Below is a glossary of the terms you may not be sure about now and should understand when taking out a new mortgage. These are not legal definitions but clear everyday descriptions to help you make a more informed choice.
Any examples given are designed solely to simply illustrate the basics of the concept and are not to be taken as anything beyond that.
A lot of mortgage adviser regularly used terminology were banned in October 2004 and replaced by industry standard phrases to help consumers understand things better. The old terms have been included for reference purposes.
No information given here should be taken as advice.
| Accountant |
A chartered or certified accountant. |
| Accountant's letter |
A letter of income confirmation provided by an accountant (normally chartered or certified). |
| Accidental Damage Cover |
Extra insurance on your buildings and / or contents insurance to cover you against accidental damage to the structure of your property and /or its contents. |
| Accident, Sickness & Redundancy Insurance (ASR) |
See Accident, Sickness and Unemployment (ASU) insurance. |
| Accident Sickness and Unemployment Cover |
An insurance policy designed to help you in the event of accident, sickness or redundancy. It will typically pay a percentage of your normal monthly mortgage payment for a specified period. This type of cover does not apply to voluntary redundancy or dismissal due to misconduct, or if your injuries are self-inflicted. |
| Actuary |
A professional that deals with calculations related to pensions, insurance and investments. In relation to your mortgage, an actuary will calculate the amounts payable for life assurance and other insurance policies you may need. |
| Added to Loan |
There are a number of costs related to arranging your mortgage, for instance administration fees or indemnity fees. When these are added to the amount that you borrow it is known as Added to Loan. |
| Additional security |
When lending exceeds a certain loan-to-value lenders may require additional security.
The simplest form of additional security is a Higher Lending Charge. Alternatively lenders may accept other security such as cash or shares being deposited with them or a charge over another property. |
| Additional Security Fee |
See Higher Lending Charge. Advisers are no longer allowed to use terms like “additional security fee”, however years of habit die hard and it’s probably just slipped out. |
| Adjustment Date |
On a variable rate mortgage, this is the date on which the interest rate changes. |
| Administration Charge |
See administration fee. |
| Administration Fee |
This is a charge levied by the lender to cover the costs of processing your mortgage application. If you do not complete your application, the fee may not be refunded. The fee may or may not include a valuation fee. The administration fee is also sometimes known as an application fee. |
| Advance |
The amount of money being lent. |
| Adverse Credit |
This term is used to apply to a borrower or application that has past problems with credit, for instance late payment, bankruptcy or County Court Judgement. |
| Agreement in principle |
An indication of the likely outcome of a loan application. This is not a formal offer but includes a credit check with a credit reference agency and an assessment of your ability to repay the loan amount requested. Once you have been given an agreement in principle we would make further checks to validate the information you have provided and check that the house you have chosen is suitable for us to lend against. At that stage we would then offer you a formal offer of loan. |
| Agricultural Restriction |
A term in the deeds of the property restricting the use of a property to agriculture. |
| Amortisation |
The reduction in the amount of your mortgage during its term as you make regular payments to cover the principal and interest. |
| Amortisation Term |
The amount of time, in months, required to pay off your mortgage loan. |
| Annual Percentage Rate (APR) |
The APR is a figure that is used to compare different types of credit, not just mortgages.. Defined by law, it includes repayments on the loan plus any fees such as booking, arrangement or redemption fees. The APR shows the true cost of borrowing, and should appear on all mortgage illustrations and quotes.
A lender can advertise a great low rate however the APR may be a lot higher. E.g. 2 credit cards one with a rate of 6% with an APR of 19% and another with a rate of 13% with an APR of 19%. Whilst the first may seem a great deal it is actually no different that the second because the APR is the same, the first has a lot of charges in their product whereas the second has less. |
| Annualised Payment Scheme |
Under a tracker mortgage, to make it easier for the borrower to budget when repayments will typically vary each month, the lender may fix interest rates for 12 months. At the end of the year, the borrower's payments will be reviewed to see if they have under- or over-paid, and a new interest rate set for the next 12 months. |
| Annuity Mortgage |
An old term for a capital and interest mortgage, not in use any more. |
| Applicant |
The person - or party - applying for a mortgage. |
| Applicant Type |
Indicates whether the applicant is a first time buyer or self employed for example. |
| Application |
The process of applying for a mortgage, including the provision of the personal and financial details of the applicant. This is not the same as picking up the phone and asking questions. |
| Appraised Value |
The value of a property, as estimated by a surveyor. |
| Appreciation |
The increase in the value of a property as a result of changes in market conditions. |
| Arbitration |
Refers to the involvement of an independent third party to resolve a dispute between two other parties (rather than resort to legal action). The arbitration process has very different rules to the legal system and the two systems should not be confused. |
Arrangement Fee
|
The meaning of this will depend upon the context in which it is used.
A broker will generally mean fees to cover the work done to search and arrange a mortgage for you.
In the case of a lender generally, this is a charge levied by the lender to cover the costs of administering and reserving the funds for certain types of mortgage. May be paid separately or added to the loan amount. |
| Arrears |
The amount, usually in either months or pounds, that your mortgage payments have fallen behind schedule. |
| Asset |
Any form of property owned by a person, including currency, stocks, and enforceable claims against others. |
| Assignment |
The term for the legal transfer of an asset, or a mortgage, from one owner to another. E,g,You give your father a set of golf clubs you bought as a present for him. You are assigning ownership of the golf clubs to him. |
| ASR |
See Accident Sickness and Unemployment Insurance. |
| ASU |
See Accident Sickness and Unemployment Insurance. |
Your home may be repossessed if you do not keep up repayments on your mortgage.
The actual rate available will depend on your circumstances. Ask for a personal illustration.
Think carefully before securing other debts against your home.
There will usually be a fee charged when we successfully arrange a mortgage / re-mortgage. The amount will depend on the complexity of your requirements and your personal circumstances, typically the fee charged will be 3% of the mortgage advance (minimum fee £3,000 up to a maximum of £10,000).
