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.
| Cap |
The condition in a capped rate mortgage that sets a maximum interest rate for a specified period. During the capped rate period the interest rate can fall below the capped rate but will never rise above it. |
| Cap and Collar |
A cap is a maximum rate of interest that can be charged for a specified period, while a collar is a minimum rate of interest that can be charged for a specified period. The interest rate can fluctuate between these rates for the special time period allowed. |
| Capital |
The amount of money either put into buying a property or the deposit placed on a property. Also known as equity. |
| Capital and Interest |
Another term for a capital repayment mortgage. |
| Capital Improvement |
Any improvement, such as new structures or components, that permanently increases the value of the property. |
| Capital Raising |
A term used for when someone wishes to remortgage and raise additional funds for non-specific purposes. |
| Capital Repayment |
There are 2 ways of repaying a mortgage - capital repayment or interest only. With a capital repayment mortgage, the capital and interest elements of the loan are paid off with each monthly instalment so that the balance reduces over time. At the end of the mortgage term the balance will be nil. |
| Capped Rate |
A capped rate mortgage sets a maximum rate of interest that the lender can charge, but only for a specified period. During the capped rate period the interest rate can fall below the capped rate but will never rise above it. |
| Cash Back |
An amount of money paid to the borrower by the lender at the end of a mortgage. A 'Cash Back mortgage' is one in which an amount of money is paid by the lender to the borrower at the start of the mortgage, typically to help with the costs of moving home. |
| Cash Back Remortgage |
A remortgage that is structured so that the borrower receives a sum of money at the start of the new term. Normally comes with early repayment charges and terms requiring a portion of the cashback to be repaid if a remortgage happens within a certain time period. |
| CAT Mark |
A symbol indicating that a financial product meets the government CAT standard. |
| CAT Mortgage (Charges Access Terms) |
A mortgage that complies with specific guidelines laid down by the government in terms of the charges applied, the flexibility of the mortgage and the terms applicable to it. CAT mortgage minimum conditions include; interest must be calculated daily, no separate charges for mortgage indemnity guarantee; all additional fees must be disclosed up front; no compulsory insurance linked to the product; no early repayment penalties on variable rate mortgages; variable rate mortgage not to be charged at more than 2% over base rate; early repayment penalties on fixed and capped rate mortgages to be stated in cash terms and kept low; no redemption charge after the fixed or capped period has ended; the mortgage can be kept when moving home provided the lender is happy to lend on the new property.
If a particular mortgage does not meet the CAT standard it does in no way mean that it is a poor product. It may simply be designed for certain types of customer with particular requirements. |
| CAT Standard |
A government benchmark standard for financial products, setting minimum conditions for Charges, Access and Terms – designed to enable consumers to identify products that offer a clear and fair deal. Products that meet the conditions can display the CAT mark. The CAT standard for mortgages was launched in April 2000. |
| Centralised Lender |
A lender that operates from a central location rather than from a network of branches. Examples would include telephone or Internet banks. |
| Certificate of Title |
The document prepared by the solicitor for the lender confirming all formalities are satisfactory, prior to completion. |
| CHAPS |
Clearing House Automated Payment System. The system which enables money to be transferred from one bank account to another on the same day. |
| CHAPS Fee |
The fee lenders and solicitors charge for the same day transfer of fund, usually to complete a loan or mortgage. |
| Charge |
The method of securing a debt on property. There is no limit to the number of charges that can be placed on a property. |
| CIDD |
See the Combined Initial Disclosure Document |
| Clear Title |
A legal term that refers to the clear ownership of a property. |
| Collateral |
An asset, such as a car or a home, which is used to guarantee the repayment of a loan. Should the borrower fail to repay the loan under the terms of the original contract, the asset may be seized by the lender. |
| Commission |
A fee levied by a broker or agent for services relating to either the negotiation of a mortgage or the purchase of a property. |
| Commitment Letter |
A letter detailing a formal offer from a lender and setting out the terms and conditions of the prospective loan. Also known as a 'loan commitment'. |
| Commitments |
Charges, such as car loan payments, family maintenance and mortgage payments, which a person has contracted to pay. |
| Common Areas |
Sections of land or buildings, such as gardens, hallways, recreational facilities and parking areas, where more than one resident shares access. |
| Company Representative |
A person with authority to deal for and on behalf of an organization. |
| Comparative Search |
A search that looks at the actual sale values of similar properties in the same area as your property. This search is normally carried out by an estate agent, and should give an indicative sale price for your property. |
| Completion |
The formal conclusion of the transaction when the mortgage monies are handed over and legal formalities are dealt with. |
| Completion date |
The completion date is the date on which your solicitor forwards the money from your lender to the solicitor of the vendor. It is the date that you become the legal owner of your new property. |
| Completion Fee |
An administration fee sometimes payable to the lender on completion of the mortgage. |
| Compound Interest |
