Mortgage glossary

another name for a mortgage or loan

Adverse credit
a poor credit history – for example if you have defaulted on debts or have CCJs (county court judgments) awarded against you

Arrangement fee
a fee for setting up your loan

Annual percentage rate.  The true interest rate you will pay, taking associated costs into account

accident, sickness and unemployment insurance.  Covers your monthly mortgage repayments should you fall ill or be made redundant

Base rate 
the rate of interest set by the Bank of England, reviewed monthly.  Sometimes lenders call their own standard variable rate their base rate or basic rate

Building report
a detailed survey of a property.  Recommended for older or unusual properties

county court judgment.  Handed out for non-payment of a debt

the point at which a property becomes legally yours

Credit check / score
the way some lenders assess the risk of taking you on as a borrower, based on your financial record and income
the name for the various costs a solicitor will pass on to you when carrying out your legal work

Early redemption
a penalty sometimes charged by a lender when you repay the mortgage earlier than expected

the difference between your loan amount and the value of your property on which it is secured

Exchange of contracts
the point at which a vendor’s and buyer’s solicitor swap contracts and begin to finalise the purchase

land or property which is owned in perpetuity as opposed to leasehold where the owner buys the right to live there for the length of the leasehold agreement

someone who agrees to guarantee your loan and is fully liable for its repayment should you default

High lending charge
charged by the lender to ensure it can get back its money should your property be repossessed.  Also known as a mortgage indemnity guarantee (MIG) or a high loan to value fee

Homebuyer’s report
more basic than the building report, it includes a valuation and should reveal any faults a property has

independent financial adviser who considers the whole market to find you a mortgage and other financial products

Individual Savings Account – allows you to save money in a tax-efficient manner.  May be suitable for repaying an interest-only mortgage

gives you the right to occupy the property on the land that the freeholder owns for a specified period

London inter bank offered rate.  The rate at which banks nationally borrow funds from other banks

loan to value.  The proportion of the value or the price of the property, whichever is the lower, that a lender is willing to offer you

Negative equity
where the size of the loan on your home is greater than the property’s market value

Pay rate
the rate of interest you pay on your home loan

where you can transfer your mortgage to a new home without penalty

arranging a new mortgage on your home, without moving

checks carried out which look for anything that may affect the value of a property – for example, planning applications

where you build your own home

where you declare your income to the lender rather than providing accounts or payslips.  Sometimes abbreviated to ‘self-cert’

Stamp duty
a type of government tax on the purchase price of your property.  This has been abolished for purchases in designated areas

Title deeds
legal documents for a property

an inspection carried out by a representative of the lender to establish if the property is good security for the proposed loan

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