How to get moving guides
Wondering what’s the difference between gazumping and gazundering? Confused about conveyancers and muddled about missives? Our Home-buying Glossary will make sense of the jargon around buying a home.
Additional Security Fee
An up-front, one-off fee paid to the lender to protect them against the borrower defaulting on the loan. Usually charged on mortgages over 75% of the house value. Also known as MIG, Indemnity Guarantee Premium and Mortgage Indemnity Premium.
A term used to describe applicants with a poor credit history.
Annual Percentage Rate (APR)
The interest rate for a whole year, rather than just a monthly rate. This helps you compare the cost of different mortgage deals.
A fee that lenders sometimes charge to cover the work involved in setting up your mortgage or for certain mortgage rates.
Bank of England Base Rate
The benchmark lending rate regulated by the Bank of England. If this is altered in an attempt to control the overall economy, then the lenders will normally follow its movement and alter their own Standard Variable Rate.
The person who receives money or other assets from a benefactor. For example, if you receive an insurance payout or inheritance on someone's death – you are the beneficiary. The person who took out the insurance premium or owned the assets is the benefactor.
An expensive temporary loan to tide you over when having to buy your new home before selling your old house.
An intermediary who will give advice and offer a range of mortgages.
Somewhere to go for mortgages and loans.
Protection for your property against hazards such as fire, flood and subsidence.
A technical report that will give you a comprehensive account of the condition of the property, describing any structural or other defects.
The sum borrowed in a mortgage.
Capital and Interest Mortgage
A repayment mortgage. Your monthly payments gradually pay off the money you borrowed, and also cover interest on the amount outstanding.
When the mortgage interest rate will not exceed a specified value during a certain period of time, but will fluctuate up and down below that level.
Money offered as an incentive to take a mortgage product.
A mortgage that meets a number of government defined standards relating to Charges, Access and Terms. According to the Treasury, the objective of CAT standards is to 'prevent confusing marketing and hidden charges'. The Government is seeking to set out basic and transparent conditions for mortgage products.
When the seller needs the sale of their house to occur before they can complete the purchase of another property. The same situation may exist for others in the chain. As a result, the whole chain can collapse if one link breaks.
The point when contracts have been exchanged and ownership legally passes to the buyer.
Pays for damage to, or loss of, an individual’s personal possessions whilst they are located within that individual’s home.
When two parties have made an offer on the same house. The vendor will sell to the first party to exchange contracts.
The legal documents needed to transfer the ownership of property.
Amounts of money placed into a fund.
A legal expert who deals with the conveyancing of land.
Legal work involved in buying and selling a property or land.
A quantitative approach used to measure and evaluate the creditworthiness of a loan applicant. A measure of profitability, solvency, management ability and liquidity are commonly included in a credit scoring model.
Current Account Mortgage (Offset Mortgage)
A linked mortgage account and current account. Any positive balance in the current account is deducted from the mortgage balance reducing the amount you owe. This is called offsetting and will reduce the interest charged on your mortgage.
When interest is charged on the amount of mortgage outstanding from day to day. This means lenders take into account any changes in the amount you owe on a day-to-day basis.
Your initial contribution towards the purchase of your new home.
All the various costs itemised on your conveyancer's invoice.
A payment made to most lenders for releasing their hold over a property once you've paid off your loan.
When interest is charged at the variable base rate that applies to the mortgage, less a discount for a set period. Your monthly payment will vary whenever the variable base rate changes, but will remain below the variable base rate during the discounted rate period.
Early Repayment Charge
A fee charged by a lender to a borrower for paying off their mortgage before its scheduled completion date. This is to compensate for the loss of income that would have been generated had the mortgage run its full course.
A type of mortgage where monthly payments are made into an endowment (life assurance) policy. The loan is paid off in one lump sum at the end of the loan period.
The difference between the amount you owe on your mortgage and the value of your property.
Property agents who link up buyers and sellers. Estate Agents advertise houses and arrange viewings.
The initial sum you have to pay on an insurance claim.
Exchange of Contracts
The point at which you commit to buying or selling the property, but do not take final ownership of it (this is called completion). Once you have exchanged contracts you are both legally bound to the transaction. Dealt with normally by a phone call between the solicitors.
A mortgage only available to intermediaries through a specific packager, in conjunction with a Lender who provides the funding.
Financial Services Authority (FSA)
The UK financial regulator for financial services.
An interest rate that applies to a loan for a set term. Both the interest rate and loan repayments are fixed for the agreed term, regardless of any interest rate variations in the home loan market. The agreed term is usually anywhere between one and seven years.
A form of legal title to land, which means you are the absolute owner of the property and the land it's on.
A term used to describe borrowers who can evidence their income.
A situation whereby the lender makes available another loan and under which both loans are included within the first charge on the property. A further advance can be used to consolidate debt or pay for improvements to the property.
When a prospective purchaser has an offer for a property accepted and then another potential buyer puts in a higher offer for the same property and the seller accepts the higher.