An interest payment on both capital and on previously accrued interest. For example, £100 borrowed for 5 years at 5% p.a. would become £105 after 1 year, £110.25 after 2 years, £115.76 after 3 years, and so on. |
| Compounding |
The process of adding interest to both the capital borrowed and any previously accrued interest. |
| Compulsory Insurance |
Insurance that is required by a lender as a precondition of issuing a mortgage. It can be any type of insurance. Compulsory insurance The insurance will typically cover the building and contents, and some mortgage providers may insist that the insurance policy also be taken out with them. Also known as Conditional Insurance |
| Concrete Construction |
A property that has been built using conventional materials and practices. Some lenders may refuse to lend, or charge higher rates of interest, on properties built using unconventional materials or techniques. This is classed as non-standard construction. |
| Conclusion of Missives |
The Scottish Equivalent of Exchange of Contracts. |
| Conditional Insurance |
See Compulsory Insurance |
| Consumer Credit Act |
Also known as the CCA 1974, CCA’ 74. Provides strict rules for the credit industry for amounts under £25,000. This act has been enhanced and in part replaced by the Consumer Credit Bill. |
| Consumer Credit Bill |
Biggest overhaul of credit legislation in 30 years..Became law in 2006. Act only applies to non-secured credit. Removed the £25,000 limit for coverage. Introduced the concept of the unfair relationship. |
| Call Credit |
One of the leading credit referencing agencies in the UK. |
| Combined Initial Disclosure Document |
This document is given to a customer in the first face to face meeting or within five working days of a telephone conversation regarding the potential purchase of a financial product. This document is used when the adviser anticipates discussing two or more types of financial product e.g. mortgage and insurance or pension and insurance and mortgages. It sets out the fees, level of advice, the extent of cover in the event of the firm going bankrupt, the complaints procedure. |
| Consent to Mortgage Form |
Used by all lenders when there is a person who is over the age of 17 living in the property and not going to be party to the mortgage. The signing the form waivers rights of occupancy in the event that the lender has to repossess. Mainly used with older children so that the parents can borrow money from the property. Any partner who is presented with a form should seek independent legal advice prior to signing it.
Lenders generally will not grant a mortgage if one is not signed, though a blind eye is turned to its absence if the person requiring to sign it is elderly. |
| Contents Insurance |
Insurance that covers the contents of your home, including electrical goods, carpets, furniture and curtains. |
| Contract |
A legally binding agreement, can be in any form, verbal or written, to do or not do something. |
| Converted Flat |
A flat or apartment that has been created by the subdivision of a larger property. |
| Conveyance |
The document that transfers the land ownership usually where the title is changing. |
| Conveyancing |
The legal procedure surrounding the transfer of ownership of a property between buyer and seller, typically carried out by a solicitor or licenced conveyancer. |
| Conveyancing Fee |
The charge made by a solicitor or conveyancer for undertaking the legal procedures necessary for the transfer of ownership of a property. |
| Corporate Relocation |
The process by which a company relocates an employee to another district as part of the employer's normal course of business. |
| County Court Judgement (CCJ) |
A ruling for bad debt issued by a County Court or higher court. The judgement will be recorded and the record will show up during any credit checks and may count against you in your mortgage application. |
| Covenant |
A clause in a mortgage contract or in a contract for the sale of a property that obligates or otherwise restricts one of the parties (buyer/lender, or buyer/seller). The contract should detail any penalties, including repossession, which will be incurred if the covenant is broken. |
| Credit |
An undertaking or agreement under which one party (the borrower) receives money or property on condition that they repay the other party (the lender) at a later date. |
| Credit Check |
The procedure by which a check is made on the credit history of a mortgage applicant, usually conducted by one of the large dedicated credit check agencies on behalf of the prospective lender. The check will include items such as credit card repayments, outstanding debts, arrears, and County Court Judgements. |
| Credit History |
A history of an individual's open and fully repaid debts. Checking a credit history helps a lender to assess the likelihood that a prospective borrower will maintain their mortgage repayments. |
| Credit Rating |
An assessment of a person's likelihood of keeping up - or otherwise - on the repayments on their loan. A credit rating is usually based on a person's credit history. |
| Credit Reference Agency |
A company that collects and stores financial and public records dealing with the payment history of a prospective borrower. Most lenders will employ a Credit Reference Agency to check your payment records as part of their assessment of your application. |
| Credit Report |
A report prepared by a Credit Reference Agency and which details the credit history of an individual. The credit report will be used by a lender to help assess the applications of prospective borrowers. |
| Credit Scoring |
The procedure by which lenders assess the likely ability of an applicant to meet and maintain their mortgage repayments. Each lender’s procedure is unique so what happens with one lender does not follow with another. |
| Current Account Mortgage |
A mortgage that also offers the same facilities, for instance a cheque book, as a bank current account. Combined with a fully flexible mortgage, this type of mortgage allows over- and under-payments as well as payment holidays. |
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).
