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Glossary of Mortgage Terms.txt

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Additional Security Fee

An Additional Security Fee (Mortgage Indemnity Guarantee policy) is the fee taken to get an
insurance policy that will cover your lender so that if you default on payments, he will not suffer
any loss. You have to pay the Additional Security Fee and the premium along with your mortgage
advance. Although you are paying the premium, remember that this policy is for the protection of
your lender and not for you.

Administration Fee

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

Adverse credit occurs when you have a history of bad credit, bankruptcy, CCJ, 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.

Agricultural Restriction

An agricultural restriction is a rule which will restrict you from holding a property if your occupation
is in any way related to agriculture.

Annual Percentage Rate

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

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

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.

Arrangement Fee

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 discounted rate mortgage, you will pay this
fee at the time that you submit your application, it must be added to the loan upon completion of
the term, or it will be deducted from the loan on completion.

Assignment

An assignment is the document transferring the lease of the property or rights of ownership from a
seller to a buyer. It may be an endowment policy to the building society in connection with a
mortgage.

ASU

ASU is Accident, Sickness, and Unemployment insurance which covers your mortgage payments
in case of an accident, a sickness, or involuntary unemployment.

Auction

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.

Authority to Inspect the Register

An authority to inspect the register document is a document fro the legal or registered owner of a
property allowing the solicitor of the purchaser to get information concerning the property.

Banker Draft

A banker 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

Base rate tracker 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.
The best part about this type of mortgage is that it has little or no redemption penalty. This means
that by making overpayments, you will be able to save money on interest by paying off your
mortgage earlier than the agreed upon date on the initial mortgage contract.

Booking Fee

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.

Bridging Loan

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 adviser before taking out a bridging loan to be sure it
is the best option for you.

Broker Fee

A broker fee is paid to your debt advisor or other intermediary that assists you in finding the best
mortgage or loan deal for your circumstances. BSAThe BSA, or the Building Societies Association,
is a group that works in the interest of member societies.

Building Societies Commission

The Building Societies Commission is a regulatory organization for Building Societies. This
commission reports to the Treasury Ministers.

Building Society

A Building Society is a mutual organization 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.

Buy-to-Let

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.

Capital and Interest

Your monthly mortgage payments consist of two parts: the interest and the capital. The interest
payment is a payment on the interest balance of your loan. The capital payment is a payment on
the amount that you borrowed.

Capital Raising

Capital raising generally means remortgaging for a higher amount than you need to pay off your
existing mortgage in order to use the excess money for other personal financial uses.
Capped Rate

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.

Cash Back

Cash back is the amount you receive when you take out a mortgage, the amount may be fixed or
a percentage of your mortgage amount.

CCJ

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.

Centralized Lender

A centralized lender is a mortgage lender that does not rely on a branch network for distribution.
Centralized lending is now provided by several building societies. These societies operate
separately from their branch networks, and they rely exclusively on mortgages from intermediary
sources.

Charge

A charge is any interest on a mortgage to which a freehold or leasehold property can be held.

Charge Certificate

A charge certificate is a certificate issued by HM Land Registry to you with your name as the
registered title for a given property. This certificate contains details of restrictions, mortgages, and
other interests. It has three different parts: a charges register, a property register, and a
proprietorship register. If there is no mortgage on the property, it is called a Land Certificate, and it
is issued to the registered proprietor.

Chattels

Chattels are moveable items in your house such as furniture or your personal possessions.Chief
RentChief rent is paid by the owner of a freehold property. This is the same as the ground rent that
is paid by a leaseholder.

CML

Council of Mortgage Lenders

Completion
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.

Conditional Insurance

When you take out a fixed or discounted rate mortgage, your lender may try to persuade you to
take out an insurance policy that will cover any missed payments due to an illness, an accident, or
unemployment.

Contract

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.

Conveyance

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

Conveyancing is the legal process by which the buying and the selling of a property take place.

Covenant

A covenant is an assurance given in a deed.Credit ScoringCredit scoring is the procedure by
which a lender evaluates your paying capacity before offering a loan or mortgage.

Credit Search

A credit search is done by a lender and a credit bureau to search your records for CCJs and other
indicators of bad credit.

Debt Consolidation

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.

Deed

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.

Deposit
A deposit is the amount of money you put down toward buying a property.

Disbursements

Disbursements are any amount you pay to solicitors against land registry fees, searches, faxes
etc.

