Mortgage Glossary

Glossary of mortgage terms

• A - D

  A

  Accident, Sickness & Unemployment Insurance (ASU)
  These policies are designed to help you pay a percentage of your normal monthly mortgage payment for a specified period in the event of accident, sickness or redundancy. However, ASU doesn’t apply if your injuries are self-inflicted, or if the redundancy is voluntary or as a result of misconduct.

   

  Actuary
  Actuaries are statisticians who calculate, among other things, insurance premiums, annuity rates, dividends and risks, usually in relation to pensions, insurance and investments. With mortgages, the actuary will calculate what you need to pay for life assurance and any other insurance policies.

   

  Added to Loan
  Many costs arise when arranging a mortgage, such as indemnity and administration fees. In some cases, these can be added to the amount that a person borrows, in which case they are known as ‘Added to Loan’.

   

  Adjustment Date
  This applies to variable rate mortgages, and is the date on which the interest rate is changed.

   

  Administration Fee
  This is a charge levied by the lender to cover the costs of processing your mortgage application. If you do not complete your application, the fee may not be refunded. The administration fee is also sometimes known as an application fee.

   

  Adverse Credit
  If a borrower has adverse credit, he or she has had problems with credit in the past, usually relating to late payment, county court judgments (CCJs) or bankruptcy.

   

  Adverse Mortgage
  This is a type of mortgage available for buyers who have had credit problems in the past, such as missed payments, arrears, defaults, and CCJs.

  If you think this might apply to you, then you should look to talk to a broker, as many of the lenders who can consider lending to such applicants do not offer mortgages directly to consumers.

   

  Agreement in Principle/Decision in Principle
  An Agreement in Principle (aka Agreement in Principle) is just a document a lender can produce confirming how much a lender will lend you for a mortgage. Buyers can then use this to prove to estate agents and sellers how much they can afford for their property.

  Essentially, it is the first part of a mortgage application where the lender uses all your personal, income, and expenditure details, performs a credit search and initially decides how much they can lend.

  It is usually valid for up to 30 days, as that is when your credit file updates. Brokers can get these on your behalf with their access to many lenders. Learn more about agreement in principle/decision in principle in our guide.

   

  Amortisation
  It might sound quite complex, but amortisation is simply the reduction in the amount you owe on your mortgage over time as you make regular payments.

   

  Annual Percentage Rate of Charge (APRC)
  APRCs are a calculation that allow people to compare the cost of borrowing as they take into account not only the amount of interest you pay but also any other fees charged by the provider, e.g. arrangement fees for setting up a loan. Put simply, the lower the APRC the better.

   

  Applicant
  The person applying for a mortgage.

   

  Application
  The process of applying for a mortgage and supplying personal and financial details to the mortgage broker and/or lender.

   

  Appraised Value
  A surveyor’s estimation of the value of a property.

   

  Appreciation
  The increase in a property’s value due to positive market conditions.

   

  Arrangement Fee
  These fees can be added to the loan amount or paid separately. Levied by the mortgage lender, they cover the administration costs of a mortgage although are usually only applied to loans with special ‘fixed’ or ‘discounted’ interest rates.

   

  Arrears
  This is the amount, usually expressed in pounds or months, which your mortgage payments are behind schedule.

   

  Asset
  A very broad term, comprising any form of property owned by a person, such as shares, cash and land.

   

  Assignment
  The situation whereby an asset, or mortgage, is transferred from one owner to another.

   

  Auction
  At an auction, properties are sold to the highest bidders. Find out how to arrange a mortgage on an auction property.

   

  B

  Balance Sheet
  A statement showing the assets and liabilities of a company at a particular time

   

  Bank Rate/Base Rate
  The interest rate set by the Bank of England’s Monetary Policy Committee. This is what tracker and variable rate mortgages will use to work out the interest rate you pay with your mortgage.

   

  Basic Earned Income
  This is your underlying basic salary, and doesn’t take into account tax and additional sources of income such as bonuses and overtime.

   

  Beneficiary
  This is a person entitled to benefit, usually financially, from a trust or a will.

   

  Booking Fee
  A charge levied for the arrangement of a mortgage and which usually guarantees funds or guarantees a rate for fixed or capped rate mortgages.

