Glossary
Please use our glossary below to search for any terms that you may be unsure about, or need clarification on.
Adverse Credit
This simply means ‘bad credit’, which can range from a missed payment on a credit card to arrears on a mortgage.
Arrangement or Admin Fee
These are usually charged by a lender when choosing certain products or mortgage deals. It is often the case that if you pay an arrangement or admin fee then you can get a slightly better rate of interest. This fee can range from a couple of hundred to a couple of thousand pounds.
ASU
This is an insurance policy which pays you a regular income in the event of accident, sickness or unemployment. Although this policy has largely disappeared from the market due to the COVID-19 pandemic, providers are slowly starting to return to offering this product in varied forms.
Auction
This is where interested buyers submit their bids, and the highest bid gets to buy the property. Unlike the usual process of purchasing a property, an auction is binding as soon as the winning bid is accepted.
Base Rate
This is the interest rate that the Bank of England will charge for loans. As a result, the lenders start to increase or decrease their own rates, on savings and mortgage accounts. This is currently at 2.25% as of 1st November 2022.
Building Insurance
You are legally obliged to have buildings insurance in place on exchange, as at this point you are responsible if anything were to happen to the property. The lender adds this as a condition of their mortgage offer as they have to protect their security. You can either pay a monthly premium or an annual premium.
Borrowing Capacity
This is the amount a lender will lend you to buy a property. We prepare a borrowing capacity document for our client before they start looking at properties to ensure they have an idea of what they can borrow and the likely monthly costs. This enables you to look at the right properties that are within your chosen budget.
Broker Fee
This is a fee for our professional services. We are all highly trained and have vast experience in the areas that we advise in.
Buy to Let Mortgage
This is a mortgage for those who want to buy a property to rent out. The affordability is mainly calculated on the estimated rental income you will receive. You usually need a larger deposit amount for these mortgages, approximately 25% in most cases. You cannot have a residential mortgage on a property you are renting, and you cannot have a Buy to Let mortgage on a property you are living in.
Capital Repayment
This is the most standard type of mortgage repayment. You are paying the loan amount back as well as interest charged by the lender on top of your debt.
Cashback
Is a one-off lump sum given to you once completion has taken place. This may be an added incentive that some Mortgage Lenders will offer. Clients may use this cashback towards other fees such as solicitor fees etc or even to add to savings.
CCJ
This is a County Court Judgement. You will get this if somebody takes court action against you for failing to satisfy a debt. This will stay on your Credit Report for 6 years unless you repay the debt and request for your credit profile to be updated. Having a CCJ makes it very difficult to obtain credit. There are lenders that may consider a mortgage; however, it does come at an increased interest rate.
Completion
This is the big day – moving day! When the funds have been received by the solicitors they will call the estate agent to release the keys to the buyers.
Contents Cover/Insurance
Contents insurance helps pay to replace or repair your personal belongings if they’re stolen or damaged by a covered peril, such as a fire. It isn’t compulsory but it’s definitely something we would recommend because it would cost a lot of money to replace everything in your house. Try our contents calculator here.
Conveyancer (or solicitor)
They handle the legal work behind the whole process of selling or buying a house. As an overview they check the person selling the house is who they say they are, and they actually own it. The conveyancer will also check the title deed and conduct various searches, so you don’t have any nasty surprises in the future.
Contract
The seller’s Conveyancer prepares the contract package which includes a sale contract and proof of the seller’s ownership. The sellers will also complete forms which provide general information about the property and contents. If the property is leasehold then the seller’s Conveyancer will supply further information about the lease and other issues such as service charges and ground rent.
Credit Report/File/History
Your credit report is a valuable source of information as it shows any lender how you conduct your finances. It will show any loans/credit commitments, your utility bills and your repayment history. It also shows address history and whether you are on the voter’s role. This is one of the items we ask for from our clients to ensure that we understand our clients’ situation fully and there aren’t any surprises when we submit their application. Check your credit profile.
Credit Search
A lender will run a credit report/search as part of their initial assessment and to produce an Approval in Principle. If we know what our clients report shows and if we are dealing with any issues such as CCJs, we will ensure we only submit the application with a lender who will be happy to lend on this basis.
