A

Accident, Sickness & Unemployment Insurance (ASU)

In the event of accident, sickness and unemployment, ASU is insurance which pays all or a percentage of your monthly mortgage payment if you cannot work. It is also known as Accident, Sickness and Redundancy Insurance (ASR), Payment/Income Protection Insurance, Mortgage Repayment Protection (MRP) or Mortgage Payment Protection Insurance (MPPI).

Accidental Damage Cover

Extra insurance on your buildings and/or contents insurance policy to cover you against accidental damage to the contacts and/or structure of your property.

Administration Fee

A fee paid to the lender to cover the costs of processing an application. This may also include the Valuation Fee.

Adverse Credit

The term applied to someone with a poor credit history owing to late mortgage, rent or credit payments, CCJs or bankruptcy.

Agreement in Principle (AIP)

(also known as a DIP) is a certificate or statement from a lender to say that 'in principle' they would lend a certain amount to a particular prospective borrower or borrowers based on some basic information.

Agricultural Restriction

A covenant restricting the use of a property to agriculture.

Annual Percentage Rate (APR)

The interest rate quoted by individual lenders to help clients compare the true cost of different credit products on offer. It is the overall cost of a mortgage during the whole term, including the interest and fees.

Applicant(s)

The individual or individuals who apply for a mortgage.

Application Pack (App Pack)

This is sent to the broker to go through with the client to ensure all the information needed by the lender is present and correct. This can also be known as an Issue.

Arrangement Fee

A fee to cover administration, usually for arranging special rate mortgages. Other names include Application Fee, Booking Fee and Reservation Fee.

Arrears

If you go into arrears it means that you have ‘defaulted’ at least once on your mortgage repayments, (you have missed a month's payment). You will owe a sum of money ‘in arrears’ to your lender.

Assignment

The term used when the ownership of a policy is legally transferred. In the case of mortgages, the ownership of a policy is usually transferred to a lender to ensure that the policy proceeds are used for the loan redemption.

Assured Shorthold Tenancy (AST)

This entitles the landlord to a possession order immediately after the initial agreed period. The landlord is therefore able to evict the tenant after the initial fixed term without a legal reason.

Automated Valuation Model (AVM)

Is the name given to a service that can provide real estate property valuations using mathematical modelling combined with a database. Most AVMs calculate a property’s value at a specific point in time by analysing values of comparable properties. Some also take into account previous surveyor valuations, historical house price movements and user inputs such as property improvements.

B

Bankruptcy

Is the state of not having enough money or assets to pay all debts and a court has to issue a bankruptcy order. This can happen for three reasons: you apply to the court if you're unable to pay your debts and want to declare yourself bankrupt, your creditors can apply to make you bankrupt if you owe them £750 or more, or an insolvency practitioner can apply to make you bankrupt because you broke the terms of your Individual Voluntary Arrangement (IVA).

Base Rate

The Bank of England base rate is set by a special Bank of England committee, known as the Monetary Policy Committee. Lending institutions use this to set the interest rates they charge on debts. Tracker mortgages and standard variable rate mortgages often follow the base rate.

Basic Income

Gross salary before taxes, excluding overtime, commission and bonuses.

Binding Offer

Is any type of action that legally binds separate parties together under a contractual agreement.

Booking Fee

A type of mortgage set-up fee -  to guarantee that a special rate will be available, provided that the mortgage application is received by a given date.

Bridging Loan

A short-term funding option. The main feature is the flexibility of the product. They can be used to complete on a purchase of a property at short notice, for example when buying a property at auction. They can also be used for carrying out necessary improvements to a property in order to obtain a mortgage.

Broker (Finance)

A person who advises on and/or facilitates the purchase of a financial product.

Broker Fee

A fee charged by a broker or financial adviser for advising/facilitating the purchase of a financial product.

Building Society Questionnaire (BSQ)

A questionnaire used by banks & building societies to gather information regarding a  mortgage account owned by someone who is applying for a loan from another lender.

Buildings Insurance

Insurance that protects against loss or damage to the main structure of the property, also to fixtures and fittings, perimeter fences/walls and outbuildings.

Buildings and Contents Insurance

Combined insurance covering both the structure of the property, and its contents.

