Jargon Buster

Adverse Credit

This is the term used if the borrower has suffered a poor credit history. This could include previous mortgage or loan arrears, CCJs, or bankruptcy. Other terms used to describe an adverse credit mortgage include:

• Credit impaired mortgage
• Bad credit mortgage
• Poor credit mortgage
• No credit check mortgage
• No credit mortgage
• Low credit score mortgage

Agricultural Restriction

A Freehold covenant restricting the occupancy of a property to those engaged in agriculture.

Apportionment

Dividing the liability for property tax, water charges, etc., between the seller and buyer of a property.

APR (Annual Percentage Rate)

An interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the advertised rate on the mortgage because it represents the total cost of the loan. The APR allows home buyers to compare different types of mortgages based on the annual cost for each loan.

Arrangement Fee

A fee you pay to your lender in return for providing you with a mortgage. Usually paid on completion or with application, these fees typically apply when you take out a fixed rate, discount, or cashback mortgage.

Assignment

A document transferring rights of ownership from one person to another, such as an endowment policy to the building society in connection with a mortgage. Can also be the document transferring the lease on a property.

ASU (Accident, Sickness, and Unemployment Insurance)

Insurance designed to cover the borrower’s mortgage payments in case of accident, sickness, or involuntary unemployment.

Auction

A public sale of a property to the highest bidder. The purchaser must immediately sign a binding contract and should ensure that all valuations, searches, etc., are carried out before the sale.

Authority to Inspect The Register

A document from the registered proprietor of land allowing another party, such as the purchaser’s solicitor, to be given information from the register of a property.

Banker’s Draft

A method of payment that has all the appearances of a cheque but is effectively a cash payment.

Base Rate Tracker

A mortgage where the interest rate is variable but set at a premium above the Bank of England Base Rate for a period or even the term of the mortgage. The advantage is that there is usually little or no early repayment charge, and interest can be saved through overpayments.

Booking Fee

Arrangement fees charged in connection with some mortgages, often associated with fixed or capped rate loans. The fee is normally non-refundable if charged upfront, and sometimes it is added to the mortgage debt on completion.

Bridging Loan

A short-term loan to facilitate the purchase of one property before the sale of another, releasing funds required for the purchase. Professional advice should always be taken before considering bridging finance, as it can sometimes worsen financial situations.

Broker’s Fee

A fee charged by an intermediary or advisor for locating the most appropriate mortgage for the borrower.

Building Societies Association (BSA)

Represents the interests of member societies. Address: 3 Savile Row, London W1X 1AF.

Building Societies Commission

A regulatory organisation for Building Societies, reporting to Treasury Ministers.

Building Society

A mutual organisation specialising in lending money to individuals for purchasing or remortgaging residential properties.

Buildings Survey

A comprehensive inspection of the exterior and interior of a property, carried out by a professional surveyor to identify defects.

Buy-to-Let

A mortgage designed for purchasing a property to rent out. The ability to repay this type of mortgage is often based on the projected rental income rather than the borrower’s personal income.

Capital and Interest Mortgage

Monthly payments cover both the interest and the outstanding mortgage balance.

Capped Rate Mortgage

An interest rate with a guarantee that it will not exceed a certain level for a set period but will reduce if the standard variable rate falls below the capped rate.

Cashback Mortgage

A mortgage that provides a cash payment upon completion, either as a fixed amount or a percentage of the loan.

CCJ (County Court Judgment)

A court decision for unpaid debts. If paid off, a note is added to reflect this.

Centralised Lender

A mortgage lender that does not rely on a branch network for distribution.

Charge

A legal right or interest, such as a mortgage, over a freehold or leasehold property.

Charge Certificate

A document issued by HM Land Registry to the mortgagee detailing property ownership and any legal interests.

Completion

The final stage of a property sale where ownership is transferred.

Contract

A legally binding agreement for the sale of a property.

Conveyancing

The legal process of buying and selling property.

Covenant

A legal promise contained in a deed.

Credit Scoring

A lender’s method of assessing a borrower’s creditworthiness.

Debt Consolidation

Repaying high-interest debts by incorporating them into a mortgage.

Deposit

The initial payment made when purchasing a property.

Discount Rate Mortgage

A mortgage with an interest rate set below the lender’s standard variable rate for a period.

Early Repayment Charges

A fee charged for paying off a mortgage early.

Endowment Mortgage

A mortgage where repayments only cover interest, with an endowment policy used to repay the capital.

Equity

The value of a property minus any outstanding mortgage balance.

Exchange of Contracts

The legally binding stage in a property sale where contracts are signed and exchanged.

Fixed Rate Mortgage

A mortgage where the interest rate remains the same for a set period.

Flexible Mortgage

A mortgage that allows for overpayments, underpayments, and payment holidays.

Freehold

Owning both the property and the land it is built on.

Gazumping

When a seller accepts a higher offer after already agreeing to a lower one.

Guarantor

A person who guarantees a mortgage repayment if the borrower defaults.

Home Buyer’s Report

A property survey that offers more detail than a mortgage valuation but less than a full survey.

Interest-Only Mortgage

A mortgage where only interest is paid monthly, with the borrower responsible for repaying the capital at the end of the term.

LTV (Loan to Value)

The mortgage amount expressed as a percentage of the property value.

Mortgage

A loan secured against a property.

Negative Equity

When the mortgage owed exceeds the property’s value.

Stamp Duty

A tax on property purchases, varying based on the purchase price.

Term Assurance

An insurance policy that pays off a mortgage in the event of death.

Title Deeds

Documents proving property ownership.

Valuation

A basic property check to assess its worth.

Vendor

The person selling the property.