Jargon Buster

 

If you have any further enquiries or require any further information please feel free to email us info@m-s-m.co, and we will be happy to answer any questions that you may have

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A

ASU (Accident, Sickness and Unemployment Insurance)

Insurance cover which is arranged by the borrower to protect them against an inability to meet mortgage payments in the event of accident, sickness or redundancy. Each provider will have different exclusions within their policies, and it is therefore important to check your policy details carefully before taking this cover out.

Arrangement Fee

This is a fee charged by the lender for arranging the loan. This fee can be payable up front or upon completion, and is usually added to the loan.

 

B

Booking Fee

Fee charged by a lender to secure mortgage funds, payable at the time the application is submitted. Normally applies to special offer loans, such as fixed or capped rates.

 

C

Capital Raising

When you remortgage, (you change your mortgage provider but stay in the same property) your new loan will pay off your existing/outstanding mortgage and leave a surplus at the disposal of the borrower.

County Court Judgement (CCJ)

This is a judgement for debt which is registered in the county court.

Completion

Completion is the final legal transfer of ownership of property. This is when all the legal formalities of a purchase or mortgage are finalised and the property legally becomes the borrowers.

Conditional Insurance

An insurance policy that has to be taken out as a condition of obtaining a loan.

Credit Check

Enquiry made on the credit history of an applicant, normally by reference to credit agencies such as Equifax or Experian which help lenders to assess your mortgage application.

It will reveal details about your credit history, together with information about credit agreements you may have with other organisations.

Even if your credit search reveals credit problems now orin the past then you should not worry as there is a very good chance that Mortgage Sense will still be able to help you.

 

D

Decision in Principle

We can normally give you a mortgage agreement within a few minutes based upon the information you provide us.

Disbursements (conveyancing)

Costs incurred by solicitors in carrying out their work which they will charge to their clients, e.g. searches, stamp duty etc.

Discounted Purchase Price

Price of a property that has been reduced below the open-market value, this might be as a result of a Right to Buy purchase, a vendor deposit or even the property being sold at undervalue by a family member.

Draw Down Facility

An additional borrowing opportunity that is agreed with a lender but the amount of which has not yet been lent to the borrower.

This is facility is normally offered within a flexible tracker mortgage. This facility is normally requested by borrowers who wish to carry out home improvements at a later or wish to raise capital for their own use without having to pay interest on the borrowing until the money has been advanced to them.

 

E

Early Repayment Charge

This is a charge in-forced by lenders for withdrawing from a mortgage deal before a set date specified in your mortgage conditions.

Equity

This is the amount of money you would have raised if you sold your home.

To calculate this, subtract the value of your outstanding mortgage and any secured loans plus any redemption penalty charges applicable from the current value of your property.

Exchange of Contracts

Exchange of contracts takes place when you pay your deposit, and agree a completion date with the sellers. Once this has happened you are legally bound to buy the property, and will be liable for any losses should you withdraw from the contract.

Existing Liabilities

Is all your debts, including any existing mortgages, hire purchase agreements, personal loans, credit cards etc.

 

F

Fee

Amount charged by a lender, broker or other source for arranging a mortgage or property purchase.

Feuhold

Equivalent of a freehold under Scottish law.

First Charge

Method of securing the main mortgage. A lender with a first legal charge over a property has a first call on any funds available from the sale of the property.

Freehold

A freehold property is one where you are the outright owner of the property.

 

H

Higher Lending Fee

When lending exceeds a certain Loan to Value some lenders may require additional security that the loan to them is repaid in full. The usual form is a High Lending Fee "HLF" (this used to be referred to as MIG (Mortgage Indemnity Guarantee Premium)) . The lender uses this fee to purchase indemnity cover to protect the lender in the event of loss. No protection is offered to the borrower who remains responsible for repaying the whole of the debt to the lender..

Homebuyer's Valuation Fee

The fee paid if you want a more in depth inspection of the property you are thinking of buying.

 

I

Incentive

Offers such as free valuation, conveyancing fees or cash-backs offered to the borrowers to encourage them to take out a loan with a lender.

Initial Interest

The payment of interest to cover the period between the date of completion and the normal date from which an interest payment is due.

Initial Rate

This is the rate of interest you will be required to pay to the lender when you first begin to repay your mortgage.

Many mortgage products such as fixed and discounted mortgages have an initial rate of interest which will change at the end of the initial set period.

 

K

Key Facts Illustration

Example of the monthly cost of a mortgage and all other expenses associated with the mortgage such as set-up costs. These must be given in the form of a Key Features Illustration to every residential borrower

 

L

Land Registry

A record of property. Ownership and the mortgage is registered in a central register at HM Land Registry.

Leasehold

The property is not owned directly by the property purchaser and is held under a lease for a fixed period.

