| Financial Term |
Definition |
| Accountants Certificate |
A reference giving confirmation of income for the self-employed, contractors or directors from their accountant. The requested information varies between lenders, but includes how long the individual has been trading, tax office details and verification of audited income. |
| AIP |
A decision of a loan that has been approved so far, subject to status, with the information provided to the lender/broker |
| APR |
Annual Percentage Rate of charge. The true rate of interest charged on a loan taking into account the total cost of interest and other charges e.g. brokers fees/legal fees. The calculation is set out in statutory regulations. |
| Arrangement Fee |
This is the sum of all administration costs associated with the product. |
| Assets |
Property, money and belongings which a person or company holds. |
| Assurance (Level Term) |
Life assurance which pays out a lump sum if you die during the term. Suitable for interest only loans as the amount owed on the loan remains the same throughout the life of the loan. |
| Assurance (Life) |
A Specific type of life insurance policy often linked with a mortgage or loan. A portion of premium goes toward insuring your life, and will pay off loan in the event of death. The rest is invested and will pay a lump sum at the end of the term. |
| Autoscore |
The process of using specialised online credit search databases to identify an applicant’s credit status. |
| Base Rate |
The Bank of England sets a base rate (officially known as a repo rate) which is used by banks and building societies, along with other factors, to set interest rates for mortgages and loans |
| Broker (Mortgage/Finance) |
An intermediary who identifies, and places, customers requiring a loan or mortgage etc. with a company (Lender) able to provide it. The broker often carries out the administration to do with processing the loan. |
| BSQ |
BUILDING SOCIETY QUESTIONNAIRE: A questionnaire completed by bank/building society or other lender providing details and conduct of an applicant‘s mortgage account. |
| Buildings Insurance |
This covers the cost of rebuilding or repairing the structure of the property. Lenders insist you have enough buildings insurance before they give you a mortgage. With leasehold properties, it is the freeholder's responsibility to arrange buildings insurance, although the freeholder will usually pass on the charges to the leaseholder. |
| Business Day |
Any day which is an English bank working day (that is days of the week not including Saturdays, Sundays and English public holidays |
| Buy-to-let |
A mortgage for private landlords seeking to purchase property for letting to tenants. |
| Cashback |
A type of loan where the borrower is given back a sum of money (usually a percentage of the loan). Used by lenders as an incentive to promote their products |
| CCJ |
County Court Judgement. An order of a court against a debtor to pay money owed. |
| CFB |
Corporation of finance brokers. An associations aiming to ensure that member firms are kept up to date with changing legislation and current trends within within the profession and to enhance the ethical standards of finance brokers. |
| CHAPS |
Clearing House Automated Payment System. An electronic way of transferring money between accounts. |
| CML |
Council of mortgage lenders |
| Completion |
When the sale and purchase of the property are finalised, and you become the owner of the house or flat and/or the funds of a loan are transferred into your name |
| Credit Search |
A check the lender makes with a specialist company to find out whether you have any County Court Judgments or a record of not paying loans, credit-card bills and so on. |
| Direct Debits |
A payment made from your account automatically to pay bills etc, usually amounts that vary, e.g. A gas bill. |
| Double Insurance |
Policies vary from lender to lender. Generally double insurance offers protection against sickness, accident and redundancy for the first and second wage earners. Cover is also available for self employed borrowers and under certain circumstances for non working partners. Details of the specific insurance plan will accompany the lenders offer. |
| Early Redemption Charges |
A fee charged by the lender if you pay off all or part of your mortgage before an agreed date or you move the loan to another lender. These charges usually apply on fixed, discounted, or cashback mortgages. |
| Endowment |
A life assurance policy that is designed to produce a lump sum to pay off an interest only mortgage. There are a number of different kinds of endowment policies: 'with-profits', 'unit-linked' etc. |
| Equity |
The amount of value in a property that isn't covered by a mortgage - simply take the amount of the mortgage from the valuation to work out the equity. |
| Equity Release |
You take a new, larger mortgage, or increase a mortgage you already have and use some or all of the extra money you have raised for home improvements, holidays and so on. |
| FISA |
The finance industry standards association. Regulatory body working to promote and enforce high standards in the finance industry. |
| Flexible Mortgages |
A more recent innovation, these give various benefits which usually include the ability to vary payments in line with your circumstances. They may also allow you to take ""payment holidays"" and to borrow back any overpayment you may have made. Because of their flexible nature and the variety of schemes available it is not possible to give a full description here, but your finance Representative will provide more detail if you are interested in this type of loan.
