The administration fee is the amount charged by your lender to start working on the documentation part of your mortgage application. It includes the home valuation fee as well. The administration fee will not be refunded even if your valuation is not done or if your application has been rejected.
Adverse credit occurs when you have a history of bad credit, bankruptcy, CCJs, or loan arrears. Adverse credit can also be called as bad credit, poor credit, or it can be said that you have a low credit score.
Annual Percentage Rate (APR)
The Annual Percentage Rate is the rate at which you borrow money from lender. It includes all the initial fees and ongoing costs that you will pay throughout the mortgage term. As the name suggests, annual percentage rate, or APR, is the cost of a mortgage quoted in a yearly rate. The annual percentage rate is a good way to compare the offers from different lenders based on the annual cost of each loan.
Apportionment, or sharing out, is a facility that allows you to divide the responsibility for utilities, property taxes, etc. with the buyer or the seller of the property when you are either selling or buying the property.
Arrears happen when you default on your mortgage payment or any other type of debt payment. If you have arrears on the record of your current mortgage, you will face problems when you want to look at remortgaging or getting a new mortgage.
An arrangement fee is the amount you have to pay your lender to access particular mortgage deals. While searching for a fixed rate, cash back, or discount rate mortgage, you will pay this fee at the time that you submit your application and it will be deducted from the loan on completion.
ASU is Accident, Sickness, and Unemployment insurance which covers your mortgage payments in case of an accident, a sickness, or involuntary unemployment.
An auction is the public sale of a property to the person who quotes highest bid. The highest bidder has to sign a binding contract that ensures that he do all valuations, searches, etc. before the sale of the property.
A banker?s draft is a way to make a payment. In appearance, it is the same as a cheque, but in effect it is a cash payment. The money is given to the bank, and they issue a cheque that is certified to be good for the given amount.
Base Rate Tracker Mortgage
A base rate tracker mortgage is a type of mortgage in which the interest rate is variable, but it is set at a premium (above) the Bank of England Base Rate for a period or for the full term of the mortgage.
A booking fee or arrangement fee is charged when applying for a fixed or a capped rate loan. Booking fees are normally non-refundable if charged upfront, but sometimes the booking fee is added to your final mortgage payment.
A bridging loan is useful when you want to purchase a property, but your ability to do so is contingent upon the sale of your old property. This is a very short term loan that is paid off as soon as your old property sells. Speak with a loan advisor before taking out a bridging loan to be sure it?s the best option for you.
A broker?s fee is paid to your debt advisor or other intermediary that assists you in finding the best mortgage or loan deal for your circumstances.
The BSA, or the Building Societies Association, is a group that works in the interest of member societies.
A Building Society is a mutual organisation that gives you money to buy or remortgage residential properties. This money comes from individual investors who are paid interest on their funds. A portion of building society funds is also raised through commercial money markets.
When you purchase a property for the sole purpose of renting it out, you can apply for a buy to let mortgage. The payments for this type of mortgage are calculated based on your projected rental income instead of your personal income.
A capped interest rate is an interest rate that will not exceed the standard variable interest rate for a set period of time (from 1-5 years) that is decided by you and your lender. If the standard variable rate falls below your capped rate, your interest rate will decrease accordingly.
CCJ stands for County Court Judgment. This is a decision reached by a county court against you when you have defaulted on your debt payments. If you clear the debt in question in a set amount of time, a satisfactory note will be put on your credit report to signify that the debt is taken care of.
A charge is any interest on a mortgage to which a freehold or leasehold property can be held.
This is the acronym of the Council of Mortgage Lenders, the trade association for the residential mortgage lending industry.
Completion is a term that explains that you have become the owner of your house after finishing the formalities of the sale and the purchase of the property.
A contract is a legally binding sale agreement. There are two identical copies signed by both the buyer and the seller, and each party keeps a copy for their records. Once both parties have signed the contract, they are committed to the terms of the agreement.
A conveyance is the deed by which a freehold, unregistered title is transferred. The deed is called an assignment if your property is unregistered or leasehold. If the property is registered, the deed is called a transfer.
Conveyancing is the legal process by which the buying and the selling of a property take place.Credit Score
A credit score is generated when a lender evaluates your paying capacity before offering a loan or mortgage. Your credit score will be different for each lender, and will also change depending on your financial circumstances.