Building Society

A financial institution owned by its members as a mutual organisation. Building societies offer banking and related financial services, especially savings and mortgage lending

Buy-to-Let (BTL)

A property is bought with the sole intention of letting it to tenants. The person taking out the mortgage becomes the ‘landlord’. Buy to Lets are generally used as an investment opportunity. The rent is paid to the landlord and it normally covers a sum to pay the monthly mortgage and an amount for repairs etc. 

C

CAP

The ceiling in a Capped-Rate Mortgage above which the interest rate cannot increase.

Cap and Collar Mortgage

A mortgage with a set maximum and minimum interest rate over a given period. The Cap defines the maximum rate and the Collar the minimum rate.

Capital Raising

A term used for remortgaging (changing lenders) where additional funds are raised over and above the existing mortgage amount for non-specific purposes.

Capped Rate

The capped interest rate moves in line with the lender’s standard variable rate. The cap means the rate can’t rise above a certain level. This is fixed when the loan is taken out.

Capped Rate Mortgage

A mortgage where the interest rate cannot rise above a maximum ‘capped’ level, but which can fall during that period. The rate moves in line with the lender’s standard variable rate, not the Bank of England base rate.

Capital

The amount of money you borrow to buy a property.

Cash Back

A sum of money paid to the borrower when a ‘Cash Back Mortgage’ completes. It may be a fixed amount, or a percentage of the mortgage.

CBTL

An acronym for consumer buy to let mortgages. These are regulated as residential mortgages and are aimed at ‘accidental’ or non-professional landlords.

CIFAS

An acronym for Credit Industry Fraud Avoidance System.  A CIFAS entry on your credit profile is a fraud warning and it does not affect your credit score.  However it will mean that any application for credit may take longer to process.

Consumer Credit Act (CCA)

The law that gives consumers protection and sets out how credit should be marketed and managed. The Consumer Credit Act 1974 (as amended by the Consumer Credit Act 2006) regulates consumer credit and consumer hire agreements.

CHAPS 

Clearing House Automated Payment System. CHAPS enables funds to be transferred from one bank account to another on the same day. There is often a fee charged by lenders and solicitors for this service. Also known as TT, Telegraphic Transfer fee.

CIC or Critical illness cover

Will pay the policy holder a lump sum on diagnosis of a range of specified illnesses – the illness may vary but generally include the major illnesses like cancer, heart attack and stroke.

COB

Close of business

COE

Contract of Employment

Collar

The Collar interest rate moves in line with the lender’s standard variable rate. The Collar means it will not fall under certain level, ‘collared’ limit.

Commission

The fee paid by a lender to a broker for introducing business to that lender.

Completion

The date the buyer’s solicitor transfers the funds needed to complete the purchase of a property to the seller’s solicitor. For remortgages, it is the date that the mortgage is transferred to the new lender.

Conclusion of Missives

The Scottish equivalent of Exchange of Contracts.

Conditional Insurance or Compulsory Insurance

An insurance product that a lender requires the borrower to take out in order to qualify for a particular mortgage. May include buildings and/or content insurance, or accident, sickness and unemployment insurance (ASU).

Contents Insurance

Insurance that covers against loss or damage to the contents normally kept in the property.

Converted Flat

A flat created from a larger property that has been subdivided.

Conveyancing

The legal process carried out by a solicitor or licensed conveyancer of buying and selling a property or transfer of a mortgage.

COT

Certificate of Completion

Council of Mortgage Lenders (CML)

Their role is to bring lenders together on matters of common interest, and to speak for the collective mortgage industry. They promote good practice, collect and publish data on mortgage lending, comment on market issues, and liaise on behalf of our members with the many organisations, government departments, and commentators who have an interest in the UK's mortgage market.

County Court Judgement (CCJ)

A ruling against a person who does not repay a debt, obtained in a county or higher court. The order details the terms under which the person owing the money is required to repay it.

Credit Account Information Sharing (CAIS)

Unique database holding over 490 million credit accounts.  It was set up by Experian, however is now also used as a generic term for credit agency bureaus such as Experian, Equifax and Noddle.  It holds credit data such as Defaults, County Court Judgements, loan payment profiles and voters roll information.

Credit Check

A report showing a person’s use of credit, using information supplied by a Credit Reference Agency. Credit Checks provide information on public credit data information, outstanding debts, past or current arrears and similar.

