Glossary Terms in alphabetical order. Please click on letters below
to view specific glossary term.

[A] [B] [C] [D] [E] [F] [G] [H] [I] [J] [K] [L] [M] [N] [O] [P] [Q] [R] [S] [T] [U] [V] [W] [X] [Y] [Z]

A

Additional Loading or Rating

The additional interest rate which a lender may charge over and above its base lending rate, based on your financial circumstances and requirements.

Advance
Another name for the mortgage or loan.

Adverse credit
Your credit may be considered adverse if you don't keep up with previous repayments. Examples of adverse credit include: County Court Judgments, mortgage arrears and bankruptcy.

Application
Providing your details to a lender or broker in order to apply for a loan. This information is used to find you a loan that suits you.

APR
Annual Percentage Rate. This shows the overall cost of a loan, taking into account the term, interest rate and other costs. The APR is intended to make it easier to compare lenders and loans.

Arrears
Missing payments on any credit you have.

ASU Insurance
Stands for "Accident, Sickness & Unemployment" insurance (sometimes known as PPI, which stands for "Payment Protection Insurance"). This type of insurance is designed to protect your monthly mortgage repayments in the event of you being unable to work due to one of the reasons specified in the insurance policy.

Advice
A recommendation about the most suitable mortgage for you made by an adviser who is regulated by the FSA.

Annual statement
A statement from your mortgage lender, sent every year, showing among other things what you've paid and what you still owe.

Authorised firm
A firm that has permission from the FSA to carry out regulated activities.

B

Bad credit
Please see 'Adverse credit'.

Bankruptcy
Bankruptcy is a legally declared inability for a person to pay their creditors. Bankruptcy can be requested by the bankrupt person, or it can be requested by creditors in an effort to recoup what they are owed.

Broker (loan)
Companies that arrange unsecured or secured loans rather than you going direct to the lender. Brokers normally have a panel of lenders and do most of the administration involved with your loan.

Brokerage
The act of bringing together two or more parties in exchange for a fee or commission.

Budget calculator
Helps you work out your financial incomings and outgoings.

Buildings Insurance
This insurance covers the cost of repairing or rebuilding the structure of your property following such events as fire, explosion etc. It also generally covers some of the "permanent" fixtures of your home such as washbasins, toilets etc. All lenders will insist that you have adequate Buildings Insurance in place.

Business loan
See 'Commercial loan'

C

Capital & Interest Mortgage
Also known as a Repayment mortgage, this is the traditional method of repaying a mortgage loan. The Monthly repayments which you make go partly towards reducing the mortgage debt, and partly towards paying the lender's interest charges. The mortgage debt is guaranteed to be repaid at the end of the term providing you have made all your monthly repayments when due, which is one of the main attractions of this type of mortgage.

CCJ or CCJ's
A CCJ (County Court Judgment) is an order of a court against a debtor which can have a adverse affect on a clients credit rating.

CeMAP
This stands for "Certificate in Mortgage Advice and Practice", and is an industry recognised qualification. The CeMap examinations (or equivalent) must be passed before a mortgage adviser can give unsupervised mortgage advice to the public.

Commercial loan
A loan for business purposes. Usually secured.

Commission
A percentage of a loan that a broker might receive for placing a loan with a lender. if we receive a commission we will tell you about it.

Completion
The formal end of the mortgage or remortgage transaction, when the money is handed over and legal formalities are dealt with.

Consolidation
Borrowing money to clear existing debts.

Contents Insurance
As the name suggests, this type of insurance covers the contents of your home, ie, furniture, personal belongings etc against theft, and against accidental damage (if you ask for "Accidental Damage" to be included in the policy). Although the lender will not insist that contents insurance is in place, it is sensible to ensure you have adequate cover.

Conveyancing
The legal process involved in buying and selling property.

Credit
Unsecured credit includes: credit cards, store cards, overdrafts and loans. Secured credit includes: secured loans and homeowner loans

Credit agreement
A legally binding contract between you and a lender detailing terms and conditions of your loan.

