Mortgage Glossary of Terms

A brief list of some of the most common MortgageLiability
terms.This relates more to commercial mortgages. With a
Adverse Creditcommercial mortgage liability for the repayment of
The term used if the borrower has a poor creditthe loan depends on the legal structure of the
history. This could include previous mortgage or loanbusiness:
arrears, bankruptcy or CCJ's. Other terms used toA sole trader will be personally liable for the mortgage
describe an adverse credit mortgage include:debt. Personal assets could be seized if the business
Bad credit mortgagedefaults.
Poor credit mortgagePartners are jointly liable for the debts of the
Non status mortgagepartnership and their personal assets are at risk
Credit impaired mortgageWith a limited-liability partnership and a limited
No credit mortgagecompany, the liability falls firstly on the business
Low credit score mortgagerather than on the individual partners and directors.
APR (Annual Percentage Rate)The lender may take a floating charge on business
The interest rate reflecting the cost of a mortgageassets in general, rather than simply on the current
as a yearly rate. The APR provides home buyersproperty being purchased.
with the ability to compare different types ofThe lender may also insist on personal guarantees as
mortgages based on the annual cost of each.a condition of granting the loan, in which case the
Arrangement Feepartners and directors may be held personally liable
The fee you pay your Lender in return for themanyway.
providing you with a mortgage. Usually paid onLife insurance
completion or with your application, these fees usuallyIf you have a joint mortgage, life insurance can be
apply when you take out a fixed rate, discount oracquired that will see the mortgage paid of should
cashback mortgage.one of you pass on.
AST (Assured Shorthold Tenancy)LTV (Loan to Value)
A form of tenancy that gives the landlord the rightThe size of the mortgage as a percentage of the
to repossess their property after a set amount ofvalue of the property i.e. A £90k mortgage on a
time laid out in the tenancy agreement. Newhouse valued at £100k would mean an LTV of
tenancies are automatically ASTs unless otherwise90%.
stated.MIG (Mortgage Indemnity Guarantee)
Assured tenancyA one off payment made when you set up a
The landlord can charge a market rent (the currentmortgage a kind of insurance policy for the lender.
rate for similar property in that area) and take backThisoffers them protection against the value of the
the property under certain conditions, as set out inhome falling to less than the mortgage. It is generally
the Housing Acts of 1988 and 1996.only charged to borrowers with a less than 10%
Bridging Loan/Financedeposit, but this can vary.
Short term loan to enable the purchase of oneMortgage
property before the sale of another essentiallyA loan to buy a property where the property is used
releasing funds that are required for the purchase.as security against you paying back the loan.
You should always consult a professional beforeMortgagee
considering any bridging finance as it could be aThe company or organisation that lends you the
solution that is worse than the problem.money.
Brokers FeeMortgagor
A fee charged by an intermediary or advisor forThe person taking out the mortgage.
locating the most appropriate mortgage for theNon-Status
borrower.Where a lender may not require income details from
Buildings insuranceyou or may accept some previous poor credit history
Insurance you can take out when you buy ai.e. CCJ's or previous mortgage arrears.
property that will cover the cost of any damage toPayment Holiday
the house and or contents..A period during which the borrower makes no
Buy to Letmortgage payments.
A mortgage meant for those who wish to purchaseRegulated tenancy
a property to rent out to others. The decision onA legal right to live in your accommodation for a
whether you are able to repay this type ofperiod of time. Your tenancy might be for a set
mortgage is often based up on the future rentalperiod such as a year (this is known as a fixed term
income from the property rather than the personaltenancy) or it might roll on a week-to-week or
income of you the borrower.month-to-month basis (this is known as a periodic
CCJ (County Court Judgment)tenancy).You are a regulated tenant if you moved in
A judgement reached in the County Court generallybefore 15 January 1989, you pay rent to a private
realted to non payment of a loan, mortgage etc debtlandlord and your landlord does not live in the same
in general. If you pay off the debt, the CCJ will bebuilding as you.
satisfied and a note is put on your records thatRemortgage
states this.The taking on of a second mortgage to pay off the
Chainfirst. The most common reasons for doing this are
A housing 'chain' made up of a number of buyers andthat another mortgage is available at a better rate or
sellers, essentially the line of buyers and sellersthat the value of the property has gone up allowing
involved in each house move.for the opportunity to borrow more money against
Chargethe property.