   

  Borrowing Back
  Available to flexible mortgage holders only, borrowing back allows you to borrow back any overpayments you have made if, for whatever reason, you need additional cash flow.

   

  Bridge Loan
  This is the money borrowed to finance a new building or property or some other project until permanent financing can be obtained. Find out more about bridging finance.

   

  Broker
  A broker is a middleman who brings two or more parties together, in the case of mortgages, the borrower and the mortgage lender.

   

  Broker’s Fee
  The fee a broker charges for finding the borrower the most appropriate mortgage.

   

  Buildings Insurance
  Buildings insurance covers loss or damage to the physical structure of your home, for example, the roof, walls and floors. Contents insurance, which is often sold alongside buildings insurance, covers loss of, or damage to the ‘material possessions’ within your home.

   

  Buy to Let Mortgage
  This is designed for people who buy a property with the sole intention of ‘letting’ it out to tenants for investment purposes. View our buy-to-let mortgage offering.

   

  C

  Calculating Interest Daily
  The interest on most flexible mortgages is calculated daily. The advantage of this is that, when you make payments or overpayments, you will be paying less interest almost immediately, as the size of the mortgage will have reduced. This may not sound much initially, but over a number of years it can add up to a substantial sum.

   

  Cap
  A cap is a ceiling on interest rates, usually for a specified period. For example, if your mortgage is capped at 5%, you will not pay more than that even if interest rates rise to 6%.

   

  Cap and Collar
  A collar is a floor on interest rates, usually for a specified period. For example, if your mortgage has a 5% collar, you will not pay less than that, even if rates fall to 4.5%. A cap and collar mortgage is a combination of the two.

   

  Capital
  In mortgage terms, this is the money, or deposit people put into buying a property. Sometimes, it is referred to as equity.

   

  Capital Improvement
  Everybody wants to improve the capital value of their homes. Capital improvement is any improvement, such as a loft extension or conservatory, which permanently increases a property’s value.

   

  Chain
  The often protracted situation whereby a buyer is waiting on the completion of the sale of an existing property in order to complete on the purchase of a new property.

   

  Clear Title
  Legal jargon referring to the clear, unequivocal ownership of a property.

   

  Collateral
  An asset, such as a car or an expensive stereo/Plasma TV, which a lender may seize to ensure the repayment of a loan if the borrower fails to repay the loan under the terms of the original contract.

   

  Commercial Mortgages
  These are for individuals or companies buying commercial property – offices, bars and retail outlets – with a view to gaining from capital appreciation and rents. Learn more about commercial mortgages.

   

  Commission
  The fee levied by a broker for services relating to the arrangement of a mortgage or insurance, or the purchase of a property.

   

  Commitment Letter
  Every prospective borrower wants one of these! This is a letter from a lender detailing a formal offer and outlining the terms and conditions of the loan. It is often referred to as a ‘loan commitment’.

   

  Common Areas
  Areas where more than one resident shares access, for example, hallways, parking areas and gardens.

   

  Comparative Search
  Usually carried out by an estate agent, a comparative search analyses the actual sale values of similar properties in the same area as your own. The aim is to give a good idea of the sale price of a property.

   

  Completion
  Everyone wants to get to completion! The completion date is the date that your solicitor forwards the money from your lender to the vendor’s solicitor. In short, it’s the date that you become the legal owner of your new property.

   

  Compound Interest
  Compound interest is the interest paid on capital and any previously accrued interest. For example, £1,000 borrowed for 5 years at 5% p.a. would become £1050 after 1 year, £1,102.50 after 2 years and so on.

   

  Compulsory Insurance
  The insurance required by lenders as a prerequisite of issuing a mortgage, and which generally covers the physical building itself and the material contents inside. Sometimes called Conditional Insurance.

   

  Contents Insurance
  Insurance that covers the material possessions within your home, for example, electrical goods such as Plasma TVs and stereo systems, furniture, curtains and carpets. Certain items, such as expensive computers, may need additional insurance.

   

  Contract
  A legal agreement between the buyer and seller of a property.

   

  Conveyancer

   A conveyancer is a professional who deals with the legal aspects of buying or selling property and land.

