Mortgages A-Z
Mortgages A-Z
Advice
A mortgage adviser that is regulated by the FSA can make a recommendation about the most suitable mortgage for you.
Annual statement
A statement of mortgage payments and your outanding balance from your mortgage lender, sent annually.
Approval in principle (AIP)
Sometimes known as a decision in principle (DIP). A certificate issued by some lenders after a credit score has been processed that will show the amount they may be prepared to lend you. This is not a guarantee of a mortgage, but can be used to show estate agents when you are making an offer or signing up with them.
APR (Annual Percentage Rate)
This shows the overall cost of a mortgage or loan, taking into account the term (number of years), interest rate, fees and other costs.
Arrangement Fee
This is sometimes referred to as a “booking fee”. The lender may charge an administration fee for processing you application. Some lenders may refund this if your application does not go beyond the initial acceptance stage and some lenders will collect the fee at the time of completion by deducting them from the advance (this may be referred to as a “completion fee”). Some lenders will add this charge to the loan.
Authorised firm
A firm that is authorised by the FSA to carry out regulated activities.
Buy To Let mortgage
A mortgage taken out to buy a property which you intend to rent to tenants.
Broker Fee
This is a fee charged by some mortgage brokers or financial advisers, typically for giving advice or arranging a mortgage or other product. A broker may charge a fee, receive a commission or both.
Capital
The amount of money you use to help buy your home - your equity.
Capped mortgage
A mortgage product that has a maximum limit on the interest rate you'll have to pay during the special rate period, the mortgage rate can go down but is limited to how high it can go.
Cashback mortgage
A mortgage that comes with a cash sum (often a percentage of the amount you're borrowing) that is usually paid on completion of the mortgage (at the start).
Collared mortgage
A mortgage with a minimum rate of interest you'll pay during a deal period, also available are "capped and collared" mortgages which have an upper and a lower limit on the interest rate payable.
Credit Check
It is important to be aware that when applying for a mortgage, a lender will carry out a credit check against you. This can leave a trace or footprint on your credit record and a lender’s decision to offer you credit or a mortgage may be affected by the number of searches registered against you.
You are entitled to check your own credit record, and you may wish to do so particularly if you have been turned down for credit in the past. On payment of a small fee, you can obtain a record of your credit file from Experian, please click here.
Deeds Release Fee
Most lenders will make a charge for releasing the property deeds to the borrower or their solicitor, on repayment of the mortgage. The current charge applicable for your mortgage, if any, is disclosed in your Key Facts document (for regulated mortgage contracts) or Mortgage Illustration (for non regulated mortgage loans) that your adviser provides you with.
Deposit
The amount of money that you're putting into buying a home (not including the mortgage money you're borrowing).
Discounted mortgage
This has a discounted variable rate of interest for a set period, after which the rate will increase.
Early Repayment Charge
Most mortgage products offering attractive terms have a tie-in period, during which you will have to pay a redemption charge or penalty if you want to repay or change the term of the loan. It is important to consider these charges when choosing your mortgage.
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.
Higher Lending Charge
This is an insurance taken out by the lender, but paid for by the borrower, for high percentage advances, for example, those over 75% Loan to Value (LTV). This covers the lender if you do not pay your mortgage and they have to repossess your home and the money from the sale isn’t enough to cover how much you owe. Many lenders now only charge this if you borrow more than 90% LTV. Note that in the event of a claim, an insurance company may try to recover the amount they have paid out from you.
Income multiples
The amount by which your earnings are multiplied to find out how much you can borrow, although most lenders typically work on an affordability basis and not just income multiples.
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. documents Standard documents that all authorised lenders and brokers must give you to explain their services and details about the mortgage you're interested in.
Key Facts document
A detailed illustration for a mortgage that should be presented to you before you proceed with a mortgage.
Legal Fees
Fees charged by your conveyancer or solicitor when you are buying, selling or remortgaging. Usually the same firm will act for you and your lender (which will help keep costs down). The amount charged by each firm can vary as can the service standards so it is advisable to obtain several quotations before appointing a particular firm.
Loan to Value
The percentage of money you want to borrow compared to the cost of the property.
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.
Negative Equity
If you borrow a high proportion of the property’s value (a high loan-to-value ratio) and house prices fall so that the debt you owe is more than the current value of your home, you will have Negative Equity. This could present problems in the event that you want to borrow more money or move home while in this position. If you wanted to sell your property, the proceeds from the sale would not be enough to pay off your outstanding mortgage and you would need to repay the difference from another source.
Register An online register of firms that are regulated by us to carry out financial services in the UK. You can check to see whether a firm is regulated by us, see Check our Register.
Remortgaging
The process of changing your mortgage for a different one, without moving home.
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.
Self Certification
If you are considering a self certification mortgage because you have irregular or non- guaranteed income, such as commission, bonuses or a second job, you need to be aware that if your income reduces you will have to continue repaying the loan. Where you can prove your income, you should not consider self certification mortgages as these are generally more expensive.
Although lenders do not check incomes shown on all self certification mortgage applications, the FSA (Financial Services Authority) expects lenders to perform random audit checks on such business.
Stamp Duty
This is a Government tax payable on the purchase of a property. The amount charged and the threshold at which the charges are applied is set by the Government. Your adviser will be able to calculate what this will be. If you are liable to pay stamp duty, this can be a considerable amount, and you need to budget accordingly when calculating what you can afford.
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.
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 mortgage.
Valuation
A brief inspection, for the benefit of your lender, of the home you hope to buy. 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.