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| Freehold |
Land / Property is owned outright by the Freeholder. Whether the property is held on a lease or a freehold basis will be identified in the deeds to the property. |
| Full Status |
Describes a borrower who can produce proof of income by way of pay slips, P60 or certified accounts to support a mortgage application |
| Ground Rent |
A fee that a leaseholder has to pay the freeholder every year. |
| HM Land Registry |
The official organisation that keeps records of properties in Wales. Transfer of ownership has to be registered with the HM Land Registry. |
| IFA |
Independent financial advisor |
| Income References |
This is confirmation from your employer that you earn the amount you claim in your mortgage application. Accountants may also give confirmation of income if you are self-employed. |
| Interest Calculation |
Interest is calculated daily and charged monthly. This is officially known as 'Monthly Rest' and gives the customer immediate benefit from Overpayments or Lump Sum Payments. Please see the General Conditions section for information regarding capital repayments made during a special offer period. |
| Interest Only |
Your monthly payments to your lender are simply made up of interest. You do not pay off any of the mortgage during the term of the mortgage. You pay off the mortgage finally using the proceeds of a separate investment plan for example, an endowment, personal pension or PEP and so on. |
| Interest Only Mortgage |
With this type of product, your monthly repayments will only cover the interest element of the loan. You will typically set up another repayment vehicle e.g. an endowment or ISA to repay the capital element of the loan |
| ISA |
Individual savings account |
| easehold |
This is when you own the property for a set number of years, after which it goes back to the freeholder. Most flats in England are leasehold, and although most lenders will lend on leasehold properties, they will demand that there is a number of years left on the lease before making a loan (this could be 60 years, but will depend on the lender). |
| Loan (Secured) |
A loan to be used for any purpose. The equity in the property is put up as security against not paying the loan back. |
| Loan (Unsecured) |
A loan to be used for any purpose. The credit rating or financial position of the applicant is such that no security for the loan is required. |
| TV |
Loan to value. This is the size of the loan or mortgage as a percentage of the value of the property or price being paid for the property e.g. A property valued at £50,000 with a mortgage of £45,000 would have an LTV of 90%. |
| MGI |
Mortgage Guarantee Insurance. An insurance policy designed to make good any shortfall between the amount owed on a mortgage and the value of the mortgaged property. Provides a benefit to the lender in the event of repossession resulting from non-payment. |
| Mortgage Certificate |
Shows you how much you can borrow in principle, based on your income and outgoings. This will help when choosing your new home. |
| Negative Equity |
The situation where the amount owed on a mortgage exceeds the value of the property. |
| Offer of Advance |
Sometimes informally known as a mortgage offer. This document details the terms and conditions upon which the lender is prepared to make a mortgage loan. The applicant must sign and return a copy of the offer indicating their acceptance of the proposed terms. |
| Processing |
The administration and paperwork related to a loan from the time a completed application form is received through to completion of the loan process. |
| Product Related Charge (PRC) |
Also known as an Early Redemption Charge, this is a fee charged by the lender if you pay off all or part of your mortgage, or you move the loan to another lender before an agreed date. These charges usually apply to all types of mortgages. |
| Rate (Discounted) |
A discounted rate gives you a reduction of, for example, 2% off the standard variable rate (SVR) for a specific period. So, during this period should the SVR rise and fall, you will still qualify for the discount and therefore pay a lower rate. |
| Rate (Fixed) |
The rate is fixed for a specific number of years, so you know what your payments will be over that period. Following this period, the rate will usually revert to the lender's standard variable rate. |
| Redemption Penalties |
When a loan is redeemed (paid off) early, either in full or in part, many lenders will charge a fee. This particularly applies to Fixed, Discounted or Capped rate loans or mortgages. |
| Regulated Loan |
