A – D
Accident, Sickness & Unemployment Insurance (ASU)
These policies are designed to help you pay a percentage of your normal monthly mortgage payment for a specified period in the event of accident, sickness or redundancy. However, ASU doesn’t apply if your injuries are self-inflicted, or if the redundancy is voluntary or as a result of misconduct.
Actuaries are statisticians who calculate, among other things, insurance premiums, annuity rates, dividends and risks, usually in relation to pensions, insurance and investments. With mortgages, the actuary will calculate what you need to pay for life assurance and any other insurance policies.
Added to Loan
Many costs arise when arranging a mortgage, such as indemnity and administration fees. In some cases, these can be added to the amount that a person borrows, in which case they are known as ‘Added to Loan’.
This applies to variable rate mortgages, and is the date on which the interest rate is changed.
This is a charge levied by the lender to cover the costs of processing your mortgage application. If you do not complete your application, the fee may not be refunded. The administration fee is also sometimes known as an application fee.
If a borrower has adverse credit, he or she has had problems with credit in the past, usually relating to late payment, county court judgments (CCJs) or bankruptcy.
It might sound quite complex, but amortisation is simply the reduction in the amount you owe on your mortgage over time as you make regular payments.
Annual Percentage Rate of Charge (APRC)
APRCs are a calculation that allow people to compare the cost of borrowing as they take into account not only the amount of interest you pay but also any other fees charged by the provider, e.g. arrangement fees for setting up a loan. Put simply, the lower the APRC the better.
The person applying for a mortgage.
The process of applying for a mortgage and supplying personal and financial details to the mortgage broker and/or lender.
A surveyor’s estimation of the value of a property.
The increase in a property’s value due to positive market conditions.
These fees can be added to the loan amount or paid separately. Levied by the mortgage lender, they cover the administration costs of a mortgage although are usually only applied to loans with special ‘fixed’ or ‘discounted’ interest rates.
This is the amount, usually expressed in pounds or months, which your mortgage payments are behind schedule.
A very broad term, comprising any form of property owned by a person, such as shares, cash and land.
The situation whereby an asset, or mortgage, is transferred from one owner to another.
At an auction, properties are sold to the highest bidders.
A statement showing the assets and liabilities of a company at a particular time
The interest rate set by the Bank of England’s Monetary Policy Committee.
Basic Earned Income
This is your underlying basic salary, and doesn’t take into account tax and additional sources of income such as bonuses and overtime.
This is a person entitled to benefit, usually financially, from a trust or a will.
A charge levied for the arrangement of a mortgage and which usually guarantees funds or guarantees a rate for fixed or capped rate mortgages.
Available to flexible mortgage holders only, borrowing back allows you to borrow back any overpayments you have made if, for whatever reason, you need additional cash flow.
This is the money borrowed to finance a new building or property or some other project until permanent financing can be obtained.
A broker is a middleman who brings two or more parties together, in the case of mortgages, the borrower and the mortgage lender.
The fee a broker charges for finding the borrower the most appropriate mortgage.
Buildings insurance covers loss or damage to the physical structure of your home, for example, the roof, walls and floors. Contents insurance, which is often sold alongside buildings insurance, covers loss of, or damage to the ‘material possessions’ within your home.
Buy to Let Mortgage
This is designed for people who buy a property with the sole intention of ‘letting’ it out to tenants for investment purposes.
Calculating Interest Daily
The interest on most flexible mortgages is calculated daily. The advantage of this is that, when you make payments or overpayments, you will be paying less interest almost immediately, as the size of the mortgage will have reduced. This may not sound much initially, but over a number of years it can add up to a substantial sum.
A cap is a ceiling on interest rates, usually for a specified period. For example, if your mortgage is capped at 5%, you will not pay more than that even if interest rates rise to 6%.
Cap and Collar
A collar is a floor on interest rates, usually for a specified period. For example, if your mortgage has a 5% collar, you will not pay less than that, even if rates fall to 4.5%. A cap and collar mortgage is a combination of the two.
In mortgage terms, this is the money, or deposit people put into buying a property. Sometimes, it is referred to as equity.