  They can be:

  • A specialist conveyancing solicitor who is fully trained in legal services but specialises in conveyancing.
  • A general solicitor that is trained in conveyancing but not as extensively as the specialist.
  • A licensed conveyancer who is an expert in conveyancing but doesn’t have any additional legal training for issues further down the line so will need to refer you to a solicitor if these issues do arise. They often work within a legal firm.

  It is generally recommended to employ a solicitor or conveyancer. In fact, most mortgage lenders will insist on doing so in order to protect their interests.

   

  Conveyancing
  The legal process relating to the transfer of ownership of a property from a seller to a buyer, and which is usually carried out by a licensed conveyancer or solicitor. A Conveyancing Fee is usually charged for this service.

   

  County Court Judgement (CCJ)
  CCJs are rulings issued by a County Court or higher court and relate to bad debt. The judgement against the individual is recorded and will show up during credit checks. They almost certainly count against people when they apply for a mortgage.

   

  Covenants
  The various regulations governing a property, usually outlined in the title deeds.

   

  Credit
  This is when one party (the borrower) receives money or an asset such as property on condition that they repay the other party (the lender) at some agreed point in the future.

   

  Credit Check
  The process whereby checks are made on a person’s credit history, often as part of the mortgage application process. These checks are carried out by dedicated credit reference agencies on behalf prospective lenders, and usually examine outstanding debts, arrears, credit card repayments and County Court Judgements.

   

  Credit History
  The full history of a person’s paid and unpaid debts. These help lenders assess the likelihood that prospective borrowers will be able to meet their mortgage repayments.

   

  Credit Rating
  Normally based on a person’s credit history, this is an assessment of whether or not they will be able to keep up repayments on a loan.

   

  Credit Reference Agency
  A company (for example, Equifax and Experian) that accumulates financial records relating to the payment history of a prospective borrower. Almost all lenders will use such an agency during a mortgage application.

   

  Credit Report
  The report issued by a Credit Reference Agency that details a person’s credit history. Used by lenders to assess the quality of a mortgage application.

   

  Credit Score

  A credit score is the total number of points a lender awards a mortgage application based on the answers given to all the questions and the data received when doing a credit search on the applicants.

  It should not be confused with the credit score credit reference agency’s offer and advertise. Lenders do not actually look at scores from credit reference agencies. They perform their own credit score and the more points you are awarded in your application, the greater chance of the lender saying ‘yes’.

   

  Credit Scoring
  The process whereby a lender assesses the likelihood of mortgage applicants being able to maintain their mortgage repayments.

   

  Critical Illness Cover (CIC)
  CIC pays out a tax-free lump sum to policyholders if, during the term of the policy, they are diagnosed with one of a number of specified ‘critical’ illnesses or conditions, such as cancer, Parkinson’s Disease, Multiple Sclerosis or paralysis following a heart attack or stroke.

   

  Current Account Mortgage
  Current Account mortgages (often referred to as ‘CAMs’) have many of the facilities that apply to a standard current account and, when combined with flexible mortgage, allow payment holidays and over- and under-payments.

   

  D

  Deeds
  The legal documents that prove ownership of a property. Deeds are usually held by the lender.

   

  Deposit
  This is the money used as a down payment on, for example, a house or some other purchasable item.

   

  Defaults
  This is when a borrower doesn’t pay their monthly payments for long enough so the lender puts the contract into a defaulted state.

  It is not the same as a CCJ, as the lender has not taken the borrower to court. If there is no attempt to make up those missed payments then the lender may well go to court to place a CCJ on the borrower’s credit file.

  If payments continue to be missed and the arrears increase in size, a lender may feel they have no option but to apply to the courts to repossess the property.

  Mainstream lenders are extremely unlikely to lend to people with defaults (or any adverse credit). There are some lenders who understand that some applicants may have had difficulties in the past six years but are still prepared to lend.

   

  Disbursements
  These are the fees, such as stamp duty and land registry, paid by the buyer’s solicitor on the buyer’s behalf.

   

  Discount Rate
  Usually relating to the initial period of a mortgage, this is when the interest rate you pay is discounted by a certain percentage from the standard variable rate for an agreed period.

• E - H

  E

  Early Redemption Charge/Early Repayment Charge/Early Repayment Penalty
  Lenders charge this charge when borrowers pay off their mortgage before the agreed date, often because they are moving their mortgage to another lender. These charges almost always apply to fixed and discounted rate mortgages.