Any right or interest, especially with a mortgage, toRight to Buy
which a freehold or leasehold property may be held.For example, a tenant in a council owned property
Basically a charge is the claim the lender has on themay purchase the property at a discount depending
property until the mortgage or loan is satisfied.on length of their tenancy.
CompletionSelf Certified
The term used when the seller and buyer exchangeGenerally when a borrower applies for a mortgage he
the finances required to buy a property through theiror she will be asked to provide pay slips or company
respective solicitors. At exchange of contracts aaccounts to prove their income. If it is difficult or
deposit, usually 10%, will have been paid. At this pointinconvenient for you to provide this evidence, you
the buyer becomes legal owner of the property.can choose to self-certify your income. This involves
Conveyancesigning a declaration which states your income
The legal process in which ownership of the propertysources and amounts. Lenders will charge you higher
is transferred from the seller to the buyer. Generallyrates than average and offer you a more limited
undertaken by a solicitor, or licensed conveyancer.range of mortgages if you choose to self-certify
Early redemption feeyour income, in general it's not a good idea to
If you decide that you want to sell your property orself-certify just to avoid some paperwork.
remortgage then you will be redeeming youStamp Duty
mortgage early. Most lenders charge a penalty fee,Tax paid by the buyer of a property set at 1% for
especially during any period of a fixed, capped orproperties over £60k, 3% for properties over
discounted rate. Be sure you are clear about any£250k and 4% for properties over £500k.
potential penalties when you are about to take on aStructural survey
mortgage.The most wide ranging check of the structure of a
Equity and negative equityproperty. This is carried out by professional surveyor
The amount of value in a property that isn't coveredand should uncover any defects or faults with the
by a mortgage - simply take the amount of thebuilding.
mortgage from the valuation to work out the equity.Tenancy
vThis is where the money you owe on theA legal written agreement between a landlord and
mortgage is greater than the value of your property.tenant that sets out the terms of the rental.
Exchange of contractsTerm
The contract is a written agreement that lays outThe period of years over which you take the
the terms between the buyer and the seller. Whenmortgage and repay it.
both parties exchange contracts, usually weeksTerm Assurance
before completion, the deal becomes legally binding.An insurance policy designed to repay the mortgage
Often a deposit of around 10%, is paid at this stage.on the death of the insured person. Level Term
Fixed RateAssurance covers a principal sum throughout the
A set interest rate on a mortgage fixed for a periodpolicy term and pays out the full amount on death.
of time. This varies from lender to lender.Reducing Term Assurance is designed to repay the
Freeholdbalance outstanding on a repayment type mortgage
If you are the property owner outright then yourupon death. Term Assurance may also pay out early
property is freehold. Most houses are freeholdon the diagnosis of a terminal illness.
wheres many flats are leasehold, since you are notUnderwriting
the owner of the whole building containing the flats.The process of evaluating a loan application to
Gazumpingdetermine the risk involved for the lender. This
If you are in the process of purchasing a propertyinvolves an analysis of the borrower's
and your offer has been accepted but the seller getscreditworthiness and the quality of the property
a better offer, before you complete, and takes ititself.
then, you've just been 'Gazumped'.Unencumbered
Interest Only MortgageWhere the property is owned outright and no
A mortgage whereby the borrower is only requiredmortgages or loans are secured against it.
to pay inerest on the amount borrowed during theValuation
mortgage term. It is the borrowers responsibility toA simple check of the property in order to find out
ensure that enough funds will exist (either through anhow much it is worth and whether it is suitable to
investment policy or other means) to repay the fullsecure a mortgage against.
mortgage at the end of the term.Valuation Fee
IntermediaryThe fee paid by a borrower to cover the cost of
A mortgage broker or advisor who finds the mostthe lender checking that the property is suitable
suitable mortgage for a borrower and arranges thesecurity for the mortgage.
mortgage on their behalf.Variable Rate
LeaseholdA type of interest rate the lender can charge. It
If you buy a leasehold property you don't own thegoes up and down and your repayments change
property rather the right to live there for a specifiedaccordingly.
period of time, however much time remains on theVendor
lease. The owner of the property is called theThe person selling the property.
freeholder or landlord.