Debt Consolidation
This is a form of refinancing that entails taking out one loan to pay off many others. This is a solution if you have many debts whether they are loans or credit cards, and managing the monthly payments is becoming difficult or nigh on impossible. Potentially you can take out one loan or if you own a property re-finance and increase your mortgage to enable you to repay this unsecured debt.
It is important to note that by doing so, you will be adding unsecured debts onto your property and thereby the debt is now secure. You will also be repaying more interest over the term of the borrowing as loans/credit cards are normally on a short-term basis, hence being more expensive monthly.
Deed
A mortgage deed is the contract between the borrower and the lender outlining the terms of the mortgage and confirming that the lender will have a charge on your property until the loan is repaid in full. Remember, it is a legally binding document.
Decreasing Term Assurance
This is a type of insurance policy that is arranged to cover your original mortgage balance but will reduce in line with a repayment mortgage. This type of policy is cheaper because the amount assured reduces over time and is therefore less risk for the provider. A decreasing term policy can either provide life cover or life cover with critical illness cover.
Default
A default is a mark on your credit report to say that you haven’t satisfied a debt. A default may come about even if you miss just one month’s payment. If you have had any defaults in the past 6 years these will be visible on your credit profile and may affect products that are available to you.
Deposit
A deposit is the amount of money you pay upfront towards the purchase of a property. The rest of the funds will be covered by a mortgage. The minimum requirement that you may be able to put down currently is 5% however this is harder to obtain as not all lenders will offer this. Those who do, will have strict criteria to adhere to and the interest rates will also be higher. The more deposit you can put down the better the terms of your mortgage deal are likely to be.
Discount Rate
This is a type of variable rate mortgage; the lender offers you a discount for a fixed amount of time. As usual, after the fixed-term, it will roll onto the standard variable rate which will be more costly for you, unless you remortgage onto another product.
ERCs
An Early Repayment Charge (ERC) is the fee charged by the lender should you wish to repay your mortgage early or change product before your previous product has expired. You can sometimes port (transfer) your mortgage if you are moving home, to avoid paying the ERC, but this is dependent on your situation and the terms & conditions of your existing mortgage.
EPC
This stands for Energy Performance Certificate; it rates the energy efficiency of your property
Equity
This is the amount of money that is tied up in your property that is yours. You can work out the equity by using the following calculation: Property Price – Outstanding Mortgage = Your Equity
Equity Release
Equity Release is the popular term for a Lifetime mortgage. These mortgages are only available for people over the age of 55 but typically clients can be much older. The lender will base the borrowing amount on the value of the property and the ages of the applicants. You can either make monthly repayments or the debt gets repaid on death of the last owner occupier of the property moving into long-term care.
Estate Agent
Is the company you buy a house through or sell a house through.
Exchange (of contracts)
When you and your seller are ready to proceed, contracts can be exchanged and a completion date set. At this point the agreement to buy your new property becomes legally binding. It is usual at this point for a deposit equal to 10% of the purchase price to be paid to the seller’s Conveyancer which they will hold until completion.
After contracts have exchanged, you are also responsible for the property if anything happens to it after this time, even if you don’t yet live in it. Hence, it is a legal requirement to have buildings insurance in place.
First Time Buyer
This is a person who has never bought a house before. They are exempt from paying stamp duty up to £300,000.
Fixed Rate
This is a type of mortgage product where the interest rate is fixed for a certain amount of time, the most common being 2 or 5 years. There are other fixed rate terms too. You generally can’t exit the current mortgage deal until your fixed rate has expired unless you are willing to pay Early Repayment Charges. If you want to move house, you can potentially ‘port’ the mortgage (subject to criteria) to avoid paying any penalties.
Fact Find
This is a document the broker completes, which holds all the required information to enable them to understand your circumstances and research your case.
Freehold
This is a form of tenure. This is the highest form of ownership where you own the property and the land that the property is on.
Free Legals
This is a type of incentive that lenders add onto their products to make them more favourable. This is usually added to remortgage products, and as part of the product you will have a solicitor allocated to complete the legal work for free.
Fracture Cover
This is an add on you can get for life insurance, it covers you for fractures and will pay out a sum of money depending on which bone you break.