Credit Rating/Score

A credit rating or score is a calculation of the ability of a person to repay their debt. Lower credit ratings result in higher borrowing costs because the borrower is considered to be a higher risk.

Credit Reference Agency (CRA)

A company which collects information relating to credit ratings of individuals and makes it available to banks and finance companies. This helps lenders to make decisions that are quick, fair, consistent, responsible and profitable. Credit referencing also helps lenders guard against fraud. Commonly known CRAs are Equifax and Experian.

Creeping Freehold

When a loft or cellar extends over or under another freehold.

Current Account Mortgage

A mortgage which combines a current bank or savings account, credit card account and/or savings account into one account.

D

Debt

An amount of money owed to a person or company.

Debt Consolidation

Combining two or more outstanding loans into one lower rate loan. Debt consolidation involves taking out a new loan to pay off a number of other debts.

Debt Management Plan (DMP)

A Debt Management Plan is an agreement between a client and their unsecured creditors to pay all their debts. Regular payments are made to a licensed debt management company. The company shares this money out between the creditors. Debt Management Plans help reduce outstanding, unsecured debts over time to help the debtor regain control of finances.

Deed of Consent

When a client mortgages or remortgages a property, anyone who lives in the home other than them (over the age of 17) could claim squatter's rights if the mortgage lender has to repossess the property.

Deed of Postponement

If your client wants to remortgage and has both a mortgage and a secured loan on the property, the new mortgage lender will request a Deed of Postponement from the existing secured loan provider.

Default

Where a client has defaulted on a loan of credit commitment and failed to meet loan repayments.  Failure to remedy a default can then lead to the client having a CCJ placed against them.

Deposit

The difference between the purchase price of a property and the amount being borrowed.

DIP

An acronym for Decision in Principle (also known as AIP - Agreement in Principle) is a certificate or statement from a lender to say that 'in principle' they would lend a certain amount to a particular prospective borrower or borrowers based on some basic information.

Disbursements

Legal and administrative costs payable to the Solicitor or Licensed Conveyancer, related to the purchase or remortgage of a property. Includes Stamp Duty, Search Fees, HM Land Registry fees, CHAPS Fees and so on. Disbursements do not include the Solicitor’s fee for carrying out the legal work.

Discounted Rate Mortgage

An interest rate set at a certain 'discount' below the lender's standard variable rate for a set period of time.  At the end of the period, the mortgage reverts to the lender’s variable rate.

Discounted Period

The length of time the Discounted Rate is payable.

Discounted Rate Mortgage

A discounted-rate deal is one where the charged interest rate is a set amount less than the mortgage lender's standard variable rate.

Draw Down Facility

A facility which allows you to borrow additional funds under your existing mortgage agreement at outset or later date.

DTA or Decreasing Term Assurance

A form of life assurance where the sum assured reduces over the term of the policy – often used to protect a repayment (capital and interest) mortgage.

DTI

An acronym for Debt to Income ratio which is the percentage of a consumer's monthly gross income that goes toward paying debts.

E

Early Redemption Charge

Penalty fees payable if the mortgage is repaid partially or in full during a specified period, usually the period of the initial deal.

Electoral Register

Also known as Electoral Roll/Voters roll.  The information is held by the local authority, which records whether, the person is eligible to vote in various types of elections.  The electoral roll is used as an index for credit reports, in the absence of any other national database of UK residents.

Endowment Policy

An endowment policy is an investment product bought from a life assurance company. It is a regular savings plan, which is generally paid monthly for a set period of time, at which point a lump sum is paid out. A policy can be taken out to run alongside an interest only mortgage and the lump sum can be used to repay the balance remaining at the end of the term. The policy includes life assurance, so it will also pay out in the event of death during the term of the policy.

Endowment Mortgage

An interest only mortgage with an endowment policy assigned to it. The borrower pays interest only during the term of the mortgage and pays separate premiums into an Endowment Policy to repay the capital part of the mortgage at the end of the term.

Equity

The difference between the value of the property and the amount of loan outstanding on the mortgage.

Estate Agent

A person or business that arranges the selling, renting or management of properties, and other buildings, in the United Kingdom and Ireland or other countries around the world.

Estate Agency Fees

The amount the estate agent charges the person selling the property.

Estimated value (EV)

Is an projected value for a given investment.

Exchange of Contracts

The stage in the buying process when the deposit is paid and the sale of a property becomes legally binding. This is not applicable in Scotland.

