The balance upon which interest is charged is adjusted once each year.
The mortgage loan.
Annual Percentage Rate (APR)
The total charge for the loan including fees interest expressed as a percentage.
Applied or Nominal Interest Rate
The rate used to calculate the interest due.
Mortgage payments which have not been paid as requested and are overdue.
Bank of England Base Rate
The Bank of England rate – the main factor influencing interest rates charged by lenders.
A full inspection of the property by a surveyor on behalf of and paid for the buyer.
Needed when you exchange contracts to cover your house.
The amount you owe excluding costs and interest outstanding.
- Final legal transfer of ownership of the property – when the property becomes yours.
- The start of the mortgage (also known as ‘drawdown’).
Cover for all your personal belongings.
The written agreement between the seller and the buyer of a property to transfer ownership.
The seller has received two or more offers on the property and will sell to whoever is ready to exchange contracts first.
Solicitor is licensed conveyancer who deals with the legal aspects.
Closing Administration Charge
A charge made by the lender to cover administration costs when a mortgage is repaid.
Collateral / Security
The property which the lender can sell to repay the loan if the borrower does not keep up the mortgage payments.
Early Repayment Charge (ERC)
A charge by the Lendor if you repay your mortgage earlier than agreed. i.e. If you took out the mortgage over 25 years but paid it back within 2 years, you would probably be liable for a charge for repaying early. This is a common factor in whether or not to remortgage as the charge is at it’s greatest the closest time after taking the loan out.
Outright ownership of the property and the land on which it stands.
An additional loan by the lender to the borrower, which may be for any purpose and secured by the existing mortgage deed.
A letter requesting payment and sent to a customer who is in arrears before legal proceedings start.
An annual charge payable by leaseholders to the freeholder.
A person who promises they will pay the borrower’s debt, usually if the borrower fails to.
When the seller, having already accepted an offer but before contracts are exchanged, accepts another, higher offer from someone else.
A surveyor’s report on a property which is less extensive than a building survey and is paid for by the purchaser.
Any payment due for the period from the day the mortgage began up to the first payment.
Interest only Mortgage
A mortgage where only interest is paid during the mortgage term. The capital is repaid at the end of the term, usually from the proceeds of an investment plan such as an endowment policy.
Provides details of the property including a plan and, if the property is leasehold, a copy of the lease.
An insurance policy that pays a lump sum on death. Often taken out with a mortgage to provide moan for the loan to be repaid if the borrower dies during the term.
Loan to Value (LTV)
The size of a mortgage as a percentage of the value of the property or its purchase price.
Local Authority Search
Questions to the local authority regarding plans for new road building, planning permission for any building work previously carried out, connection to the mains sewer, etc.
The person who leases the property from the landlord.
The bank/building society where you have your mortgage.
The right to possession, but not ownership, of a property for an agreed period of time. Ultimate ownership remains with the freeholder.
Land Registry Fee
A fee paid to the Land Registry to establish ownership of a property.
The person who grants a lease – the landlord.
Mortgage Indemnity Premium (MIP)
A payment to a lender for an insurance policy for the lender’s benefit when they lend above a certain percentage of the property value. The policy covers the risk of selling a repossessed property at a loss. (Also sometimes called a higher lending fee or lender’s risk free).
Has a specific meaning in law but has come to mean a loan with property as security.
The period over which the mortgage loan is to be repaid.
A 10-year guarantee, provided by the National House Building Council, that the builder will put right serious defects on a newly-built property. Zurich Municipal and Premier Guarantee all offer similar guarantees.
When the value of the property has fallen and is less that the loan secured on it.
Insurance which pays your monthly mortgage payments, usually for a specified period, if you lose your income through sickness, injury or unemployment.
An investment plan which can provide a lump sum on and an income after retirement. A pension plan is sometimes used as a way of providing a lump sum to repay the capital of an interest only mortgage.
The amount of the loan on which interest is calculated.
A mortgage where the capital borrowed is gradually repaid over the agreed term.
Repaying one mortgage by taking out another secured on the same property, possibly to take advantage of a particular mortgage product or better interest rate from a different lender.
When a mortgage is repaid (Also called redemption).
Surveyor / Valuer
The person qualified by the Royal Institution of Chartered Surveyors or the Incorporated Society of the Valuers and Auctioneers to carry out valuations and surveys of properties.
Subject to Contract
The phrase used before exchange of contracts which allows either party to withdraw without incurring a penalty.
Standard Variable Rate
Traditionally, mortgage interest rates would rise and fail in line with the Bank of England base rate.
A report required by the lender into particular defects discovered at the property to be purchased, such as dry or wet rot, damp, etc, before they will agree the mortgage.
A government tax payable on exchange of contracts on properties of a certain value.
Tie in Term
The period of time you would need to remain on certain mortgage terms to avoid an early repayment charge.
Title Deeds / Title Documents
The legal documents which provide proof of ownership of a property.
A form which provides details of the transfer of ownership to be entered on the Land Registry register.
An inspection of the property to ascertain its acceptability to the lender as security against the mortgage loan, for which the borrower may have to pay.
The person(s) from whom you are buying your new home.