Adverse credit mortgage
A mortgage for people with a poor credit history.
Annual percentage rate. The standard industry true cost of the mortgage over the full term set out as a yearly rate, including all fees, terms and interest. This enables mortgages from all lenders to be compared but because it assumes you will have the mortgage for the whole term it may not always be a useful way to compare deals.
A set-up fee for your mortgage. Most mortgage lenders will charge an arrangement fee when taking out a mortgage and allow you to add this fee to the loan. This will mean you end up paying interest on it for the life of the loan. You can choose to pay the fee which will save you the interest. Our advisers will be able to talk you through the options.
If you go into arrears it means that you have ‘defaulted’ at least once on your mortgage repayments. If you find yourself in this situation you should contact your mortgage lender to seek help as soon as possible.
Accident, Sickness & Unemployment cover. An annually renewable policy providing short term cover if you are unable to work due to accident, sickness or redundancy.
The rate set by the Bank of England, which tracker rates and standard variable rates follow. It is reflected in the interest rates charged by lenders.
Insurance which covers you for damage to the structure of your home. A lender will require you to have buildings insurance in place when you take out a mortgage.
An extensive survey, carried out by a qualified surveyor, to spot faults and potential problems in the property you are buying.
Buy to let
A buy to let property is purchased for renting out to a tenant as an investment. Some mortgage lenders offer special ‘buy to let’ mortgage deals for this purpose. In deciding how much you can borrow a Buy to let mortgage takes into account the rent you will earn from the property as the primary source of income and some may also take the landlord’s personal income into account.
The amount you have borrowed on the mortgage to buy a property. Interest will be charged on this amount.
With a capped rate, you will pay a variable interest rate but your payments won’t go above a certain limit for a set period of time.
Cash back mortgages
Cash back mortgages pay you a cash lump sum upon the completion of the mortgage which you can choose to use how you see fit.
County Court Judgements are made against you for non-payment of debt, and could make it harder for you to get a mortgage.
Critical illness cover pays the policy holder a lump sum on diagnosis of a range of specified illness (refer to specific policy terms and conditions for further details) – the illness may vary but generally include the major illnesses like cancer, heart attack and stroke.
When you become the legal owner of the property. Some lenders charge completion fees in additional to an application fee, although these fees are less common. Completion fees are usually charged on the day that the mortgage completes.
The legal process, completed by a solicitor or specialist licensed conveyancer, involved in selling and buying property.
Is a current account mortgage in which your mortgage, credit card, loan debts, current account and savings balances are combined into one account. Your credit balances offset your debts so you only pay interest on the difference. The appropriateness of these mortgages depends on your circumstances and or advisers will explain the options.
If you cannot meet your minimum required monthly mortgage repayment and go into arrears on your mortgage, this is known as ‘defaulting’. You should speak to your mortgage lender as soon as possible. There are also Government schemes designed to help people whose homes are at risk from repossession.
This is the amount you are required to pay towards the cost of the property yourself. Typically this is now at least 10%+ of the value of the home. Generally the more deposit you are able to put down the lower the interest rate is likely to be and there will usually be a wider range of mortgage deals to choose from.
The fees, such as stamp duty and Land Registry fees which you pay to the conveyancer or solicitor.
Discounted rate mortgage
A discounted rate deal is one where the interest rate you are charged is less than your mortgage lender’s standard variable rate (SVR). For example, if the lender has an SVR of 5.5% and the discount is 1% then you will end up paying 4.5%.
DTA or Decreasing Term Assurance
A life assurance policy where the sum assured reduces over the term of the policy – often used to protect a repayment mortgage.
Early repayment charge
The charge some lenders make if a mortgage is paid off early during a specified period, usually the period of the initial deal. They can be charged at around 1-3% of the amount of the loan you have left to pay off.