Existing Liabilities

The individual’s existing financial outgoings which lenders may take into account when assessing ability to meet future mortgage repayments. Includes all nature of existing loan/credit card repayments, hire purchase agreements, rental agreements, maintenance payments etc. 

F

FCA

The Financial Conduct Authority is a financial regulatory body in the United Kingdom. This body brought in regulations in April 2014 to ensure the financial market works well so that consumers get a fair deal.

Feuhold (Scotland)

Similar to freehold in England and Wales. However, whilst you own both the property and land, a ‘Feudal Superior’ has an interest in the title of the property and may impose certain restrictions.

First Charge

A legal charge is used to secure the main mortgage and is registered with the Land Registry. A lender with a first legal charge over a property has first call on any funds from its sale.

First Time Buyer (FTB)

Someone who has never previously owned a property.

Fixed Rate

A mortgage where the interest rate will stay the same throughout the length of the product deal no matter what happens to the base rate.

Fixtures

Items attached to – and therefore legally deemed to form part of a property or land, such as, kitchen fittings.

Flexible Mortgage

A mortgage which allows overpayments and underpayments on the mortgage without penalty.

Flying freehold

A freehold which overhangs or underlies another freehold. Common cases include a room situated above a shared passageway in a semi-detached house, or a balcony which extends over another property.

Forced Sale Value (FSV)

This is how much the property would sell for in 90 days if a fast sale was required.

Freehold

A property where you own both the building and the land on which it is built indefinitely. See Feuhold for Scotland, as freehold is not applicable there.

Full Mortgage Application (FMA)

Each lender has a FMA they need completing by the client in order for the lender to process and complete the application.

Full Status – Mortgage

A mortgage where the lender requires proof of income and credit references in order to verify the applicant’s ability to meet the mortgage repayments.

Further Advance

An additional loan which is consolidated with an existing mortgage.

G

Gross Annual Income

Yearly personal income, before accounting for taxes or other deductions

Gross Development Value (GDV)

The expected property value, all circumstances being normal, when a property is sold to a willing purchaser on the open market

Ground Rent

A fee that a leaseholder has to pay the freeholder every year to provide certain services, such as ground maintenance.

Guarantor

A person who has opted to be legally liable for the repayment of a mortgage if a borrower fails to meet repayments. 

H

High Loan To Value Fee

A fee charged by a lender if the mortgage amount is above a specified percentage of the property value. Also known as Mortgage Indemnity Premium/Protection (MIP ); Mortgage Indemnity Guarantee (MIG); Mortgage Indemnity Fee; Mortgage Guarantee Insurance (MGI ); High Percentage Loan Fee; Additional Security Fee.

HMO

An acronym for a house in multiple occupancy.  This is where two or more unrelated households reside together in one house. An example of an HMO would be multiple persons renting a room with shared facilities.

Homebuy Schemes

These are government schemes designed to help existing tenants and key workers (nurses, teachers and social tenants) to get onto the property ladder.

Home Buyer’s Report

A surveyor’s report which provides details concerning the condition of a property and its fixtures. This usually contains more detail than a Valuation Report but less than a Structural Survey.

I

Illustration

A document setting out the costs of a particular mortgage for a potential borrower, usually showing the monthly payments for the first five years, and the cost of all fees associated with that mortgage product.

Impaired Credit

A deterioration in the creditworthiness of an individual or entity. The term is applied to someone with a poor credit history owing to late or missed payments on secured or unsecured credit commitments, CCJs or bankruptcy.

Income

The amount of money an individual earns, whether from employment or other means.

Income Multiplier

The factor(s) by which lenders multiply one or more applicants’ annual income to determine the maximum amount they are prepared to lend.

Income Reference

Confirmation from an employer of a mortgage or loan applicant’s stated earnings. If self-employed, the applicant’s accountant may be asked to confirm income either by letter or by providing audited accounts for a specified period.

Independent Financial Adviser (IFA)

An individual who operates independently of any financial product provider and is qualified to give impartial advice on financial planning and products.

Index Tracker

A mortgage type where the interest rate rises and falls in line with a particular published interest rate (usually the Bank of England Base Rate).

Individual Voluntary Arrangement (IVA)

Alternative to bankruptcy. A formal arrangement between a client and their creditors to repay a percentage of their debt at an affordable amount.

