Buy-to-let Landlords



Mortgage A-Z Jargon Buster

October 15, 2019
Information published was correct at the time of writing

Let us help you cut through the jargon.

Agreement in Principle

This is a document that is provided by a mortgage lender which can confirm to the seller or estate agent of a property that you are able to borrow a certain amount. Also known as a decision in principle.

APRC

APRC (Annual Percentage Rate of Charge) is a rate the lender is always required to quote when providing details on a mortgage product. It is a calculation to show the total amount of interest paid over the whole mortgage term.

Arrangement Fee

This is a fee charged by mortgage lenders for setting up your mortgage. You can pay this upfront or add it to your overall mortgage. If you were to pick the second option though, you will be charged additional interest on this amount.

Arrears

The legal term for a debt that is overdue.

Base Rate / Bank of England Base Rate

A rate of interest set by the Bank of England. The base rate influences the interest rates that many lenders charge for their mortgage products.

Bridging Loan

A bridging loan is a type of short-term property backed finance. They are often used to fund you for a period of time whilst allowing you to either refinance to longer-term debt or sell a property.

Buildings Insurance

Buildings insurance covers the cost of repairing damage to the structure of your property. This is a condition of your mortgage offer.

Buy-to-Let

A property purchases with the intention to let it out.

Capped Rate

A capped rate is an interest rate that is allowed to fluctuate, but which cannot surpass a stated interest cap.

Capital Repayment Mortgage

When your mortgage payments consist of repaying the capital amount borrowed as well as the accrued interest, so that the amount borrowed decreases throughout the term and by the end of the term of the mortgage will be fully repaid.

Cashback Mortgage

A cashback mortgage is one where a cash lump sum is paid to the mortgage applicant on completion of the mortgage.

CCJ

A County Court Judgment (CCJ) is a type of court order in England, Wales and Northern Ireland that might be registered against you if you fail to repay money you owe.

Completion

The day you collect the keys or for remortgage transactions, when the deal is finalised.

Contents Insurance

Contents insurance covers your possessions in the event of theft, loss or damage, including natural disasters, fires or flooding. It’s separate from home insurance, which covers the building you live in, including fixtures and fittings.

Consent to Let

Enables you to let you a property without switching to a buy-to-let mortgage, terms must be agreed with your lender.

Credit Check

A credit check, also known as a credit search, is when a company looks at information from your credit report to understand your financial behaviour.

Credit Rating

A credit rating is an evaluation of the credit risk of a prospective debtor, predicting their ability to pay back the debt, and an implicit forecast of the likelihood of the debtor defaulting.

Conveyancing

In law, conveyancing is the transfer of legal title of real property from one person to another.

Deposit

A deposit is an amount of money that you pay, which is a percentage of the full cost of the property you want to buy, so that a bank or money lender will give you a mortgage to pay for the rest of the property.

Defaulting

Falling behind on your mortgage repayments.

Disbursements

This is another name given to the extra fees relating to your mortgage.

Early Repayment Charges (ERCs)

A fee you may be required to pay if you wish to pay off your loan before the initial period of the deal ends.

Equity

Your equity is made up of your deposit plus what you’ve paid off on your mortgage. So essentially, the part of your property that you own.

Exchange of Contracts

A final agreement between the buyer and the seller of a property, after the exchange of contracts the sale cannot legally be stopped.

Fixed-Rate Mortgage

A fixed-rate mortgage is exactly as it sounds. The mortgage interest rate stays the same or ‘fixed’ for the initial period of the deal, which can be anything from 1-15 years, most commonly between 2-5.  This means that what you pay each month will stay the same for this period.

Flexible Mortgage

Flexible mortgage product offers flexibility to the structure of your monthly mortgage repayments.

Freehold

You own the property and the land it’s built on.

Full Structural Survey

A detailed and comprehensive look at the condition of a property by a surveyor.

Further Advance

A further advance is taking on more borrowing from your current mortgage lender. This is typically at a different rate to your main mortgage.

Fixtures and Fittings

A fixture is understood to be any item that is bolted to the floor or walls, and a fitting to be any item that is free-standing or hung by a nail or hook.

Gazumping

Make a higher offer for a house than (someone whose offer has already been accepted by the seller) and thus succeed in acquiring the property.

Green Mortgage

A mortgage or cashback offered at a lower rate if the home has an A or B rating on the EPC. See what is a green mortgage?

Ground Rent

Regular payments made by a holder of a leasehold property to the freeholder/managing agent as required under a lease.

Guarantor

This is a third party who agrees to cover your monthly mortgage repayments if you are unable to. Often a parent or guardian.

Interest-only Mortgage

Each month, you only pay off the interest, without repaying any capital from the loan. Therefore, you are required to have another way of paying off the loan when your mortgage term comes to an end.

Help to Buy

Help to Buy is the name of a government programme in the United Kingdom that aims to help first time buyers, and those looking to move home, purchase residential property.

Help to Buy ISA

Help to Buy ISAs are a type of ISA designed to help first-time buyers save up a deposit for their home. The government will add 25% to your savings, up to a maximum of £3,000 on savings of £12,000. It can be used on a property with a maximum price of £450,000.

Higher Lending Charge

A higher lending charge is a charge made by mortgage lenders in the UK when the loan-to-value ratio of a mortgage is higher than they are prepared to accept at standard rates.

