Jargon-buster
Confused
about any of the remortgage process or terms used? Read on...
apr
Annual Percentage Rate of charge. The true rate of interest charged
on a loan taking into account the total cost of interest and other charges
e.g. brokers fees/legal fees. The calculation is set out in statutory
regulations.
(Life) Assurance
A Specific type of life insurance policy often linked with a mortgage
or loan. A portion of premium goes toward insuring your life, and will
pay off loan in the event of death. The rest is invested and will pay
a lump sum at the end of the term.
(Level Term) Assurance
Life assurance which pays out a lump sum if you die during the term.
Suitable for interest only loans as the amount owed on the loan remains
the same throughout the life of the loan.
Autoscore
The process of using specialised online credit search databases to identify
an applicants credit status.
(Mortgage/Finance) Broker
An intermediary who identifies, and places, customers requiring a loan
or mortgage etc. with a company (Lender) able to provide it. The broker
often carries out the administration to do with processing the loan.
BSQ
BUILDING SOCIETY QUESTIONNAIRE: A questionnaire completed by bank/building
society or other lender providing details and conduct of an applicant‘s
mortgage account.
Cashback
A type of loan where the borrower is given back a sum of money (usually
a percentage of the loan). Used by lenders as an incentive to promote
their products.
CCJ
County Court Judgement. An order of a court against a debtor to pay
money owed.
Conveyancer
A person, used as an alternative to a solicitor, to carry out the legal
work involved in buying and/or selling a property. Note: It should be
checked that they are licensed to carry out this function.
Discounted Rate
A discounted rate gives you a reduction of, for example, 2% off the
standard variable rate (SVR) for a specific period. So, during this
period should the SVR rise and fall, you will still qualify for the
discount and therefore pay a lower rate.
Double Insurance
Policies vary from lender to lender. Generally double insurance offers
protection against sickness, accident and redundancy for the first and
second wage earners. Cover is also available for self employed borrowers
and under certain circumstances for non working partners. Details of
the specific insurance plan will accompany the lenders offer. We strongly
recommend that you consider some form of insurance protection, especially
in the case of secured loans and mortgages.
Exchange of Contracts
Agreement signed by house purchaser and vendor committing themselves
to the transaction. Once this has occurred a legally binding contract
is in existence and the purchaser must complete the purchase within
a specific period of time.
Emergency Home Assistance
An insurance policy that will provide a suitable tradesman to effect
a repair in the event of an unforeseen home emergency e.g. a plumber
for burst pipes, a roofer for lost tiles etc.
Endowment
A life assurance policy that is designed to produce a lump sum to pay
off an interest only mortgage. There are a number of different kinds
of endowment policies: 'with-profits', 'unit-linked' etc.
Fixed Rate
The rate is fixed for a specific number of years, so you know what your
payments will be over that period. Following this period, the rate will
usually revert to the lender's standard variable rate.
Flexible mortgages
A more recent innovation, these give various benefits which usually
include the ability to vary payments in line with your circumstances.
They may also allow you to take "payment holidays" and to
borrow back any overpayment you may have made.
Freehold
Land / Property is owned outright by the Freeholder. Whether the property
is held on a lease or a freehold basis will be identified in the deeds
to the property.
IFA
Independent Financial Advisor.
(Term) Insurance
A life insurance policy often linked with a mortgage or loan. The premium
goes towards insuring your life, and will pay off loan in the event
of death. No benefits are received after the policy expires.
Interest Only Mortgage
With this type of product, your monthly repayments will only cover the
interest element of the loan. You will typically set up another repayment
vehicle eg an endowment or ISA to repay the capital element of the loan.
Income Replacement
An insurance policy that will provide an income in the event of job
loss or illness.
Leasehold
A leaseholder holds the title to land only for a finite term i.e. the
length of the lease upon payment of a consideration e.g. rent.
Lender
The actual company that provides the finance to satisfy a loan or mortgage
request.
(Secured) Loan
A loan to be used for any purpose. The equity in the property is put
up as security against not paying the loan back.
(Unsecured) Loan
A loan to be used for any purpose. The credit rating or financial position
of the applicant is such that no security for the loan is required.
LTV
Loan to value. This is the size of the loan or mortgage as a percentage
of the value of the property or price being paid for the property e.g.
A property valued at £50,000 with a mortgage of £45,000
would have an LTV of 90%.
MCRI
Mortgage Code Register of Intermediaries. A register maintained by the
Council of Mortgage Lenders of the names of mortgage brokers subscribing
to the Mortgage Code.
MGI
Mortgage Guarantee Insurance. An insurance policy designed to make good
any shortfall between the amount owed on a mortgage and the value of
the mortgaged property. Provides a benefit to the lender in the event
of repossession resulting from non-payment.
MIG
Mortgage Indemnity Guarantee. See MGI
Mortgage
A loan to purchase a home where the property is used as security in
the event of non-payment of the mortgage.