As a leaseholder you have the right to live there for a specified length of time, and should pay rent and service charges to the land owner. (It is important to check the term of the lease as some lenders are reluctant to lend if there is only a short term left on the existing lease).

Legal Charge

This legal document grants rights of security over your property to the Lender.

The key LIBOR rate is 3 month LIBOR, however rates are also quoted for one, six and twelve month periods.

LIBOR-linked

A mortgage linked to LIBOR will be charged at a given margin over the Inter-bank rate (typically 1 to 2%) and is likely to be reset quarterly for mortgage purposes (every 3 months). (The key LIBOR rate is 3 month LIBOR, however rates are also quoted for one, six and twelve month periods.)

Local Authority Search

A search of local authority records to confirm the status of the property. Local authority searches should reveal any proposed changes in the area, details of the planning permission for the subject property and whether any enforcement notices have been served by the local authority.

 

M

Mortgage Arrears

Mortgage payments that have not been made by the due date to the lender in accordance with the contractual agreement.

Mortgage Deed

Legal document securing a loan on property.

Mortgage Term

Length of time before the loan must be repaid, expressed in months or years.

Mortgage Term Assurance

Simplest form of life assurance. The insured person or persons are covered against death within a fixed period subject to the payment of the premiums as they fall due (normally monthly or yearly).

If an insured person dies within the policy term the sum assured is paid out. If all insured persons survive the term the insurance ends with nothing being paid to the policyholders.

Multipliers (income)

Factor applied to a prospective borrower's income to calculate how much can be borrowed.

 

N

Negative Equity

Situation which occurs when the amount loaned against a property is in excess of the market value of the property.

No Credit History

Individuals who have no previous or existing credit agreements in place may find it difficult to obtain credit. (eg first time buyers living at home with their parents). This is because on a credit search there is no credit history and many lenders are therefore unable to assess whether they are reliable payers or a good lending risk.

 

O

Open Market Value

Value of a property on the basis of a willing buyer and willing seller in the open market allowing for a reasonable period for sale (Normally a 3 month period).

 

P

Portable

Describes a mortgage that can be transferred from one property to another at the discretion of the lender and the conditions set out in your Offer of Advance.

 

R

Redemption

Paying off the mortgage, either to move to another property or at the end of the mortgage term.

With some products redemption charged can be levied by the lender if the mortgage loan is repaid.

Regulated Loans

This applies to loans of under £25,000 which are regulated under the terms of the Consumer Credit Act.

Remortgage

A remortgage is when you decide to switch your existing mortgage to a new lender without actually moving house.

Repayment Mortgage (Capital & Interest)

With a repayment mortgage you pay part interest and part capital repayments to the lender each month and in this way the capital that you borrowed is reduced until the loan is repaid.

 

Right to Buy (RTB)

Option for council tenants to purchase the property in which they currently live, often at a discount proportional to the length of the occupancy.

For property purchased under the Right to Buy scheme at a discounted price, the value of the discount, or a portion of it, that has to be repaid to the local authority in certain circumstances e.g. if the property is sold within a certain period of time, normally 5 years from date of purchase.

 

S

Sealing Fee (Discharge Fee or Deeds Release)

Fee charged by a lender releasing its charge over a property following the redemption of a mortgage.

Second Charge

A legal charge that ranks behind a first charge, normally to secure a second mortgage.

Security Address

When taking a secured loan or mortgage, the security address is the address of the property which is being offered as security for the loan.

Sitting Tenant

A person having a legal right of occupation, even if the property changes ownership, and who is able to apply to the local authority to set a fair rent.

Solicitors Fees (Conveyancing )

Fee charged by a solicitor or licensed conveyancer for arranging the necessary legal paperwork in transferring the ownership of a property. Other fees that your solicitor may charge their clients are stamp duty, land registry fees and disbursements.

Special Conditions

These are the specific terms of the mortgage, as outlined on the mortgage offer document, that apply to a particular loan offer.

Split Repayment Mortgage (Part & Part)

This refers to a loan, part of which is interest only (i.e. the capital never declines) with the remaining part being repaid as under capital and interest arrangement

Stamp Duty

This is the government tax you'll need to pay on any property sale over £120,000.

Sum Assured

The maximum amount payable under a policy of insurance. In the case of a life assurance policy this is the amount payable upon death..

 

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.

Unencumbered

Property that is owned without borrowing or other legal charge over it.

 

V

Valuation

A brief inspection of a property for mortgage purposes confirming the suitability of a property to secure money against and its value.

Whilst the borrower may be given a copy of the valuation this is only a limited form of inspection and should not be relied upon when deciding whether to purchase a property.

Purchasers should be advised to obtain either a House or Flat Buyer's report or a full structural survey before proceeding with a purchase.

Variable Rate

Interest rate that will vary over the term of the loan, normally in line with the general cost of borrowing.