Everybody wants to improve the capital value of their homes. Capital improvement is any improvement, such as a loft extension or conservatory, which permanently increases a property’s value.
The often protracted situation whereby a buyer is waiting on the completion of the sale of an existing property in order to complete on the purchase of a new property.
Legal jargon referring to the clear, unequivocal ownership of a property.
An asset, such as a car or an expensive stereo/Plasma TV, which a lender may seize to ensure the repayment of a loan if the borrower fails to repay the loan under the terms of the original contract.
These are for individuals or companies buying commercial property – offices, bars and retail outlets – with a view to gaining from capital appreciation and rents.
The fee levied by a broker for services relating to the arrangement of a mortgage or insurance, or the purchase of a property.
Every prospective borrower wants one of these! This is a letter from a lender detailing a formal offer and outlining the terms and conditions of the loan. It is often referred to as a ‘loan commitment’.
Areas where more than one resident shares access, for example, hallways, parking areas and gardens.
Usually carried out by an estate agent, a comparative search analyses the actual sale values of similar properties in the same area as your own. The aim is to give a good idea of the sale price of a property.
Everyone wants to get to completion! The completion date is the date that your solicitor forwards the money from your lender to the vendor’s solicitor. In short, it’s the date that you become the legal owner of your new property.
Compound interest is the interest paid on capital and any previously accrued interest. For example, £1,000 borrowed for 5 years at 5% p.a. would become £1050 after 1 year, £1052.50 after 2 years and so on.
The insurance required by lenders as a prerequisite of issuing a mortgage, and which generally covers the physical building itself and the material contents inside. Sometimes called Conditional Insurance.
Insurance that covers the material possessions within your home, for example, electrical goods such as Plasma TVs and stereo systems, furniture, curtains and carpets. Certain items, such as expensive computers, may need additional insurance.
A legal agreement between the buyer and seller of a property.
The legal process relating to the transfer of ownership of a property from a seller to a buyer, and which is usually carried out by a licensed conveyancer or solicitor. A Conveyancing Fee is usually charged for this service.
County Court Judgement (CCJ)
CCJs are rulings issued by a County Court or higher court and relate to bad debt. The judgement against the individual is recorded and will show up during credit checks. They almost certainly count against people when they apply for a mortgage.
The various regulations governing a property, usually outlined in the title deeds.
This is when one party (the borrower) receives money or an asset such as property on condition that they repay the other party (the lender) at some agreed point in the future.
The process whereby checks are made on a person’s credit history, often as part of the mortgage application process. These checks are carried out by dedicated credit reference agencies on behalf prospective lenders, and usually examine outstanding debts, arrears, credit card repayments and County Court Judgements.
The full history of a person’s paid and unpaid debts. These help lenders assess the likelihood that prospective borrowers will be able to meet their mortgage repayments.
Normally based on a person’s credit history, this is an assessment of whether or not they will be able to keep up repayments on a loan.
Credit Reference Agency
A company (for example, Equifax and Experian) that accumulates financial records relating to the payment history of a prospective borrower. Almost all lenders will use such an agency during a mortgage application.
The report issued by a Credit Reference Agency that details a person’s credit history. Used by lenders to assess the quality of a mortgage application.
The process whereby a lender assesses the likelihood of mortgage applicants being able to maintain their mortgage repayments.
Critical Illness Cover (CIC)
CIC pays out a tax-free lump sum to policyholders if, during the term of the policy, they are diagnosed with one of a number of specified ‘critical’ illnesses or conditions, such as cancer, Parkinson’s Disease, Multiple Sclerosis or paralysis following a heart attack or stroke.
Current Account Mortgage
Current Account mortgages (often referred to as ‘CAMs’) have many of the facilities that apply to a standard current account and, when combined with flexible mortgage, allow payment holidays and over- and under-payments.
The legal documents that prove ownership of a property. Deeds are usually held by the lender.
This is the money used as a down payment on, for example, a house or some other purchasable item.
These are the fees, such as stamp duty and land registry, paid by the buyer’s solicitor on the buyer’s behalf.
Usually relating to the initial period of a mortgage, this is when the interest rate you pay is discounted by a certain percentage from the standard variable rate for an agreed period.