Interest

The money you are charged for borrowing.

Interest Only Mortgage

A mortgage which only requires the interest charged on the loan to be repaid during the term of the loan and the amount borrowed to be repaid at the end of the term.

Interest Rate

The amount of interest due per period, as a proportion of the amount deposited or borrowed. The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, the compounding frequency, and the length of time over which it is lent, deposited or borrowed.

Intermediary

A mortgage broker or adviser who will arrange a mortgage on behalf of a client with the aim of finding the best deal.

Introducer

Any person or business which refers business to a distributor.

J

Joint Life

Where a life insurance policy is covering two individuals.

Joint Life 1st Death

The sum assured is paid on the death of whichever of the two dies first.

Joint Income

The gross income of two people applying for a mortgage with the intention of sharing the monthly repayments.

Joint Tenants

A type of concurrent estate in which co-owners have a right of survivorship -  if one owner dies, that owner's interest in the property will pass to the surviving owner or owners  avoiding probate.

K

Key facts Illustration (KFI)

Sets out the terms of the mortgage product and the total cost of the loan. All mortgage sellers are required to set out the details in a Key Facts Illustration in the same format, so it is simple to compare different mortgage deals.

L

Land Registry Fee

A fee paid by the solicitor or licensed conveyancer to the Land Registry to record a change in registered ownership.

Landlord Insurance

An insurance policy that covers a property owner from financial losses connected with rental properties. Also known as Buy to Let Insurance.

Landlord’s Reference

A document provided to a lender by an applicant’s current or previous landlord commenting on the applicant’s ability to meet regular rent payments.

Leasehold Property

A homeowner owns a property, but not the land. Flats are usually owned on a leasehold basis. Ground rent is paid to the lease owner.

Leaseholder

Someone who owns the lease to a property.

Legal Charges

A document which records a lender’s or other party’s contractual rights to the title of a property. Legal charges arise from agreements that give lenders an interest over a borrower's assets. A legal charge does not confer ownership rights.

Legal Fee

Charges made by a solicitor or licensed conveyancer for carrying out conveyancing and other legal work in connection with a property purchase or remortgage.

Lender

A bank, building society or other company offering a loan.

Lender’s Fee

May include one or more of the following: Administration Fee; Arrangement Fee; Booking Fee; Completion Fee; Valuation Fee.

LIBOR

The London InterBank Offered Rate is considered to be one of the most crucial interest rates in the finance world. It is the rate at which banks lend to each other. The rate is compiled and published at 11am each day by the British Bankers Association (BBA) and is used as a benchmark for bank rates all over the world. It influences the level at which lenders set some rates on loans, especially mortgages, to consumers and to businesses.

LIBOR-Linked Mortgage (LIBOR)

The rate for this kind of mortgage is normally quoted as an amount above LIBOR. Although the LIBOR rate changes daily, the rate for a LIBOR linked mortgage will normally only be adjusted every three to six months.

Licensed Conveyancer

Someone who undertakes the legal work associated with buying, selling and remortgaging property. May be used instead of a solicitor.

Life assured

Life assured or insured is the person(s) whose life is covered in the insurance contract.

Life Insurance

A policy which pays a lump sum on the death of the policyholder or after a set period.

Loan to Cost (LTC)

A ratio used to determine the loan percentage or amount a lender is willing to finance based on the hard cost construction budget.

Loan to Income Ratio (LTI)

The amount a lender will let the client borrow depending on how much they earn.

Loan to Purchase (LTP)

The amount a client wants to borrow compared to the amount they are purchasing the property for.

Loan to Value (LTV)

The amount of a loan expressed as a percentage of the value of the property.

Lump Sum

A single payment of money, as opposed to a series of payments made over time.

M

MAMR

This is the Maximum Affordable Monthly Repayment - The most a client can afford to pay back to the loan each month after to taking in to consideration their monthly expenditure.

Market Value (MV)

The amount for which something can be sold on a given market.

Mortgage

A loan secured against a property and incorporating a document which records a lender’s or other party’s contractual rights to the title of a property if the conditions of the legal charge are not met.

Mortgage Advance

This is the total loan amount.  Usually the funds are sent to the client’s solicitor for them to complete a purchase.