An investment policy that you pay into over a set period of time, typically 25 years. This can be used to pay off an interest-only mortgage at the end of the mortgage term. There is a risk that the endowment may not grow enough to pay off the mortgage, leaving you with a shortfall.
The total value of your property less the amount of the mortgage and any other secured loans you have against it.
Estate agency fees
Fees charged by estate agents either upfront or at the completion of the sale. The cost is likely to be based on a percentage of the property value, so it is best to get a quote before proceeding.
Exchange of contracts
The point where the property sale becomes legally binding.
External inspection valuation
The surveyor will estimate the value of the property by viewing it from the road.
The mortgage interest rate stays the same for the initial period of the deal, usually 2, 3 or 5 years. This gives you the security that your monthly payments are the same so you know exactly what you’ll be paying each month even if interest rates change during the period of the deal. At the end of the deal the rate reverts back to the lenders standard variable rate.
Allows you to vary the amount you pay each month and take payment holidays in some circumstances. It may help to reduce your mortgage with lump sum payments without incurring an early repayment charge. This can help you pay your mortgage off early and save money on interest, but flexible mortgages are usually more expensive than conventional ones.
You own the property and the land it stands on.
A third party who guarantees to meet the monthly mortgage repayments if you are unable to. This is more common with first-time buyers, with the guarantor likely to be their parent or guardian.
Help to buy
A government scheme to make it easier for people with small deposits to buy their first property or for existing homeowners to move house.
Higher lender charge
This fee is designed to protect the lender against you defaulting on your mortgage and is usually charged if you borrow a high percentage, often more than 75% of the price of the property.
A detailed valuation, undertaken by a surveyor, that contains a report on the condition of the property, highlighting defects.
Where the level of cover provided under a policy increases over time – this is often used to ‘inflation proof’ cover and often linked to the Retail Price Index.
The money you are charged for borrowing.
With this type of mortgage you are only paying interest each month. In order to pay off the capital owed on the mortgage at the end of its term you take out an investment policy although there is a risk that this will not grow enough to pay off the loan.
Where a life insurance policy is written on the lives of two individuals to provide cover if either dies.
Joint life 1st death
The sum assured is paid on the death of whichever of the two lives dies first.
Land Registry fee
A fee paid to the Land Registry to register ownership of a property.
A legal contract which gives the ownership of a leasehold property to the buyer, but not the land it stands on, for a fixed period of time. Flats are usually owned on a leasehold basis. You may find it hard to get a mortgage if there are fewer than 70 years left on the lease of the property you want to buy.
The provider of the loan to buy the property.
The person on whose life or death the payment of the sum assured depends. The life assured is not always the same person as the policy holder.
The size of your mortgage loan as a percentage of the property’s value.
LTA or Level Term Assurance
A form of life assurance where the sum assured under the policy remains constant over the policy term.
The amount you pay your lender for your mortgage each month.
A loan to buy a property. The property acts as security for the loan and so can be repossessed and sold if the mortgage repayments are not made.
Mortgage agreement in principle
A document from a mortgage lender to show you will be able to borrow a certain amount, in principle. This can be used to prove to a seller that you can afford to buy their property.
Mortgage application fees
Fees charged by the lender to organise the mortgage for you. These are not usually refunded if you do not go ahead with the mortgage. Some lenders will only charge such fees for specific mortgage deals.
The legal agreement between lender and borrower, outlining the legal obligations of the borrower and the rights the lender has should the borrower fail to make a repayment (see Defaulting).
The length of time over which the mortgage will be repaid.
When the amount owed on your mortgage is greater than the value of your home.
Offer of advance
The formal offer of a mortgage from a lender.
Links your mortgage with your current account, savings account or both. Each month credit balances in your current and savings accounts are offset against your mortgage debt so you only pay interest on the difference. You are unlikely to earn interest on your savings which are offset against your mortgage. These are usually more expensive than conventional mortgages so whether they are worth it for you depend on your circumstances.