A credit search is done by a lender when you make a mortgage application (or any other application for credit). They must apply to a credit reference agency, who hold your credit history report) and will search your records for CCJs and other indicators of bad credit.
Debt consolidation is the process by which you take out a loan or mortgage in order to pay off a number of high interest debts. By doing this, you will only need to make one payment each month, and you will save significantly on interest charges.
A deed is a legal document that denotes the owner of a given property. You can transfer a title to both freehold and leasehold with a deed.
A deposit is the amount of money you put down toward buying a property.
Disbursements are fees that you pay to solicitors against land registry fees, searches etc. This relates to all the peripheral fees and charges associated with buying a property.
Discounted rates are used to attract new borrowers to lenders by setting the interest rate below the standard variable rate for a guaranteed period of time. However, if you repay the entire discount rate mortgage within the first few years, your lender may charge you early redemption penalties.
Early Redemption Penalty
An early redemption penalty is charged by your lender if you do a part or full payment of your mortgage amount before the completion of your mortgage term. These penalties will also be charged if you decide to remortgage and move your mortgage to a new lender. Early redemption penalties mainly apply to fixed rate, discounted rate, and cash back mortgages.
An endowment mortgage is an interest only mortgage supported by an endowment policy. During the term of the mortgage you will pay only interest to the lender, and your premiums are alternately paid into an endowment policy which will mature over the term of your mortgage. The endowment policy is designed to pay off your mortgage as well as act as life insurance. However, you cannot depend on this amount to be sufficient to pay all of your debt.
An endowment is a life insurance policy that will pay off your interest only mortgage.
Equity is the amount of value in your home. It is the value of your home less the amount left to be repaid on your mortgage.
Equity release is a means of releasing money from the value of your home either in a lump sum or in monthly installments. This money may be used for home improvements, debt consolidation, or other large expenses.
Exchange of Contracts
Exchange of contracts occurs when the buyer and the seller of a property sign and swap the contracts which detail the property, the price, the date, and the terms of the arrangement. When the contracts are signed, they become legally binding, and legal action can be taken against anyone who breaks the contract.
Existing liabilities are all financial commitments outside of your mortgage. Existing liabilities may include bank loans or credit card debt.
First Time Buyers (FTB)
A first-time buyer is someone who has never owned property before.
A fixed rate mortgage is when you pay a fixed amount of interest on a loan for a fixed period of time. Lenders provide fixed rate loans for short periods of time (3-6 months) all the way up to 25 years. Early redemption penalties apply if you pay off the mortgage before the end of the fixed rate term.
Flexible Mortgage Scheme
A flexible scheme is a new way of calculating mortgage interest charges. Lenders calculate interest on a daily basis instead of on an annual basis. The new interest rates will only affect the remaining balance of the mortgage. By making regular overpayments, you can repay the loan faster thereby saving a lot on interest charges.
Freehold means that you have ownership of a property for an indefinite period of time. This is in contrast to leasehold which means that the property is only under your control for a limited period of time.
A guarantor is a person who guarantees the lender that the borrower is eligible for a loan or mortgage. If the borrower fails to make payments, the guarantor will make them.
Ground rent is the amount which a leaseholder needs to pay to the freeholder each year.
Home Buyer?s Report
A home buyer?s report is made by a lender after a mortgage valuation has been done and before the full survey takes place in order to give the borrower a complete understanding of the property they are thinking of buying.
An income multiplier is a type of calculation that a lender will use to calculate the amount a borrower can receive. The most common income multiplier is three times a single income or two and a half times joint income. The lender will choose the one that yields the higher figure. Lenders are more flexible if your LTV ratio is low.
Income Protection Insurance
With income protection insurance, your monthly payments will be covered in the case of illness, accident, or unemployment.
Land Registry Fee
A land registry fee is paid when you want to register your ownership of a property or when you want to change the registered title of a property.
Unlike freehold in which a property is owned, leasehold is when a property is owned, but the land that it?s built on is not owned by the leaseholder. Their control of the property is only for a set number of years.
A licensed conveyancer is like a solicitor in that they specialise in the legalities of buying and selling property.
Local Authority Search
A local authority search is made by the solicitor of the people that plan to buy your property. They check to make sure there are no planned developments on the property such as roads or buildings. They will check for any planning permissions or enforcement notices posted on your property.