Mortgage Conduct Of Business (MCOB)

Regulations given by the FCA to ensure a company/business is providing an acceptable level of service.

Mortgage Deed

The legal document recording the existence of a mortgage on a property.  A formal contract between lender and borrower, outlining the legal obligations of the borrower and the rights the lender has if the borrower fails to make a repayment.

Mortgage Subsidy

A payment made by an employer towards an employee’s mortgage.

Mortgage Term

The length of time over which a mortgage is taken.

N

Negative Equity

The mortgage outstanding is higher than the value of the property.

Net Profit

A self-employed person or company’s income after working expenses have been deducted.

New-Build

A recently built property that has never previously been occupied.

Non-Status Mortgage

A mortgage where the lender does not require proof of income or other references used for income verification. 

O

Offer Letter

A formal offer of a mortgage stating the terms under which a lender agrees to lend money to an applicant.

Office of National Statistics (ONS)

Is the executive office of the UK Statistics Authority, a non-ministerial department reporting directly to UK parliament. It is used by some lenders to calculate affordability as opposed to working of client budget planners.

Offset Mortgage

An offset mortgage links current and savings accounts to a mortgage and 'offsets' the credit balances in the savings accounts against the mortgage balance. The interest is calculated on the difference only. The interest is calculated daily and the capital part of the mortgage is repaid every month as usual. Any savings can act as an overpayment, which can clear the mortgage early, but interest is not earned on any credit balances.

Open Market Value

The best price at which the sale of a property or asset would have been completed unconditionally on the date of valuation.

Other Outgoings

Covers all types of expenditure other than those specifically mentioned.

Outstanding Balance

The amount of money owed or due that remains in a deposit account.

Overpayments

Increased or additional mortgage payments made by the borrower usually to repay the mortgage early. 

P

Packager

The company arranging the loan but not necessarily the Regulated Intermediary of record

Part and Part Mortgage

A combination of a Repayment and Interest Only mortgage.

Payment Holiday

A period of one or more months when the borrower does not make any mortgage repayments. Interest will continue to be charged during this time.

Pension Mortgage

An Interest Only mortgage where the borrower plans to use some or all of the cash lump sum from a pension policy to repay the mortgage at the end of the term.

Portable Mortgage

A mortgage that can be transferred to another property if you move, without paying arrangement fees.

Pre-Emption

The purchase of goods or shares by one person or party before the opportunity is offered to others.

Previous Lender’s Reference

A document provided by a lender outlining an individual’s previous repayment history. 

Q

Quotation

A document showing the monthly cost of a mortgage based on the information supplied. The quotation also shows all other mortgage related expenses, such as estimated solicitor fees and survey costs. This is also known as an Illustration.

R

Rate

The percentage interest rate charged by a lender.

Redemption

The process of paying off the mortgage.

Redemption Amount

The amount of money required to repay the mortgage in full.

Redemption Charge

Fees charged by the lender to cover administration costs when a borrower pays off a mortgage.

Regulated Intermediary

The company taking regulatory responsibility for the sale of the financial product to the client.

Remortgaging

Changing mortgage lenders without moving house and using the proceeds from the new mortgage to repay the previous one.

Renewable Term Assurance

A policy that contains an option, which can be exercised at the end of term, to renew the policy for the same sum assured without further medical evidence.

Repayment Method

The means by which a mortgage is repaid. The two main options are Interest Only and Repayment Mortgage.

Repayment Mortgage

A mortgage where part of the actual loan plus interest on the outstanding loan amount is repaid each month, gradually reducing the amount borrowed. A repayment mortgage guarantees to repay the total mortgage debt at the end of the mortgage term provided the correct monthly repayments are made on their due dates. Also called a Capital & Interest Mortgage.

Repayment Period

The number of years and months over which the borrower agrees to pay back the mortgage. Also called the Mortgage Term.

Repayment Vehicle

A plan to pay off the capital at the end of the term (for example for interest only mortgages). Repayment vehicles could be a pension, endowment policy, shares and investments that are paid monthly to build up the amount needed to re pay the mortgage in full at the end of the term.

Repossession

An owner takes from the borrower an object that was rented or leased, or was borrowed, either with or without compensation.

Residential Mortgage

A mortgage for a main residence, whether purchasing a new home or remortgaging an existing one.

Residual Value

The value of an asset once it has been fully depreciated.

