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| jargon explained | |
Advance The mortgage or loan APR Annual Percentage Rate. This is meant to be a way of comparing the cost of credit. It takes into account most of the up-front and on-going costs involved (throughout the entire mortgage term) in taking out a mortgage. It is a yearly percentage cost. Arrangement Fee A fee you pay to the lender in return for a mortgage deal. This deal could be fixed, discounted or cashback. The fees can also be known as the: application fee, booking fee, completion fee, drawdown fee or reservation fee. ASU Insurance This covers Accident, Sickness and Unemployment. It provides a monthly payment if you cannot work for an extended period due to accident, sickness or involuntary unemployment Arrears Contracted mortgage payments not made by the due date. This may cause problems for applicants when trying to arrange a future mortgage 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 freeholders responsibility to arrange buildings insurance, although the freeholder will usually pass on the charges to the leaseholder. Buildings and Contents Insurance This is a combined insurance which may be cheaper than one policy for buildings insurance and another separate policy for contents insurance. Base rate The rate of interest set by the Bank of England Buy to Let A property that is purchased for the sole purpose of renting out. Capital and interest Your monthly payments are partly to pay the interest on the amount you borrowed and partly to repay the outstanding mortgage. Also known as a repayment mortgage. Capped rate An interest rate charged for a set period of months or years which can go up and down with the variable rate, but there is a maximum (capped) interest rate which it cannot go above. Cashback A payment you receive when you take out a mortgage. It may be a fixed amount, or a percentage of the amount of the mortgage. CCJ County Court Judgement. A decision reached in the County Court which can be for not paying debts. If you pay off the debt, the CCJ is satisfied and a note is put on your records to say this. CML Council of Mortgage Lenders. Building societies and most banks and other lenders are members of this trade organisation. Completion When the sale and purchase of the property are finalised, and you become the owner of the house or flat. Contents insurance Insurance cover for your possessions. This may include cover against loss or damage away from the home. Contracts The legal documents under which you and the person selling the property agree to buy and sell the property. Conveyancing The legal process involved in buying and selling property. Credit search A check the lender makes with a specialist company to find out whether you have any County Court Judgements or a record of not paying loans, credit-card bills and so on. Critical Illness Insurance that generally pays out a lump sum if you are diagnosed with a life-threatening illness or disease. Deposit The amount of money you put towards buying a property. Disbursements A solicitor's expenses – for example, for stamp duty, HM Land Registry fees, searches, faxes and so on. Discounted rate A guaranteed reduction in the standard variable mortgage rate. This often lasts for an agreed period. Decreasing Term Assurance Also known as Mortgage Protection. Life assurance for a fixed period where the sum assured reduces to nil over the term of the policy. Provides life assurance for a fixed term where the benefit (usually a lump sum) reduces to nil over the term of the policy. The benefit is payable only on death during the fixed term. Premiums are payable throughout the term of the contract. There are no investment benefits or payment on survival - it does not provide a surrender value, nor a maturity value. Product is usually coupled with a repayment mortgage 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 different types of endowments, for example, 'with-profits', 'unit-linked' and 'unitised with-profits'. 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. Exchange of contracts The point where you and the person selling the property sign and swap identical contracts that show the price and what fixtures and fittings are being sold, as well as a date when everything will be finalised. When you exchange contracts the deal becomes legally binding, and if you or the seller pull out before completion. Fixed rate The interest charged on the mortgage is for a set amount for an agreed period of months or years. Fixtures Any item that is attached to a property, and so is legally part of the property. Flexible mortgage A type of mortgage where you can make extra payments and even underpayments without paying a charge or penalty. Freehold This is when you own the property and the land it is on. Health Insurance A general term to describe different types of policy providing a benefit if the client is unable to work through sickness, or if they require medical expenses or long term care. HM Land Registry The official organisation that keeps records of properties in England and Wales. Transfer of ownership has to be registered with the HM Land Registry. Homebuyer's report This is when a professional surveyor checks the structural state of a property. This is more detailed than a valuation but less detailed than the structural survey. The report is optional and you pay the bill; but, this report should pick up possible problems and may give you the chance to negotiate a lower price. And you have more grounds to sue or get compensation from a surveyor for a poor report than you would from a simple valuation. Income protection insurance The objective of Income Protection insurance is to replace earnings lost through long-term disability. This means that the benefit is not a capital sum but an income and therefore benefits are tax-free. Benefit is paid after a deferment period and continues until the first of these three events: the claimant returns to work full or part time; retirement; or death. Increasing Term Assurance This is a contract which starts with a fixed sum assured. Either this will be increased automatically at a fixed rate a year, or RPI, or it can be increased at the option of the policyholder. Premiums will increase at the same rate as