Negative Equity
The situation where the amount owed on a mortgage exceeds the value
of the property.
No Insurance
Insurance is offered to provide peace of mind against life's unexpected
problems which invariably occur. Selecting "No insurance"
means that you are choosing not to protect your proposed loan repayment
in the event of you being unable to work due to an accident, sickness
or redundancy.
Offer of Advance
Sometimes informally known as a mortgage offer. This document details
the terms and conditions upon which the lender is prepared to make a
mortgage loan. The applicant must sign and return a copy of the offer
indicating their acceptance of the proposed terms.
Office Copies
Copies of documents held at Land Registry showing ownership and mortgages
outstanding on a property.
Processing
The administration and paperwork related to a loan from the time a completed
application form is received through to completion of the loan process.
(Capped) Rate
Usually for a set number of months/years where the interest rate can
go up and down but there is a maximum (capped) interest rate which it
can not go above.
(Variable) Rate
A rate of interest which may vary up or down during the lifetime of
a loan. The circumstances causing any change are outlined in the loan
conditions.
Remortgage
Loan taken out by a borrower to replace another one secured on the same
property. Typically taken out by borrowers switching lenders to achieve
a better rate.
Representatives
Local representatives (Reps) who are available, if required, to pay
home visits to help and advise in the completion of loan applications.
Repayment Mortgage
With a repayment mortgage you pay part interest and part capital repayments
to the lender each month and in this way the capital that you borrowed
is reduced until the loan is repaid.
Retention
Sum of money retained from a mortgage pending completion of improvements
or repairs as stipulated by the Valuer.
RTB
A term associated with legislation that gives council house tenants
the Right to Buy their homes.
Redemption Penalties
When a loan is redeemed (paid off) early, either in full or in part,
many lenders will charge a fee. This particularly applies to Fixed,
Discounted or Capped rate loans or mortgages.
Sealing Fee
A charge made by lenders when a mortgage is paid off.
Second Charge
Mortgage ranking behind a first mortgage ie a second loan.
Second Mortgages
Company or building society who have registered a charge or mortgage
directly behind that of the first mortgages.
Secured Loan
Mortgage ranking behind a first mortgage ie a second loan.
Security
When a loan is taken out it is ‘secured‘ on a property,
the borrower agrees to the lender creating a charge over the property;
the deed makes reference to the rights and obligations of both parties
as detailed in the Legal Charge, Standard Security or Loan Agreement.
Thus the property is known as the ‘security‘.
Security Address
When taking a secured loan or mortgage, the security address is the
address of the property which is being offered as collateral for the
loan. Where property is offered as security in this way, lenders are
generally prepared to offer more flexible terms and lower interest rates.
Self - Certified
Lenders that operate this type of scheme allow the applicant to confirm
how much they earn by "Self-certifying" their income. Schemes
are available to both employed and self employed applicants. Typically
for the employed, the schemes are designed to help those applicants
with incomes that incorporate a large element of bonus or where they
derive income from a number of jobs. Where as for self employed there
is no need for full 3 years audited accounts to be provided.
Settlement Figure
The sum quoted in order for the loan to be repaid during the contracted
term.
Single Insurance
Policies vary from lender to lender. Generally single insurance offers
protection against sickness, accident and redundancy for the main wage
earner. Cover is also available for self employed borrowers. Details
of the specific insurance plan will accompany the lenders offer. We
strongly recommend that you consider some form of insurance protection
, especially in the case of secured loans and mortgages.
Stamp Duty
A tax (currently 1%) paid on the purchase of properties costing more
than £60,000.
Standard Security
The equivalent of the Legal Charge in Scotland.
Status
The credit-worthiness or otherwise of a potential borrower.
Structural Survey
A detailed survey of the structure of a building carried out by a Structural
Engineer or Chartered Building Surveyor. Surveyors are liable for negligence.
Sub-prime Mortgage
Mortgage granted to a person who is unable to borrow money secured on
a property from a normal lending source. The reasons the applicant may
not be granted a mortgage by a high street lender, could fall into one
of three categories:-
Adverse Credit information registered against them Existing arrears
on current mortgage facilities An inability to satisfactorily prove
the level of income required by a high street lender
Term
Period of a loan expressed in months or years.
Title Deeds
Set of documents relevant to present and past ownership of a property.
Details names of owners and details of institutions that have registered
a charge against the property. Held by the first mortgagee lender whilst
their charge remains in existence.
Underwriting
The process by which the ability of a prospective borrower to repay
a loan is assessed (also the name of the department that undertakes
this work). The process takes into account various factors including
employment history, financial status, previous credit history and current
earnings.
Unsecured Loan
A loan to be used for any purpose. The credit rating or financial position
of the applicant is such that no security for the loan is required.
Valuation
A brief inspection of a property for mortgage purposes. Whilst it is
for the lenders use it is often paid for by the loan applicant.
All
purpose remortgages from 5.5%!