Retention

This is when a lender holds back or ‘retains’ part of the agreed mortgage until certain conditions have been met such as repairs and warranties.

Right-To-Buy

The right of a tenant in a local authority owned property to buy the property, sometimes at a discount.

S

SA302 Self-Assessment of Self-Employment

The SA302 is a response from HMRC. Once you have submitted accounts, HMRC responds with a SA302 form which states how much tax you have either overpaid or owe.

Searches

Checks carried out by a Solicitor or Licensed Conveyancer with local authorities and other official organisations to ensure there are no planning proposals or other matters that could adversely affect the value of the property.

Second Charge Mortgage

A mortgage on a property which is subordinate to a more senior mortgage or loan - positioning the second mortgage falls behind the first mortgage.

Self-Build Mortgage

A mortgage taken out on a property that is still under construction. This is a specialist type of mortgage designed for people who are building their own home. The lender usually pays out the loan in instalments to ensure that the loan doesn’t at any stage exceed the value of the property at its current stage of building.

Service Charge

Shared owner

Shared Ownership

Shared ownership schemes allow people to get a foot on the property ladder. The home buyer will enter into an agreement, usually with a local housing association, which sees them take out a mortgage on a portion of the property and pay rent on the remainder.

Shortfall

If the mortgage outstanding is higher than the value of the property there will be negative equity and the difference is referred to as a shortfall.

Stamp Duty

A land tax paid by the buyer when purchasing a property. This is calculated as a percentage of the property price.

Standard Construction

A building constructed using standard techniques such as bricks and mortar, tiled roof and cavity walls.

Standard Variable Rate (SVR)

The default interest rate charged by lenders which is usually in line with the Bank of England Base Rate.

Stepped Rate Mortgage

A mortgage where the interest rate charged rises in stages over time.

Structural Survey

A detailed examination of a property’s structural condition by a surveyor or other qualified person. A structural survey report will normally provide a full and detailed description of the structure, list all the defects and alert the recipient if a specialist report is needed, e.g. drainage, damp or subsidence.

Survey Fee

The fee charged by a surveyor to carry out a Home Buyer’s Report or Full Structural Survey on a property.

Surveyor

A person professionally qualified to estimate the value of land and property and carry out a survey. 

T

Terminal Illness Cover

An option included in life assurance policies whereby the life company will pay out if the policy holder is terminally ill – this should not be confused with Critical Illness Cover (CIC).

Tie-in Period

The period you agree to stay with the lender for when you take up a special offer mortgage. These sorts of products normally commit you to staying at least until the end of any special rate offer, and sometimes for a period afterwards.

Tracker

A product where the interest rate is set at a stated percentage above a published index rate, then rises and falls in line with that index.

Transfer of Equity

A change in the legal ownership of a property without selling the property itself.

Trust

An arrangement whereby a person (a trustee) holds property as its nominal owner for the good of one or more beneficiaries. If a policy is written in trust, then you can help determine who should benefit from the policy when it is paid. 

U

Underwriter

An underwriter is a person who assesses the ability of a prospective client to repay a loan. The process takes into account various factors including employment history, financial status, previous credit history and current earnings.

Underpayment

A mortgage payment that is less than the amount normally required for that month. Usually only allowed for borrowers with flexible mortgages or by prior arrangement with the lender.

Unencumbered

Free of debt or any other financial liability

Unlicensed HMO

Where the local council do not have additional license requirements and the property does not require a license under the Government’s compulsory licensing (five or more people, on three or more storeys, with two or more households and shared amenities).  Failure to comply is a £20,000 fine and possibly a prison sentence.

V

Valuation

A Valuation is report for the lender’s use stating the current value of the property and other information concerning the state of repair, area, etc.

Valuation Fee

A fee paid to the lender to cover cost of the Valuation.

Value

The price that a property would in normal circumstances be expected to sell for in normal market conditions.

Variable Rate Mortgage

A mortgage whose interest rate rises and falls roughly in line with a stated index, such as the Bank of England Base Rate.

Vendor

The person(s) selling a property.

W

Waiver of Premium (WOP)

Is an additional option that can be taken out with most forms for protection. The insurance company will pay the premiums due on a life assurance policy if the policy holder is unable to do so because they are unable to work due to accident or illness. The insurance company will pay the premiums for you until you are able to return to work.