the sum assured. The policy is for a fixed term and the benefit is payable only on death during the fixed term. Premiums are payable throughout the term of the contract. There are no investment benefits or payment on survival - it does not provide a surrender value, nor a maturity value. Income multipliers or multiples The size of mortgage that lenders will offer will often be worked out by multiplying your income each year by a set figure. If you are the only person taking out the mortgage, the usual maximum income multiple is three times your yearly income. So someone earning £15,000 could borrow three times this amount, or £45,000. If you are taking out a mortgage with someone else, the multipliers might be three times the main income plus one times the second income. Or it could be two-and-a-half times the two incomes added together. Lenders may consider including all or part of any regular bonuses or commission you receive as your income. 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. Leasehold 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). LIBOR (London Interbank Offered Rate) is the interest rate that European financial institutions charge each other for funds. These rates are often determined from information that is available as of 11:00 AM (London Time) on the second to last business day of each month. LTV Loan to value. This is the size of the mortgage as a percentage of the value of the property or the price you are paying for the property. A £45,000 mortgage on a house valued at £50,000 would mean an LTV of 90%. Level Term Assurance Provides life assurance for a fixed term. The benefit (usually a lump sum) is payable only on death during the fixed term. Premiums are payable throughout the term of the contract and the sum assured payable will remain level throughout the term of the contract. There are no investment benefits or payment on survival - it does not provide a surrender value, nor a maturity value. Life assurance A general term to describe different types of personal protection policy, whose main purpose is to provide payment in the event of death. Mortgage Protection Insurance Also known as Decreasing Term Assurance. Life assurance for a fixed period where the sum assured reduces to nil over the term of the policy. Provides life assurance for a fixed term where the benefit (usually a lump sum) reduces to nil over the term of the policy. The benefit is payable only on death during the fixed term. Premiums are payable throughout the term of the contract. There are no investment benefits or payment on survival - it does not provide a surrender value, nor a maturity value. Product is usually coupled with a repayment mortgage. Mortgage Payment Protection Insurance (MPPI) Provides cover for all the risks to which mortgage customers are exposed: death, disability for whatever cause and unemployment through redundancy. Such wide cover is fairly expensive, although more cost effective than Mortgage A loan to buy a home where you put up the property as security against you paying back the loan. Negative equity This is where the money you owe on the mortgage is greater than the value of the property. For example, if you had a £60,000 mortgage on a property valued at £50,000, you would have £10,000 negative equity. Non-status This means the lender does not need employment or income references from you. This type of loan is often offered to self-employed people. Possession The lenders' term for repossessing your property. Purchaser The buyer of the property. Repayment Your monthly payments are partly to pay the interest on the amount you borrowed and partly to repay the outstanding mortgage. Also known as a capital and interest mortgage. Sickness & Accident Insurance A policy that pays a benefit in the event of injury or death to the life insured, caused by an accident. It may pay a lump sum on death or for serious disability, or an income in the event of less serious disability, including temporary or partial disablement. Income is paid for a maximum of 104 weeks, and there is a deferment period from the date of injury or commencement of illness during which no income is payable. The period is usually between 7 days and 4 weeks. Unlike income protection Insurance, terms are usually 1 year only. Both the insurer and the insured can decide whether to renew the contract. Searches Checks carried out during the conveyancing. 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. Self cert You confirm how much you earn, and the lender does not need any references. (for more infomation See Self certification mortgages) Stamp duty A tax you pay on properties which cost over £125,000. SVR Standard variable rate. The interest rate the lender charges goes up and down, with your interest payments changing accordingly. Term Assurance Provides life assurance for a fixed term. The benefit (usually a lump sum) is payable only on death during the fixed term. Premiums are payable throughout the term of the contract. There are no investment benefits or payment on survival - it does not provide a surrender value, nor a maturity value. Tie-in period As a condition of a special mortgage deal (discount or fixed rate, for example), you may have to agree to stay with the lender for a period of months or years after the deal has ended. If you move your mortgage elsewhere during this period, you may have to pay an early redemption charge. Term The period of years over which you take the mortgage and when you have to repay it. Most new mortgages are taken on a 25-year term. Title deeds Documents to show proof of who owns the freehold and leasehold property. Total Amount Payable (TAP) The total cost of repaying a mortgage over the loan period, including the initial amount borrowed and the interest. Valuation A check of the property in order to find out how much it is worth and whether it is suitable to lend a mortgage on. This is carried out by a professional surveyor for the lender. Variable rate The interest rate the lender charges goes up and down, with your interest payments changing accordingly. Vendor The person selling the property. FULL WRITTEN DETAILS AND QUOTATIONS ON REQUEST. ALL LOANS SUBJECT TO STATUS. ASHLEY COURT IS AUTHORISED AND REGULATED BY THE FINANCIAL SERVICES AUTHORITY. |