   

  Endowment
  A popular savings vehicle designed to generate a sum sufficient to pay off an interest-only mortgage at the end of its term. As a rule, endowments invest in a mixture of equities, cash, and (Government) bonds.

   

  Equity
  Very simply, the amount of value in a property that isn’t covered by a mortgage. To work it out, simply subtract the amount of the mortgage from the valuation of the property.

   

  Equity Release
  Equity release is a way for homeowners to convert a proportion of the value of their homes into cash without having to sell up and move out. This could be a lump sum, a regular extra income or a combination of the two. It’s often used to carry out home improvements, to fund a holiday or to improve the quality of a person’s retirement.

   

  Exchange of Contracts
  The exchange of contracts is the point at which the buyer signs the contract for sale and sends it to the seller who also signs it. Both buyer and seller are then legally bound to complete the transfer. Once the contract has been signed, the contract becomes legally binding, meaning that if the buyer or seller pulls out prior to completion, they may have to pay compensation.

   

  Existing Borrower (Product) Transfer/Rate Switch
  When you come to the end of your current mortgage product (or deal) you will be switched on to the lender’s standard variable rate. As that is more expensive than other products, you can either move your mortgage to a new lender with a new product (called remortgaging) or stay with your current lender and take one of the products they offer to existing borrowers only. This is called a product transfer or rate switch.

   

  F

  Fixed Rate Mortgage
  The interest rate on a fixed rate mortgage is set at an agreed rate for an agreed period, often two or five years but sometimes 25 years. It is especially favoured by people who want to know exactly what they are paying each month as it is not vulnerable to changes in the base rate. The downside is that fixed rate mortgages often come with heavy penalties if they are redeemed early. And if interest rates are lowered, you run the risk of being locked into a higher rate.

   

  Fixtures
  Any item that is deemed to be ‘attached’ to a property and therefore legally part of that property.

   

  Flexible Mortgage
  A mortgage that allows you to vary your monthly repayments and, for a certain number of months, even take a payment ‘holiday’. Because of the ability to overpay, people can pay off their mortgage early and therefore reduce the interest payable. However, as a result of all this flexibility, flexible mortgages usually charge a higher interest rate.

   

  Freehold
  If you own your property’s freehold, you not only own the property itself but also the land that it is on.

   

  Foreclosure
  Following on from mortgages, let’s look at the complete opposite or when it goes wrong. This is incredibly rare but still useful to know – repossessions count for 1% of sales (and these statistics come from 2020). There are other options before this happens.

  Foreclosure happens when you cannot make or stop paying the monthly repayments (aka going into arrears). It is a legal process in which the lender attempts to recover the balance of the loan by forcing the sale of the property.

   

  G

  Gazumping
  Nobody likes to be gazumped. This is when the person selling a property accepts an initial offer and then accepts a second, higher offer from a different buyer prior to the exchange of contracts. Tends to happen in strong housing markets.

   

  Gazundering
  The seller’s nightmare. This is the situation where a buyer makes a reduced offer to a seller just prior to the exchange of contracts.

   

  Ground rent
  The fee payable by a leaseholder to the freeholder. Tends to be paid annually or six monthly.

   

  Guarantor
  A Guarantor is the person liable for the repayment of a mortgage if, for whatever reason, the borrower fails to keep up their mortgage repayments. Guarantors are usually parents or close family members.

   

  H

  Home Buyer’s Report
  A property survey, or report half way between a mortgage valuation and a full survey, and which is intended to satisfy the buyer that the property they are purchasing is in a good condition. Find out about the other types of property surveys.

   

  Help to Buy
  The Help to Buy Scheme is a government-funded scheme to help first-time buyers on the property ladder. The original scheme closed in 2019 but the new Help to Buy Equity Loan is available until 2023. A new scheme is hoped to be announced to replace it to aid first time buyers but no announcement has been made (as of February 2022).

• I - L

  I

  Income Multiples
  When calculating how much they will offer as a mortgage, lenders multiply an applicant’s income by a set figure, which depends on the person’s salary, circumstances and ability to keep up payments. As a rule, lenders will accept 3 times the gross salary of a sole applicant plus or 2.5 times on a joint salary.