Discounted Rate

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. If you repay the entire discounted 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.

Easement

Easement is the right held by one property owner to make use of the land of another for a limited
purpose, like a right of passage.

Endowment Mortgage

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.

Endowment

There are different types of endowments, but here an endowment is a life insurance policy that will
pay off your interest only mortgage.

Equity

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

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

Existing liabilities are all financial commitments outside of your mortgage. Existing liabilities may
include bank loans, credit card debt, maintenance payments, etc.

First Time Buyers (FTB or FTP)

A first time buyer is one who has never owned property before.

Fixed Rate

A fixed rate 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 (three-six 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 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.

Fixture

A fixture is an item attached to your property, and therefore it is legally part of the property.

Freehold

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.

Further Advance

A further advance is an add-on loan to your existing mortgage from your existing lender. The
money from a further advance may be used for home improvements, to purchase a freehold
property, or for personal purposes such as debt consolidation.

Guarantor
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.

Gazumping

Gazumping occurs when a seller agrees to sell a property to one person, and they proceed to
decline that offer in favor of a higher one.

Ground Rent

Ground rent is the amount which a leaseholder needs to pay to the freeholder each year.

Home Buyer Report

A home buyer 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.

Income Multipliers

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.

Intermediary

An intermediary is a mediator who finds the best mortgage for you, and they also arrange the
mortgage for you on your behalf.

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.

Leasehold

Unlike freehold in which a property is owned, leasehold is when a property is owned, but the land
that it is built on is not owned by the leaseholder. Their control of the property is only for a set
number of years.

Licensed Conveyancer
A licensed conveyancer is like a solicitor in that they specialize 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

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

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.

MIG

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.

MIRAS

MIRAS, or mortgage interest relief at source, was a tax relief given to those with mortgages, but
this relief was abolished by the government in April of 2000.

Mortgage

A mortgage is a loan that allows someone to buy a property. The property itself is the security for
the loan.

Mortgagee

The mortgagee is the company or organization that finances your mortgage.

Mortgagor

The mortgagor is the person taking out the mortgage to buy a property.

MPPI
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.

MRP

MRP, or mortgage repayment protection, is insurance taken out through your lender during the
term of your loan.

Negative Equity

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.

Overpayment

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.Payment
HolidayA payment holiday is a period during which you make no mortgagee payments. This is
normally available with flexible mortgages only.

PEP

A PEP, or personal equity plan, allows you to own shares or unit trusts without paying any taxes.

Personal Pension

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.

Portability

Portability is a term used to describe a mortgage that can be transferred between properties when
you move from one house to another.

Redemption

Redemption is when you pay off your mortgage, when you remortgage, or when you move to a
new house.

Remittance Fee

A remittance fee is charged by a lender for sending the amount of a mortgage to your solicitor.

Remortgage
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 are paying
or to raise extra capital.

Repayment Mortgages

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.

Retention

Retention is the amount that your lender keeps pending until certain conditions of your mortgage
are met.

Repossession

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
have been a tenant for a long enough period of time.

Sealing Fee

A sealing fee is an amount charged by your lender when you repay your mortgage.

Self Certification of Income

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

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

Solicitors are the people who give legal advice and carry out all the legal work for mortgage and
remortgage transactions.Stamp Duty Stamp duty is a tax paid to the government on the purchase
of a property.
SVR

The SVR, or standard variable rate, is the base rate of the lender. It is subject to change at any
time depending on the lender. The SVR will fluctuate based on the Bank of England Base Rate.

Structural Survey

A structural survey is the thorough inspection of a property carried out by a professional surveyor.

Tenure

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.

Term

The term of a mortgage is the number of years over which you plan to pay your mortgage off.

Tie-in Period

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.

Title Deeds

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.

Transfer Deed

A transfer deed is a legal deed used for transferring the ownership of your property to a buyer.

Unencumbered

The term unencumbered means that you own your property outright with no mortgages or loans
against it.

Valuation

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.

Variable Rate

A variable rate means that your interest rate may change from month to month thereby causing
your payments to fluctuate monthly.

Vendor

A vendor is the person from whom you purchase a property.




If you would like help finding the best mortgage or remortgage deal for you, take a moment and fill
out this simple questionnaire. Once you have do so, a SimplyFinance representative will contact
you to introduce you to a mortgage broker that will search to find the best mortgage deal for you.

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