When the buyer blackmails the seller into accepting a lower offer just before contracts are about to be exchanged.
A person that signs a guarantee with a lender and promises to repay a borrower's loan if the borrower can't or won't.
Higher Lending Charge
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.
A more detailed survey than a mortgage valuation, but not as detailed as a Full Structural Survey, and is carried out by a qualified surveyor.
Homebuyer's Valuation Report
An assessment of the value (and general condition) of a property for mortgage purposes by the lender's surveyor. It is not as detailed as a structural survey report.
The tax you pay on the income you earn each year above a certain amount. As well as your salary, income tax is also charged on interest and dividends you receive. The amount of tax you pay depends on the amount of money you earn and on your allowances.
The amount in percentage terms by which prices rise or fall year on year. In the UK, the primary measure of this is the Retail Price Index (RPI); the underlying rate of inflation is the RPI with mortgage repayment figures stripped out.
When you only pay interest to your lender throughout the mortgage term and your mortgage balance doesn't reduce.
Dying without having made a Will. If a UK resident dies intestate there are rules as to the distribution of the estate, which have to be followed whether or not they coincide with what the deceased person would have wished.
When the seller commissions two independent estate agents to sell their house.
Key Facts Illustration (KFI)
A mortgage quotation detailing all of the costs and payments for the mortgage you are applying for.
Carried out by the solicitor to register a buyer as the new owner of the house.
A document in which the owner of a freehold property lets out their premises to a named party at a certain price and for a specified time.
When the land on which the property is built is owned by someone known as the freeholder and whilst living in the property you will be required to pay them a small amount of rent each year. When purchasing the property, you are actually purchasing a lease giving you rights over the property for a set number of years. Leases are most commonly found in association with flats.
Lender's Arrangement Fees
A charge passed on to the buyer by the lender for arranging a loan.
Lender's Legal Fees
The fees incurred by the lender when arranging a mortgage. These costs are passed on to the buyer.
A valuation of the proposed property carried out by the lender before agreeing to give out a mortgage. This is only a valuation survey. A separate full structural survey is needed by the buyer.
A variable mortgage that is linked to the London Inter-Bank Offered Rate. The Libor rate is set independently every three months.
An insurance policy that pays out on death (or on certain other conditions).
Loan to Value (LTV)
A figure representing the size of loan to a property's worth as a percentage. Hence, mortgages where no deposit exists have 100% LTV.
Local Authority Search
A search carried out by the solicitor to find out if there are any Local Authority Notices, with respect to the building itself (eg. whether it has been condemned), and the surrounding area (eg. whether plans have gone through to build a motorway next to the house).
In Scottish law, a missive is a document or contract that is exchanged on the successful sale of a property.
The legally binding contract between lender and borrower. The main type of mortgage deed used in England and Wales is a legal charge. In Scotland it is a standard security.
A written offer to lend money on a property. The mortgage offer will contain all the terms of the loan and the conditions upon which the money is loaned.
The amount of time the bank has agreed to lend you the money for.
The amount by which the market value of a property falls below the amount of the mortgage secured upon it. The situation in which a property is worth less than its mortgage.
When the amount of money withdrawn from a bank account is greater than the amount actually available in the account. The excess is known as an 'overdraft' and the account is said to be 'overdrawn'. If agreed in advance by the bank this is essentially a form of loan facility. If not agreed in advance by the bank, penal charges may be incurred.
When you pay more than your normal monthly payment to pay off your mortgage earlier.
An agreed period of time when you can take a break from making payments. Subject to the lender's terms, you can take a payment holiday up to the extent of any previously accrued overpayment (when not used to reduce the mortgage term).
When a mortgage can be transferred to another property. Early repayment charges may apply if a smaller loan is required for the new property.
A fee paid to some lenders if you pay off some or all of your mortgage, or you transfer to a different mortgage product within a certain timescale.
The process of paying off one mortgage with the proceeds from a new mortgage using the same property as security. Also known as refinancing.
A term generally used in the UK to describe a mortgage in which the monthly repayments consist of repaying the capital amount borrowed as well as the accrued interest. The mortgage statement, usually received annually, shows the amount borrowed decreases throughout the term.
Second Charge Mortgage
A loan that is secured on your property as well as the main mortgage.
A mortgage for property under construction. The loan is paid out in stages as the property is completed.
A scheme where the borrower owns part of a property, and pays the mortgage on this. A Housing Association usually owns the rest of the property, and the borrower pays rent on this.
A detailed survey of the structure of a building carried out by a Structural Engineer or Chartered Building Surveyor.
A mortgage that is linked to the Bank of England base rate. The interest rate applicable and subsequently the amount charged each month fluctuates in line with this.
A brief inspection, for the benefit of your lender, of the home you hope to buy. This is to make sure they are not lending more than the property is worth and that the property is suitable security for the mortgage, but this will not tell you if it is a good or bad buy. For your own peace of mind, you may want your own survey.
Variable Base Rate
The basic rate of interest charged on a mortgage, which may go up or down in relation to market conditions.
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