   

  Income Reference
  Lenders often ask employers to confirm the amount mortgage applicants claim they earn. For self-employed applicants, lenders may ask for confirmation from an accountant.

   

  Individual Savings Account (ISA) Mortgage
  An interest-only mortgage that relies on the performance of a tax-efficient Individual Savings Account to pay off the loan at the end of the mortgage term. An ISA can invest in numerous asset classes, including shares, (Government) bonds and cash.

   

  Interest
  Interest is what lenders charge people for borrowing money. Exactly how much interest is charged depends upon many factors, including the time period of as loan and the deemed credit risk. However, in a deposit account, for instance, interest can also be the return upon a capital sum invested.

   

  Interest-Only Mortgage
  With interest-only mortgages, borrowers only have to pay off the interest on the mortgage and not the capital. However, the onus is upon the borrower to ensure ¬ via a savings vehicle such as an endowment – that sufficient funds will be in place at the end of the mortgage term to pay off the mortgage in full.

   

  Intermediary
  A ‘middleman’, or ‘broker’ who searches the market for the most appropriate mortgage for a borrower.

   

  J

  Joint Tenancy
  A form of property ownership between two people, whereby if one of the owners dies, their share of the property will be automatically transferred to the other party.

   

  Joint Mortgage
  A joint mortgage is when a mortgage is taken out by two or more people. You might decide to buy a house with a partner or friends. A parent can also help their children buy a property by entering a joint mortgage with them.

  One thing to note is if you buy with a partner but they pass away, the ownership of the mortgage reverts to you, the surviving person.

   

  L

  Land Registry Fee
  The fee paid to the Land Registry to register the ownership of a specific area of land.

   

  Leasehold
  A common type of home ownership whereby you purchase a house or flat for an agreed number of years but where the actual land it is on remains the property of the freeholder. When the leasehold period ends, the freeholder reclaims ownership of the property, although leases can often be extended.

   

  Licensed Conveyancer
  A person specializing in the transfer of the legal ownership of a property. Often used in place of a solicitor.

   

  Life Assurance
  Life assurance policies pay out either a lump sum or a series of payments when a person dies during the life, or ‘term’ of a policy, usually to his/her dependants. In most instances, these payments – known as the ‘sum assured’ – are tax-free.

   

  Listed Building
  A building of special historic, or architectural interest, which cannot be altered by an owner without official (usually Local Government) consent.

   

  Local Authority Search
  Carried out by the buyer’s solicitor, and carrying a fee, a local authority search checks, for example, that there are no proposed developments close to a property that could make it less attractive. The last thing a new homeowner wants is a motorway being built at the end of their garden just after they have bought their dream property. The search also highlights the various planning permissions for the property and whether any enforcement notices have been served upon it.

   

  LTV (loan to value)
  A mortgage term describing the amount of money a bank or building society will lend you as a percentage of your property’s value. 95% is a common LTV although in some cases they will lend the full value of the property, or 100% LTV.

• M - P

  M

  Mortgage
  A loan where the ‘mortgaged’ property acts as a security for the lender until the loan is repaid in full — often after 25 years.

   

  Mortgagee
  The organisation that lends you the money to buy a property. Usually a building society or bank.

   

  Mortgage Indemnity Guarantee (MIG)
  An insurance policy that covers lenders in the event of a property being repossessed and the mortgagor (see below) not being able to repay any payments outstanding. Ironically, while these insurance policies protect the lender, it is the borrower who has pay for them. MIGs are generally asked when the LTV (loan to value) is over 75%. Fortunately, MIGs are becoming less common.

   

  Mortgage Payment Protection Insurance (MPPI)
  Also known as Accident, sickness and unemployment insurance (ASU), MPPI pays a percentage of a person’s mortgage payments if they are unable to work because of illness, accident or enforced redundancy.

   

  Mortgagor
  The person who borrows money from a lender (such as a bank or building society) under a mortgage agreement.

   

  Monthly Repayments
  Monthly repayments refer to the amount you pay your lender each month. The payment covers a percentage of your mortgage plus interest. This monthly amount is determined by the percentage of the deposit you initially pay.

   

  N

  Negative Equity
  The unfortunate situation whereby the money a borrower owes on a mortgage is greater than the value of the property. It really becomes a problem if a person wants to sell their home.

   

  New for old
  A form of property insurance that replaces damaged or lost items in your home with new items.