Funeral Plan
This is a bit like a finance scheme for a funeral. You can plan your funeral and pay monthly charges towards it so when you do pass away, the funeral is already paid for, and your family doesn’t have to worry about finding the finances to do so.
Ground Rent
This is a fee you have to pay when you own a leasehold property. As you do not own the land that you have purchased the property on, you essentially have to pay rent to the landowner to live there. You do not have to pay this with a freehold property as you own both the land and the property.
Green Mortgages
This is a type of mortgage incentive the lenders have recently introduced. If you have an EPC rating of A or B then you could potentially be getting better interest rates under Green mortgage deals.
Habitable Property
This is a property that is safe and can be used for residential purposes within reasonable comfort. You cannot get a mortgage on a property that you cannot live in, it must have a working kitchen, bathroom, etc. You often find that the un-habitable properties are put on auction or will require cash buyers.
Help to Buy ISA
A Help to Buy ISA is the older form of government backed savings scheme. Since November 2019, you haven’t been able to open one of these but if you previously opened one then you can still use it. It’s not as beneficial as the Lifetime ISA as you can only save £2,400 maximum. The government will still put in 25% of whatever funds you deposit, however you don’t see the bonus getting added annually, unlike the LISA. Find more about Help to Buy ISAs here.
Home Buyers Report
This is an in-depth report which tells you about any issues the property has or may be starting to have. These are more costly than the valuation the lenders carry out on the property as they just give you a figure. Although the lenders will obviously tell you the figure, they won’t share the report. It is always worth paying extra for a home buyer report, so you know more about the property you are purchasing.
Income Multiples/Multipliers
This is the number by which a mortgage lender will multiply your sole or joint incomes when calculating the maximum amount they are prepared to lend you.
Income Protection
This is a type of insurance that pays out when you are unable to work for a period of time. They won’t pay out forever, but you can choose the term that it covers you for.
Interest-only
This is a mortgage repayment type by which you only pay the interest each month. At the end of the term, the amount you initially borrowed will still be outstanding, so you need to have a repayment plan, usually being the sale of the house.
Intermediary
A person who acts as a link between parties in order to try and bring about an agreement, a mediator. In this case, us as your mortgage brokers would be the intermediary as we are setting up the mortgage between you and the lender.
ISA
An ISA is an Individual Savings Account, it is tax free, and you can use it to maximise the potential of your returns. There are ISAs by which you can get quite large bonus’ to help save for your first home and for retirement. These ISAs are called ‘Help to Buy’ and ‘Lifetime’.
Land Registry
A Government department which keeps track of the owners of land and properties, including details of the land or property.
Leasehold
This is a type of ownership where you own the property but not the land. You will sometimes be subject to certain conditions, and you will have to pay a ground rent to the owner of the leasehold. It’s important to keep on top of how many years you have left on your ‘lease’ as this can cause many complications down the line if it were to expire. Lenders often won’t lend on a property which has less than 30/40 years remaining after the term of the mortgage.
Legal Fees
The fees you will have to pay to your solicitor or conveyancer so they can carry out the legal work involved in your property transaction.
Level Term Assurance
This is a type of insurance policy where you take out a certain amount of cover and it remains the same. You can also get policies that decrease and increase over time.
Lifetime ISA
Also known as a LISA, this is a type of government backed savings scheme to help people buy their first home or save up for their pension. Each tax year you can put in a maximum of £4,000, and you will receive a 25% bonus on your input at the end of every month. You cannot take the money out without paying charges until you use the account for your first home or pension. You can learn more about this here.
LTV
This stands for Loan To Value. It is the loan amount compared to the property value, the lower the LTV the better the products you can get. If you have a 10% deposit then your LTV will be 90%, meaning you will require a loan worth 90% of the property value.
Mortgage Adviser/Broker
A mortgage broker acts as an intermediary, who brokers mortgage on behalf of individuals or businesses.
Mortgage in Principal/AIP/DIP
Approval, Decision or Mortgage in Principle An Approval in Principle (AIP) or Decision in Principle (DIP) is a document that most Estate Agents request. It will demonstrate that you have passed the lenders’ initial credit checks. Each lender will have their own AIP/DIP application process, and the result will tell you the amount the lender is willing to lend to you as well as if you have passed their credit checks. However, the AIP/DIP is subject to all the documents that the lender requires to validate the full application meet their criteria, as well as an acceptable valuation being received.