Income Multiples            

Your “income multiple” is used as a guide to how much a lender will be prepared to advance you on a mortgage.

Intermediary

The ‘middle person’ in a transaction. i.e. a mortgage adviser would be an intermediary because they are the person acting between the mortgagee and the mortgagor.

Land Registry Fee

The cost to the Land Registry for ensuring the correct charges and proprietorship shows on the title deeds – your solicitor will often deal with this aspect.

Leasehold

You own the property but not the land it’s built on. Commonly, flats and maisonettes are leaseholds, so while you own your property in the building, you do not own the building it is in.

Legal Fees

Fee’s payable to your solicitor to carry out the legalities involved with purchasing property.

Life Assurance

Life assurance, often known as term assurance, pays out a lump sum once a policyholder passes away within the policy term (assuming they’ve met their monthly premiums).

Lifetime Mortgage

With a lifetime mortgage, you take out a loan secured on your home which does not need to be repaid until you die or go into long-term care.

Loan-to-Value (LTV)

The size of your mortgage as a percentage of the property’s value.

Mortgage Deed

The mortgage deed is what a borrower signs to accept the mortgage offer and the terms and conditions within it.

Mortgage Illustration

When a lender or an adviser recommends a mortgage, they have to give you a mortgage illustration document commonly known as a Key Facts Illustration document its purpose is to outline in detail the mortgage being recommended.

Mortgage Offer

A mortgage offer is official confirmation from a lender that it will provide you with a mortgage.

Mortgage Term

The length of time you are taking out the mortgage for.

Negative Equity

Negative equity occurs when the value of a property used to secure a loan is less than the outstanding balance on the loan.

New Build Property

A ‘New Build’ is defined as a property that hasn’t been purchased (even if it’s been occupied) within two years of being newly constructed, converted or refurbished, including properties bought off plan.

NHBC

National House-Building Council (NHBC) is the leading home construction warranty and insurance provider for new and newly-converted homes in the UK.

Offset Mortgage

An offset mortgage links your mortgage to your savings account. The value of your savings is deducted from the amount you pay interest on, which lowers your monthly payments. With an offset mortgage, you will not earn interest on your savings.

Outstanding Balance

The current outstanding balance required to redeem a mortgage with your current lender.

Payment Holiday

A Payment Holiday is a feature offered within some mortgage products.

Planning Permission

Permission needed from the local authority to undertake works (whether they be extensive or not) on your property.

Product Transfer

A product transfer is when you move from your existing mortgage deal to a new one with your current lender.

Redemption statement

A Redemption Statement (Red Stat) is a statement a solicitor will request from your existing lender up to a week before your sale or refinance to a new bank to get the most up to date figure of the full mortgage to be redeemed.

Repossession

When a property is taken back from a lender when mortgage repayments are not being met by the mortgagor. Always as a last resort.

Retention

Mortgage retention is where the lender holds back some of the funds until you’ve completed essential works.

Right to Buy

Right to Buy is a government scheme designed to help tenants in council housing to buy their homes with often rather large discounts.

Secured Loan

A loan that is secured against an asset such as a mortgage on a property.

Service Charge

A service charge is a fee collected to pay for services related to the primary product or service being purchased.

Shared Ownership

Shared Ownership is an affordable homeownership scheme that makes it easier for first-time buyers to get on the property ladder. Buyers purchase a share of the property, and pay rent on the remaining share.

Stamp Duty

When you buy a property in England and Northern Ireland you will have to pay a tax called stamp duty if the property is worth more than £125,000 (or more than £40,000 if it’s your second home).

Standard Variable Rate (SVR)

This is the name for the interest rate that your lender will begin charging you after your initial mortgage deal ends.

Subject to Contract

Once an offer has been accepted by the seller, then the property is sold subject to contract (STC). This means that although the offer has been accepted, the paperwork is not yet complete. No money will have changed hands yet, so nothing is legally binding and the price can still be negotiated.

Tie-in Period

This is the period during which you are ‘locked in’ to your mortgage deal. You may have to pay an early repayment charge if you leave your mortgage during this period.

Title

The title is a document that gives evidence of legal ownership of property.

Transfer of Deeds

A transfer deed is a document used in conveyancing in England and Wales to transfer real property from its legal owner to another party.

Tracker Mortgage

A tracker mortgage is a type of variable mortgage, which means that the interest rate you pay usually tracks the Bank of England base rate and is subject to change in line with this.

Transfer of Equity

A Transfer of Equity is when a jointly owned property is transferred to one of the existing owners, or when a single owner adds one or more people to the ownership of the property.

Underpayment

When you have paid less on a mortgage than the amount agreed e.g. your monthly repayment with Barclays is £500 but you pay £300 one month. Usually allowed if you have overpaid on the mortgage previously but has to be pre-agreed with the lender.

Underwriting

The process of document assessment by a lender in order to agree a lending decision on the mortgage.

Valuation Survey

A valuation survey is what a lender will use to independently confirm the value of the property you wish to purchase.

Variable Rate

A variable interest rate (sometimes called an “adjustable” or a “floating” rate) is an interest rate on a loan or security that fluctuates over time because it is based on an underlying benchmark interest rate or index that changes periodically.

Vendor

A person selling a property.

 

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