed to be paid upfront and you do not proceed with your mortgage then this fee may not be refunded. However if it is an arrangement fee it may be possible to either pay it at the end of the application or add the fee to the loan.
Adverse Credit
Sometimes people are unlucky enough to have had problems with credit in the past. This could be late payments, bankruptcy, defaults or county court judgments. This is quite often referred to as adverse credit.
Agreement in Principle
A lender can agree to lend a specific amount of loan based on basic information provided and a credit check. This is called an agreement in principle and will be subject to full underwriting once you have found a property
Annual Percentage Rate (APR)
The APR is a compound interest rate figure used to compare different mortgages. Defined by law, it includes repayments on the loan plus any mortgage related fees such as booking, arrangement or basic valuation fees. The APR shows the true cost of borrowing over the entire term and should appear on all mortgage illustrations.
Base Rate
The rate of interest set by the Bank of England.
Booking Fee
A lender may offer a particularly commutative interest rate but in order to secure the rate, ask you to pay a booking fee. This fee will guarantee that you get the interest rate subject to full underwriting.
Bridge Loan
A short-term loan commonly used to cover - or ‘bridge’ - the overlap between the purchase of a new property and the sale of an old one.
Broker’s Fee
A fee charged by a broker for locating the most appropriate mortgage.
Buy to Let
A mortgage designed for investors wanting to purchase a property with the sole purpose of renting it out.
County Court Judgement (CCJ)
A ruling for bad debt issued by a County Court or higher court. The judgement will be recorded and the record will show up during any credit checks and may count against you in your mortgage application.
Credit Check
When applying for a mortgage the lender will need to know that you can and will pay for you mortgage. They will ascertain this by conducting a credit check via one of the credit reference agencies to establish your suitability to repay a mortgage. They will check for things like loan or credit card commitments, your payment conduct. And they will also check for any bad dept, as in County Court Judgments, arrears, defaults or any missed payments on any commitments.
Credit Rating
Following a credit check you will be given a credit rating which is an assessment of your ability to repay loan or not.
An assessment of a person’s likelihood of keeping up - or otherwise - on the repayments on their loan. A credit rating is usually based on a person’s credit history.
Credit Reference Agency
A company that collects and stores financial and public records dealing with the payment history of a prospective borrower. Most lenders will employ a Credit Reference Agency to check your payment records as part of their assessment of your application.
Credit Report
A report prepared by a Credit Reference Agency and which details the credit history of an individual. The credit report will be used by a lender to help assess the applications of prospective borrowers.
Credit Scoring
The procedure by which lenders assess the likely ability of an applicant to meet and maintain their mortgage repayments.
Deposit
When purchasing a property generally (although not in all cases) you will be required to put down a deposit. This is typicality 10% of the purchase price and the rest of the monies need to purchase the property are made up with the mortgage.
Early Repayment Charge (ERC)
A charge that may be levied by the lender as a penalty if a mortgage is paid off within a specified period.
Equity
The amount of money either put into buying a property or the deposit placed on a property. Also known as capital.
Equity Release
A mortgage taken out on a home that is already fully owned, typically in order to make use of the capital tied up in it.
Fees Free
A lender may pay all survey and legal fees as an incentive to choose them. This will be known as a fees free mortgage.
Feuhold
A term used in Scotland to refer to the ownership of both a property and the land on which it is built. The closest equivalent in England and Wales is Freehold.
Financial Services Authority (FSA)
The regulator of the UK s financial services industry. The FSA s jurisdiction now covers mortgages (except for some buy-to-let mortgages) and general insurance.
First Time Buyer (FTB)
A person buying a property for the first time. Quite often lenders will offer incentives for first time buyers.
Freehold (England & Wales only)
A situation whereby the owner owns both the property and the land on which the property is built. See also Feuhold (Scotland)
Further Advance
A situation whereby the lender makes available another loan and under which both loans are included within first charge on the property. This is normally used to consolidate debt or pay for improvements to the property.
Higher Lending Charge
A fee charged by lenders when the loan-to-value (LTV) ratio on a borrower’s property is above a certain level, typically 90%.
Income Multiplier
The formula used by lenders to calculate how much a prospective borrower can borrow. Normally this amount will be three or 3.25 times the person’s income, or for joint applicants it is typically 2.5 times joint income.
Interest Only Mortgage
A type of mortgage in which the borrower only repays the interest on the loan for the duration of its term, and repays the full loan amount at the end of the mortgage period.
Key Facts Illustration (KFI)
Customer specific, illustrating the key information relating to a mortgage and any charges inherent to it and the application process. All KFIs for UK residential mortgages will be presented in the same format for easy comparison. When looking at protection policies, a KFI constitutes a customer specific illustration (CSI) and key features document together.
Leasehold (England & Wales only)
A type of ownership in which a person owns a property, but not the land on which it is built. Typically the land will be leased to the owner.
Lender
The party, typically a bank, building society or mortgage company, offering the loan.
Loan to Value Ratio (LTV)
This is how much lender is prepared to loan you compared to the purchase price. For example, if a lender was prepared to lend you £90,000 on a property worth £100,000, that would be 90% loan to value (LTV)
Overpayment
Situation where repayments are increased so that the mortgage is repaid before the end of the agreed term. Some mortgages (flexible mortgages) allow for overpayment, but others may impose early redemption penalties for overpayment.
Penalties
A specified charge that is levied by the lender under certain circumstances, usually for full or part repayment within a specific period linked to a discount, tracker, fixed or other product type.
Portable
In relation to a mortgage, this refers to a mortgage product that can be transferred between properties when the policyholder moves home. And possiably avoid paying any penalties
Redemption
The name given to the full payment of a mortgage, at the end of its term.
Remortgaging
The process whereby a new mortgage replaces an old one, and both use the same property as security. See also Refinancing
Repayment Method
The method by which a borrower repays their mortgage, for instance interest-only, or interest and capital.
Repayment Period
The term or number of years, over which the borrower must repay the mortgage.
Repossession
The legal procedure by which a defaulting borrower is deprived of their interest in the mortgaged property, typically involving the forced sale of the property at a public auction.
Right to Buy
Many local authorities offer tenants the right to buy the public housing they occupy, usually at a discount and usually the scheme will depend on the length of the existing tenancy.
Self Certification
A mortgage intended for borrowers who are unable to categorically prove their income by conventional means such as payslips and fully audited accounts, but can provide alternative evidence and thereby demonstrate the level borrowing is affordable. Typically the lender will charge higher rates of interest, or require a larger deposit.
Shared Equity
A scheme whereby a borrower purchases part of a property and the other part is purchased by a third party, such as a housing corporation. A shared equity scheme differs from shared ownership in that no ongoing rent is paid to the third party. However, any future increases to a property s value results in the third party s share of equity in the property increasing proportionately. In other words, a borrower does not fully benefit from future increases in a property s value.
Shared Ownership
A scheme similar to shared equity. However, the third party receives a monthly rental payment from the borrower in respect of their share in a property.
Stamp Duty
A government tax payable by the purchaser upon purchase of a property. Currently no stamp duty is applicable on purchases of up to £125,000; 1% on purchases between £125,001 and £250,000, 3% on purchases between £250,001 and £500,000 and 4% on purchases exceeding £500,000. Importantly the duty is levied on the whole value of a property. Some properties in designated disadvantaged areas may be exempted from stamp duty up to a threshold of £150,000. Its full title is “Stamp Duty Land Tax” in order to differentiate between duty on land and stock market shares.
Term
The period of time between the start and finish of the mortgage loan or long term insurance policy.
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