Memorandum of Sale
This is a document which outlines who the vendors and purchasers are and who is acting for both parties, including contact details, property address, the purchase price and solicitor details.
Negative Equity
This is when you owe more on a mortgage or loan than what the property is worth. If you are in negative equity you are classed as a ‘mortgage prisoner’.
Overpayment
This is simply overpaying on your monthly mortgage payments so that you repay the mortgage a bit quicker. Your mortgage offer will state the amount you can repay per annum but usually the allowance is 10% of the current mortgage balance.
Offer
This is a formal document that confirms that your application has been approved and explains the terms and conditions.
Payment Holiday
This was common during the height of the Covid pandemic. It is an agreement with your lender to pause your mortgage, credit card or loan payments for an amount of time. In doing so, it can help you in the short term, but it will roll up your debt making it more costly in the future or extending the term of it.
Porting/Portability
This is when you move your mortgage to a different property. People do this to avoid any early repayment charges or simply because they don’t want to lose their current rate until it expires. You can check your original mortgage offer which will tell you if the mortgage is portable or not and the terms and conditions that will apply.
Power of Attorney
This is a document when you give someone permission to act on your behalf. This is a legal document that needs to be set up before you ‘lose capacity’ so when you are unable to make your own choices, you have someone to do it for you.
Remortgaging
This is the process of paying off one mortgage, using the proceeds from a new mortgage, whilst remaining in the same property. People often remortgage once their current product has expired or if they are looking to raise further funds.
Repossession
This is the action of retaking possession of something, in this case a property when the owner defaults on payments to the mortgage lender.
Right to Buy Mortgages
This is a government scheme designed to help their council tenants buy the house they are currently living in, often with a large discount.
Searches
These are completed by the solicitors. They ‘search’ for any information on the property. They work with the local authority and other organisations to do this.
Service Charge
This is a fee you have to pay usually when you own a flat in a block. You will pay annual service charges which include costs for maintenance, repairs and insurance on the building and communal areas.
Shared Ownership
This is a type of affordable home ownership when a purchaser only buys a percentage on the house and pays rent on the remaining percentage. You then get the opportunity to buy the remaining percentage of the property in the future.
Solicitors
The solicitors complete the legal work behind your transaction. They check any background issues with the house, register you as the new owner and make charges in favour of the lender if you are buying with a mortgage.
Stamp Duty
This is a type of land tax that the government charges when you buy a property. Find more information about how much you have to pay here https://www.mortgage-consultancy.co.uk/stamp-duty-calculator/
Suitability Report
This is a report that the broker writes to the client. It outlines the current situation and why we recommend a certain lender, what product we have advised and why.
Subject to Contract
When an offer gets accepted on a property it will read ‘subject to contract’ because unlike in Scotland, an offer is not legally binding, as until exchange happens there is no guarantee the transaction will complete.
Survey
This is what the lenders need to confirm that the property is worth what you are paying for it.
SVR
Every lender has a ‘Standard Variable Rate’. This is what your mortgage payments will revert to after your fixed rate has expired if you don’t remortgage or complete a rate switch. The SVR usually follows the same pattern as the Bank of England base rate.
Term
This is the amount of time that a mortgage deal is arranged over. Terms for mortgages are usually about 25-35 years long to start with and then reduce each time you review your mortgage.
Term Assurance
This is a form of insurance.
Title Deeds
This is a document which shows the past owners of a piece of land/property since it was registered. It has a full history of the property including any mortgages, charges, etc.
Tracker Mortgages
A tracker mortgage is a type of variable rate mortgage which “tracks” a variable rate – usually the Bank of England’s base rate. If you get a tracker mortgage, your mortgage repayments (including the interest you pay on your mortgage) could change every month.
Unencumbered
This is a house that is owned outright with no mortgage on it.
Valuation
This is what the lenders need to confirm that the property is worth what you are paying for it.
Variable Rate
A variable interest rate is an interest rate on a mortgage that fluctuates over time.
Wills
This is a document that outlines how you wish to divide your Estate/possessions amongst your chosen beneficiaries. We recommend that this is done by a professional so that it can be executed without any issues when needed.