   

  Non-Status Mortgage
  With a non-status mortgage, the lender may not require income details from the borrower. This kind of mortgage is often taken out by people who cannot prove their income, have unusual employment circumstances or a poor credit history.

   

  O

  Offer
  The sum of money that a buyer offers to a seller for a property.

   

  Offshore Mortgage
  These are usually for people with complex mortgage needs, such as high net worth foreign nationals and international sports stars looking to purchase a UK home. Finance is arranged through any number of trusts and companies in the various offshore jurisdictions — from the Cayman Islands to the Isle of Man. Check our our offshore mortgage offering.

   

  Offset Mortgage
  An offset mortgage is a combination of a normal mortgage and a savings account that is linked to the mortgage account. At the end of every day, any balance in the savings account is deducted from the outstanding mortgage balance before the amount of interest you will be charged is calculated.

  This allows you to use savings to lower your mortgage costs each month, which means instead of earning interest on your savings, you’ll have less interest charged on your mortgage. Offset mortgages are extremely flexible, very tax-efficient, and can be used for many reasons.

  They are more complicated than a normal mortgage, however, so talking to a broker is very much advised.

   

  Open Market Value (OMV)
  The price of a property when both buyer and seller are willing.

   

  Overpayment
  Generally applies to flexible mortgages, which allow overpayments to be made by the borrower without incurring a penalty. Over the term of a mortgage, this can result in significant interest savings.

   

  Overseas Mortgage
  These are taken out by investors looking to build a portfolio of properties abroad, or by people who simply want to buy a holiday home, possibly secured against the equity in their UK property. Can be either sterling or foreign currency loans.

   

  P

  Payment Holiday/Break
  Generally applies to flexible mortgages, and is a period during which borrowers make no mortgage payments (usually for six months). In some cases, there is a prerequisite that they have already made ‘overpayments’ on their mortgage.

   

  Permanent Health Insurance (PHI)
  Provides a regular tax-free income for policyholders if they are unable to work due to accident or sickness. It is available to both the employed and the self-employed.

   

  Portability
  A mortgage that can be transferred between properties when a borrower moves house is said to be ‘portable’.

   

  Principal
  The amount of the loan on which lenders calculate interest.

   

  Purchaser
  The person who is buying a property.

• Q - T

  R

  Redemption
  The ‘paying off’ of a mortgage when remortgaging, moving house or simply at the end of the mortgage term.

   

  Redemption Penalties
  Lenders levy redemption penalties when borrowers pay off their mortgage before the end of the agreed redemption period. They are very common with fixed rate and discounted mortgages.

   

  Remittance Fee
  This is charged by lenders for sending mortgage funds to an individual’s solicitor prior to the purchase of a property.

   

  Remortgage
  When you remortgage a property, you pay it off with the money you receive from a new mortgage, using the very same property as a security. People often remortgage to secure a more competitive interest rate. Take a look at our remortgage service or learn more in our why would you want to remortgage guide.

   

  Repayment Mortgage
  Repayment mortgages, often referred to as capital repayment mortgages, require borrowers to repay on a monthly basis not just the interest on the loan but also a slice of the capital borrowed. This kind of mortgage is usually favoured by more conservative homeowners who want to guarantee that, at the end of the mortgage term, the property will belong to them.

   

  Repossession
  The unfortunate situation whereby a borrower can no longer keep up with his/her mortgage repayments and the property is legally repossessed by the lender. In order for the lender to then retrieve any outstanding debt, the property is usually sold at a public auction.

   

  Retention
  The holding back by a lender of a mortgage until certain repairs have been satisfactorily completed.

   

  Right to Buy Scheme
  This scheme provides council tenants to right to buy the council houses they live in. The scheme is now allowing housing association tenants to do the same.

  The council will give you a discount on the purchase price that is not as much as it used to be but it can still be a significant amount that has enabled many council tenants to own their home rather than rent.

  There are quite a few conditions that have to be met and rules to follow, so we advise you to talk to the council early on to check what you are eligible to receive as a discount and what you can and cannot do with the property.

   

  S

  Self Invested Personal Pension (SIPP)
  A personal pension where the person investing for his/her retirement makes the investment decisions rather than a pension fund manager. Favoured by higher net worth, more investment-savvy individuals.