Credit check
Looks at your credit files to see how risky it is to lend you money. Arrears will appear along with your address, electoral roll information and previous checks. A credit check cannot be done without your permission but is needed to qualify for all loans.

Credit rating
Evaluation of a person's credit history. Credit ratings are used to assess your ability to pay back a loan.

Credit reference agency
A company used by loan companies to make a credit check, e.g. Equifax.

Capped mortgage
A mortgage that has a maximum limit on the interest rate you'll have to pay during a special deal period.

Cashback mortgage
A mortgage that comes with a cash sum (often a percentage of the amount you're borrowing).

D

Daily Interest
This refers to how a lender calculates the interest it charges you for your mortgage. If a lender uses a "daily interest" calculation, this means that it bases its ongoing interest charges on what you actually owe each day. Therefore, from the day after your monthly repayment is credited to your mortgage account, the lender's interest charges are based on a lower mortgage balance because your mortgage payment has reduced the amount you owe to them. A daily interest calculation is more beneficial than a monthly interest calculation, it effectively takes a "snapshot" of your account once each month (usually at the end of the month), and bases its interest calculation on what you owe on that date. Therefore, regardless of the date your monthly repayment was actually credited to your mortgage account, your interest charges will not be recalculated until the end of the month.

Debt
Money owed by you to a lender or other financial institution.

Debt consolidation loan
See ‘Consolidation’

Defaults
If you fail to make repayments after three months you may be classed as defaulting on the credit agreement.

Disbursements
Various conveyancing costs incurred during the mortgage process which can include, for example, Stamp Duty, Land Registry Fees, Local Searches etc. These fees are usually collected by your solicitor.

Discounted Rate Mortgage
This is a variable rate mortgage where the lender reduces the normal rate for a set period of time at the start of the mortgage. This reduction is guaranteed for a specified time, sometimes for a certain number of years from completion but more often until a set date in the future.

Deposit
The amount of money that you're putting into buying a home (not including the mortgage money you're borrowing).

E

Endowment
This is a combined life assurance/savings policy designed to produce a lump sum to pay off an Interest Only Mortgage.

Equity
Equity is the value of you property minus your mortgage and loan. Equity is the amount of money you would receive if you sold your house after you had repaid your mortgage and any other secured loans.

Exchange of contracts
This is the point where the person buying and the person selling a property sign and "exchange" contracts which show the agreed price of the property and what fixtures and fittings are included, as well as a date when everything is to be finalised. When the contracts are exchanged, the transaction becomes legally binding and if either party pulls out, compensation will be due to the other party.

Early repayment charge
A charge you may have to pay if you break off a mortgage deal - by paying it back early and/or moving to another lender. The Early Repayment Charges attached to a mortgage can be found within the terms and conditions of the lender's Mortgage Offer.

F

Finance broker
See 'Broker'

Financial Services Authority
They are responsible for Authorising and Regulating companies within many business sectors, including the mortgage industry.

Fixed Interest Rate
The interest you pay on a secured loan will stay at the original figure agreed, regardless of circumstances like the Bank of England base rate rising. APRs are usually only fixed for a specified term.

Fixed Rate Mortgage
This is where the interest rate on a mortgage is fixed for a set period of time at the start of the mortgage. The rate is sometimes fixed for a certain number of years from completion, but more often until a set date in the future. The benefit of having a fixed rate mortgage is that you have the security of knowing exactly what your mortgage repayments are going to be each month for as long as your rate is fixed, however the drawback is that if interest rates fall during that time and go below your own fixed interest rate, your monthly repayments will not go down.

Flexible Mortgage
A mortgage which offers a range of flexible options including overpayments, underpayments and payment holidays (subject to the lender's terms and conditions).

Freehold
If your property is freehold then you own it outright but this is only after you have paid off the mortgage and all secured loans on it. You can take a secured loan against this land or property.

Fixed rate
An interest rate that is fixed (ie it doesn't move up or down) for a set period of time.