LTV, or loan to value, is the percentage derived from dividing the value of your property by the amount of your mortgage. A low LTV is much less risky for lenders than a 100% LTV.
Loan consolidation happens when a loan is taken out to repay another loan with a higher interest rate or to repay a number of high interest debts. Loan consolidation is often achieved through remortgaging.
A MIG, or mortgage indemnity guarantee, is insurance one takes out to cover their lender in the case that their property is repossessed, and the lender is unable to get their money back. A MIG is paid for upon completion of a mortgage.
A mortgage is a loan that allows someone to buy a property. The property itself is the security for the loan.
MPPI, or mortgage payment protection insurance, is insurance one takes out in the case of an accident, an illness, or involuntary unemployment that would render them incapable of making their monthly mortgage payment.
Mortgage Payment Protection
Also known as 'decreasing term life assurance, this is insurance taken out through your lender during the term of your loan. Depending on your lender, it may be compulsory to take out mortgage payment protection before you can be approved for a home loan. It means that if you were to die unexpectedly before your mortgage loan has been repaid, the insurer would pay a lump sum to clear the outstanding mortgage balance. As your mortgage balance decreases, the cover would decrease accordingly.
Negative equity occurs when the money you owe to your mortgage lender is greater than the value of your property. People find themselves in negative equity situations when they take out 100% LTV mortgages, because they are more at the mercy of fluctuations in house price value within the property market.
Overpayment happens when you pay more than the regular monthly payment on your mortgage so that the mortgage is repaid before the end of the mortgage term. With overpayments, you can save money on interest, but you may also be charged an early redemption penalty.
A payment holiday is a period during which you make no mortgagee payments. This is normally available with flexible mortgages only.
A personal pension provides for your financial needs after retirement. You make structured payments into your pension savings during your working years. Often, some of this money may be taken out to pay off your mortgage liabilities.
Redemption is when you pay off your mortgage, when you remortgage, or when you move to a new house.
A remittance fee is charged by a lender for sending the amount of a mortgage to your solicitor.
A remortgage is a loan taken out from a new lender or a loan renegotiated with your existing lender to pay off your existing mortgage. This is done to decrease the interest rate you?re paying or to raise extra capital.
A repayment mortgage is when part of your monthly payment goes toward the interest and another part of the payment goes toward the principal. This is also known as a capital and interest mortgage. If payments are made regularly, the entire sum of the loan will be repaid by the end of the term.
Repossession is a legal process by which your mortgaged property comes under the control of your lender due to incomplete repayment. Your property may then be sold at public auction.
Right to Buy
Right to buy means that you are legally able to purchase the property at a discounted rate if you?ve been a tenant for a certain period of time.
Self certification of income means that you confirm how much you earn, and the lender does not need proof of your income from a third party. Self certification is useful for self employed people or contract workers.
Shared ownership is a scheme devised by housing associations that requires you to pay mortgage payments on the part of a property that you own while you also make monthly rent payments on the portion of the property owned by the building association.
Solicitors are the people who give legal advice and carry out all the legal work for mortgage and remortgage transactions.
Stamp duty is a tax paid to the government on the purchase of a property.
The SVR, or standard variable rate, is the lender?s own base rate. It is subject to change at any time depending on the lender. The SVR will fluctuate based on the Bank of England Base Rate.
A structural survey is the thorough inspection of a property carried out by a professional surveyor.
Tenure means the type of rights a person has over a property or the land it stands on. Tenure could be freehold or leasehold, for example.
The term of a mortgage is the number of years over which you plan to pay your mortgage off.
A tie-in period is an amount of time for which you are bound to a lender. Tie-in periods often exist with special mortgage deals like fixed, capped, or discounted rates. If you move your mortgage to a different lender during this period, you are subject to an early redemption fee.
A title deed is a legal document that validates the ownership of your property. A title deed proves your true and legal right to your property.
A transfer deed is a legal deed used for transferring the ownership of your property to a buyer.
The term unencumbered means that you own your property outright with no mortgages or loans against it.
A property valuation is a survey conducted on a property by a qualified surveyor in order to assess the value of the property. This valuation is done on behalf of your lender so that they are able to confirm the value of your property.
A variable rate means that your interest rate may change from month to month thereby causing your payments to fluctuate monthly.
A vendor is the person from whom you purchase a property.
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