A loan which is regulated under the consumer credit act (CCA) - all loans up to and including £25k. The act defines a strict timetable when introducing a loan including a consideration period. |
| Re-mortgage |
A new mortgage although you are not moving home. Loan taken out by a borrower to replace another one secured on the same property. Typically taken out by borrowers switching lenders to achieve a better rate. Finance Tracker Ltd specialise in this service. |
| Repayment Mortgage |
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. |
| RTB |
Right to Buy. Legislation that gives council house tenants the 'right to buy' their homes. |
| Rule 78 |
The formula used to calculate the early settlement or redemption of a loan |
| Sealing Fee |
A charge made by lenders when a mortgage is paid off. |
| Searches |
Checks carried out during the conveyance phase. These checks are made with local authorities and other official organisations to check planning proposals and other matters that may affect the value of the property, and if it can be sold in the future. |
| Second Charge |
i.e. a secured loan. |
| Second Mortgage |
Company or building society who have registered a charge or mortgage directly behind that of the first mortgages. |
| Security |
When a loan is taken out it is ‘secured‘ on a property, the borrower agrees to the lender creating a charge over the property; the deed makes reference to the rights and obligations of both parties as detailed in the Legal Charge, Standard Security or Loan Agreement. Thus the property is known as the ‘security‘. |
| Security Address |
When taking a secured loan or mortgage, the security address is the address of the property which is being offered as collateral for the loan. Where property is offered as security in this way, lenders are generally prepared to offer more flexible terms and lower interest rates. |
| Self-certified |
Lenders that operate this type of scheme allow the applicant to confirm how much they earn by "Self-certifying" their income. Schemes are available to both employed and self employed applicants. Typically for the employed, the schemes are designed to help those applicants with incomes that incorporate a large element of bonus or where they derive income from a number of jobs. Where as for self employed there is no need for full 3 years audited accounts to be provided. |
| Settlement Figure |
The sum quoted in order for the loan to be repaid during the contracted term. |
| Standard Security |
The equivalent of the Legal Charge in. |
| Standing Order |
A regular payment for a fixed amount that you can ask us to make from your account to another specified account |
| Status |
The credit-worthiness or otherwise of a potential borrower. |
| Structural Survey |
A detailed survey of the structure of a building carried out by a Structural Engineer or Chartered Building Surveyor. Surveyors are liable for negligence |
| Sub-prime Mortgage |
Mortgage granted to a person who is unable to borrow money secured on a property from a normal lending source. The reasons the applicant may not be granted a mortgage by a high street lender, could fall into one of three categories:-
- Adverse Credit information registered against them
- Existing arrears on current mortgage facilities
- An inability to satisfactorily prove the level of income required by a high street lender.
|
| Surveyor |
The qualified professional who assesses the value of a property to help the lender decide whether the property is suitable security for the mortgage/loan |
| SVR |
Standard variable rate. The interest rate the lender charges goes up and down, with your interest payment changing accordingly. |
| Time Taken to Complete |
If the loan is under 25k it can take from 2-3 weeks as sometimes we may need to request a mortgage reference or valuation as it depends on the company. If the loan is over 25k it can take from 1-2 weeks as you will receive the documents straight away. |
| Title Deeds |
Set of documents relevant to present and past ownership of a property. Details names of owners and details of institutions that have registered a charge against the property. Held by the first mortgagee lender whilst their charge remains in existence. |
| Transfer Deed |
A document that, once you sign it, actually transfers the ownership of the property to you. |
| Underwriting |
The process by which the ability of a prospective borrower to repay a loan is assessed (also the name of the department that undertakes this work). The process takes into account various factors includingemployment history, financial status, previous credit history and current earnings. |
| Valuation |
A brief inspection of a property for mortgage purposes. Whilst it is for the lenders use it is often paid for by the loan applicant. |