FSA
The Financial Services Authority - the UK's financial services regulator.

G

Gazundering
This is where someone will offer a price and then before exchange lower their offer.

H

Higher Lending Charge
This is a one-off fee charged by some lenders where the LTV (see above) is more than around 75%. The fee is used by the lender to buy insurance to protect itself in case your property has to be taken into possession and then sold for less that your outstanding mortgage debt. It is important to note that the insurance covers the lender and not the borrower - indeed; if a claim is paid out under such insurance, the insurers generally have the right to recover the claim from you.

Homeowner
Owner of a residential property, even if you are still paying a mortgage on it.

I

IFA
Independent Financial Advisor. A professional adviser who is not employed by an institution selling financial services.

Insurance Term
A life insurance policy that is often linked with a mortgage or loan. The premium goes towards insuring your life, and will pay off the loan in the event of your death.

IPT
This stands for Insurance Premium Tax, and is a tax payable on all UK general Insurance policies. The rate can vary and is subject to government change.

ISA
This stands for Individual Savings Account, and is an investment product which has certain tax advantages.

Interest
The charge made by lenders when you borrow their money.

Interest rate
The figure that determines how much interest you pay. Usually linked to the Bank of England's rates and can move up or down.

Interest-only mortgage
A mortgage where you only pay the interest charges of the loan each month. This means you are not reducing the loan amount (or capital) itself, and this will need to be repaid in some other way.

K

Keyfacts Document
Standard documents that all authorised lenders and brokers must give you to explain their services and details about the mortgage you're interested in.

L

Leasehold
This is where you own the property but not the land it stands on. With a leasehold property you pay a monthly rental payment to the person or company who owns the land, known as "ground rent".

Lender
A company that provides you with your secured loan. A secured loan broker can introduce you to the lender and the loan that best fits your situation.

Lender's Administration Charge
This is a fee charged by the lender to cover its own administration costs.

LIBOR Rate
This stands for London Inter Bank Offer Rate, and is the interest rate at which banks lend to each other. LIBOR can vary day by day and is not linked directly to the Bank of England Base Rate. LIBOR is used by some lenders as their base lending rate instead of a Standard Variable Rate which is connected to the Bank of England Base Rate. Where a lender uses LIBOR as its base lending rate it usually reviews the rate on a quarterly basis.

Loan
Money borrowed from a lender by an individual.

Loan - Secured
The property is used as security against the loan.

Loan - Unsecured
The credit rating or financial position of the applicant is such that no security for the loan is required.

LTV
This stands for loan to value. It is the percentage of a mortgage and secured loan against the value of the property e.g. a property valued at £100,000 with a mortgage and secured loan totaling £90,000 would have an LTV of 90%.

Loan application
See 'Application'

Loan broker
See 'Broker'

Loan purpose
Reason why you would want to borrow money, e.g. debt consolidation.

http://www.debtbusterloans.com

M

Monthly Interest
See "Daily Interest".

Mortgage Offer
This is a formal document from the lender stating how much it is offering to lend you and on what terms.

Mortgage
A loan which is secured against your property.

Mortgage broker
A mortgage broker helps you understand the various mortgage types and deals available to them. A mortgage broker may recommend a mortgage for you or they may provide you with information to enable you to make your own choice.

N

Negative Equity
The amount owed on the mortgage is more than the value of the property.

Non status
Describes someone with a poor or bad rating and who would find it difficult to get finance from a bank or building society.

P

Past arrears
Missed payments which have occurred in the past, normally within the last 12 months.

Payment protection plans
Insurance that can be taken with a loan to help you make repayments in the event of accident, sickness or unemployment. See ASU Insurance.

Payment protection insurance
Please see 'Payment protection plans'

Portability
When a product is described as "portable" it means that you may be able to transfer it to a new property if you should move home (subject to the lender's terms and conditions).

PPP Insurance
See "ASU Insurance".

R

Rate - Capped
Usually a rate 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.