   

  Sealing Fee
  A charge levied by lenders when a mortgage is repaid.

   

  Searches
  The checks carried out during the conveyancing process before the offer of a loan. They are made with local authorities and other organisations and reveal any planning proposals that could adversely affect the value of a property in the future.

   

  Self-Certified Mortgage
  These are generally for the self-employed and people with more complex forms of income. As a rule, lenders will charge a higher interest rate, or require a larger deposit to meet the increased level of risk.

   

  Shared Ownership
  With shared ownership, you can buy between 25% and 75% of a property and pay rent on what’s left. Again, these schemes can really help people get on the housing ladder but not all lenders offer mortgages for them and there are considerable terms and conditions that come with them.

  Make sure you talk to the shared ownership scheme provider to fully understand what is involved and what your options are in the future.

   

  Short Lease Loan
  Favoured by more speculative borrowers, these can be a cost-effective way to buy properties in some of London’s most desirable locations and generate spectacular capital growth and rental yields as a result. Changes in the law mean that individuals or companies – if they have owned a property for at least two years – can now apply for a lease extension, which will theoretically increase a property’s value. Check out our short lease mortgage offering.

   

  Stamp Duty
  If you want to move home, it is important that you establish how much Stamp Duty you need to pay so that you can budget for this before making an offer. Stamp Duty is a land tax which applies to any property purchase over £125,000. Under the new system, the amount of Stamp Duty owed will work in a way much like income tax. On residential properties, Stamp Duty can range between 0-12% dependent on the purchase price of the property. Learn more in our stamp duty guide.

   

  Property Price Band Rate of Stamp Duty
  £0 – £125,000 0%
  £125,001 – £250,000 2%
  £250,001 – £925,000 5%
  £925,001 – £1.5m 10%
  Over £1.5m 12%

   

  Standard Variable Rate (SVR)
  The standard variable rate is a type of interest rate on a mortgage that often moves in line with the Bank of England base rate. However, unlike a tracker mortgage, changes are ultimately at the lender’s discretion.

   

  Structural Survey
  Sometimes referred to as a Building Survey, this is an in-depth structural analysis of the inside and outside of a property that should reveal any hidden, or not obvious faults. Carried out by a chartered surveyor who proceeds to write an extensive report outlining any defects. Structural surveys tend to be carried out on older properties, those that have been poorly maintained or where there are subsidence concerns.

   

  T

  Term
  The time period – usually in years – over which a mortgage is repaid. The standard mortgage term in the UK is 25 years, but terms of up to 30 or 40 years are becoming more common. The shortest terms are around 5 years.

   

  Term Insurance
  The most common form of insurance, this pays out a lump sum if the policyholder dies at during the term of a policy. The money is usually used to pay off a mortgage or to provide financial security for the policyholder’s dependants.

   

  Tie-in Period
  The tie-in period refers to the time you cannot leave your agreed mortgage term unless you pay an early repayment charge. In the past, there were some mortgage products where the introductory rate ended before the penalty period had finished. That type of product is really quite rare nowadays though.

   

  Title Deeds
  Important documents that prove ownership of the freehold and leasehold of a property.

   

  Transfer Deed
  Once you have signed the transfer deed, ownership of the property in hand is transferred to you

• U - Z

  U

  Under Offer
  A property is said to be ‘under offer’ when a seller has accepted an offer from a buyer but the exchange of contracts has not yet been reached.

  Unencumbered
  The ideal form of home ownership, i.e. where the property is owned outright and no mortgage is secured against it.

   

  V

  Valuation
  A check carried out by the lender that finds out how much a property is worth and whether it is suitable for a mortgage. The valuation fee is usually paid by the borrower. We can offer you a free property valuation report! 

   

  Variable Rate
  On a variable rate mortgage, the interest rate charged by the lender goes up and down according to base rate movements and your mortgage repayments change accordingly. The variable rate will always be at a slight premium to the Bank of England base rate.

  Vendor
  A person selling a property to a buyer.

   

  W

  Waiver of Premium
  An option within an insurance policy that allows a policyholder who has become seriously ill or disabled to not pay the premiums while continuing to be covered.

   

  Y

  Yield
  For buy to let investors, this is the income generated from a property and calculated as a percentage of its value.