The point at which a life, critical illness, income protection, accident sickness and unemployment or other similar policy comes into effect.
The policy holder is the owner of the policy and responsible for paying the premiums. The sum assured will be paid to the policy holder unless other arrangements are made.
If you decide to move a portable mortgage enables you to transfer borrowing from one property to another without paying any extra fees.
A company providing the cover i.e. life assurance or buildings and contents.
The cost of rebuilding your home for insurance purposes if it were to be destroyed.
Paying off a mortgage.
When you change your mortgage without moving to save money, change to a different type of mortgage or to release equity from your home.
Where the premium is subject to review and potential increase over the term of the policy.
Renewable Term Assurance
A life assurance 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.
With this type of mortgage (also known as capital and interest) you pay off the mortgage interest and part of the capital of your loan each month. In the earlier years, the majority of your monthly repayment is made up of interest, however towards the latter part of your mortgage term the situation is reversed with the majority of your monthly payment reducing the amount borrowed. This is the only type of mortgage which guarantees that you will pay off the mortgage by the end of the term.
An investment or savings plan you pay money into each month, to try to build up the amount of money you need to pay off the mortgage at the end of the term.
This is a ‘front end’ charge levied by several home lenders. Typically £100 to £300, you’re asked to pay the fee to secure the funds you are intending to borrow. Sometimes described as an administration or booking fee.
Shared ownership schemes are designed to allow people who would otherwise be unable to get a foot on the property ladder to do so. The home buyer will enter into an agreement, usually with a local housing association, which sees them take out a mortgage on a share of the property and pay rent on the remainder. The portion that is owned will vary depending on the circumstances.
Conveyancing is the legal process to transfer the ownership of a property from the seller to the buyer. If you are buying a property, your solicitor generally works on behalf of the mortgage lender, who usually insists on certain searches before they will release them money for your property.
A government tax you have to pay when you buy a property for more than £125,000,or £250,000 if you are a first-time buyer. Typically you’ll pay between 1 – 5% of the whole purchase price.
Standard variable rate
The standard rate set by the lender that rises and falls in relation to the Bank of England base rate. Your lender may choose not to pass on the change in base rate immediately, by the same amount or at all.
This is a detailed report that can include tests on drains and utilities. It could be very useful if you’re thinking about building an extension for example.
A sub-prime, or non-conforming, mortgage is geared towards people with a less than perfect credit history. This could be bankruptcy or county court judgements (CCJs), or you could have fallen into arrears in the past. These products, because of their circumstances, have higher rates, but mean that those who couldn’t otherwise obtain finance for their property purchase can do so.
Subject to survey and contract
Wording included in any agreement before the exchange of contracts. This wording allows the seller or buyer to withdraw from the property sale.
Terminal illness cover
An option in a life assurance policy to provide cover in the event that the life assured, subject to certain conditions, should be diagnosed with a terminal illness.
The period during which you are ‘locked in’ to your mortgage deal and will pay an early repayment charge should you wish to pay off your mortgage.
The legal documents which set out the ownership of a property.
Tracker rates are usually linked to and rise/fall in accordance with changes to the Bank of England base rate.
If a policy is written in trust, then you can help determine who should benefit from the policy when it is eventually paid.
An insurance underwriter will assess the risk for insuring a person based on things like medical history, hereditary illnesses, occupation and sporting activities and then decide whether to offer cover and if so at what price. For mortgages they will decide whether to lend or not.
An assessment of a property value to ensure, from the lender’s perspective, that it is worth the amount you want to borrow. There are 3 levels of valuation 1. A basic valuation, 2. Homebuyers survey, 3. Full structural survey. A valuation will value the property and tell you how much it is worth, whilst a survey will tell you about the structure of the property and any faults that it may have.
Waiver of premium (WOP)
Is an additional option that can be taken out with most forms of 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.
If you do not make a will then you will die Intestate and will lose control over the proceeds of your estate.