Redemption Charges/Penalties
(See also Early Repayment Charges)
A charge you may have to pay if you break off a mortgage deal - by paying it back early and/or moving to another lender. The Early Repayment Charges attached to a mortgage can be found within the terms and conditions of the lender's Mortgage Offer.

Remortgage/ Remortgaging
This is where you take out a new mortgage on your property with a new lender, even though you are not moving home. Your previous lender is paid off with funds from your new mortgage.

Repayments
This is the amount you pay back on your loan/s. Loan repayments are usually monthly.

Repayment Types
See headings for "Capital & Interest Mortgage" and "Interest Only Mortgage".

Repayment mortgage
A mortgage that pays off both the home loan and the interest at the same time. Make all the payments and the mortgage will be fully repaid.

Repayment Mortgage
See "Capital & Interest Mortgage".

S

Secured loan
A loan secured on assets, e.g. your house.

Security
The asset (e.g. your house) which the lender is entitled to sell should you be unable to repay your secured loan.

Security address
When applying for your secured loan, this is the address of the property which is being offered as security for the secured loan.


Self-Certification of Income
This is where you confirm in writing how much you earn, and the lender does not need confirmation of your income from a third party.

Settlement figure
The amount needed to repay the secured loans in full.

Soft credit check
An informal credit check indicates the secured loan repayments you might qualify for. An informal credit check does not leave a record in most cases.

Solicitors
Solicitors are required for all mortgage and remortgage transactions to carry out the legal work involved.

Status
The credit-worthiness or otherwise of a potential borrower.

Sub-prime loan
A secured loan made available to people who have been turned down by Banks and Building Societies.

SVR
This means Standard Variable Rate, and is the way which most lenders define their standard lending rate (some lenders use the LIBOR rate instead, see heading on "LIBOR Rate" above). A lender's Standard Variable Rate is linked to the Bank of England Base Rate, however whilst the SVR will generally go up and down in line with changes to the Bank of England Base Rate, it is normally set by the lender at a slightly higher rate. Lenders calculate their own SVR's, and they therefore vary from lender to lender.

Stamp duty
A tax which home buyers must pay on properties above a government set figure.

Standard variable rate mortgage
A loan at the lender's normal mortgage rate - ie without any discounts or deals.

Secured
A mortgage is a secured loan on your home; this means that if you fail to repay it, your lender may be able to sell your home to get its money back.

Survey
A report on the condition of the property you are planning to buy.

T

Tenant
A person who rents, i.e. not a homeowner. This includes living with parents. A tenant can't qualify for a secured loan.

Tenure
This refers to the type of ownership of a property and the land it stands on, ie. Leasehold or freehold (freehold in Scotland).

Tie-In Period
If you have a special mortgage deal such as a fixed or discounted rate, you may have to agree to stay with the lender for a period of time after the special deal has ended. Moving your mortgage within this period can incur early redemption penalties.

Title deeds
Documents regarding the ownership of a property outlining owner names and details of institutions that have registered a charge against the property.

Transfer Deed
This is a legal document which is used when there is to be a partial change in ownership of a property, for example where someone is being added to or removed from the Title Deeds of the property.

Total amount repayable
Original loan amount plus fees and interest charged over the loan term.

Tracker mortgage
A mortgage with an interest rate that is usually linked to a particular rate that is set independently from the lender and moves up or down with it.

Term
The length of your loan or mortgage.

U

Underwriting
The process by which the ability of a prospective borrower to repay a loan is assessed (this is 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
These loans provide no security for the lender and are usually higher rates of interest, because there is more risk to the lender.

V

Variable rate
This is the interest rate, which may fluctuate during the lifetime of a loan. The circumstances causing change are outlined in the loans terms and conditions. It is usually if the cost of money increases to the lender.

Valuation
A brief inspection, for the benefit of your lender, of the home you hope to buy or remortgage. This is to make sure they are not lending more than the property is worth and that the property is suitable security for the mortgage, but this will not tell you if it is a good or bad buy. For your own peace of mind, you may want your own survey.