The amount of money that we the lender may lend you.
APR stands for Annualised Percentage Rate. A lender
is always required to quote the APR rate when advertising
a loan / borrowing rate. The lender will usually also
quote the headline rate, and the APR next to it. The
headline rate states the rate of interest you pay
per month or per year on the mortgage, but the APR
calculates the total amount of interest that will
be paid over the whole term of the loan. It should
also take into account any charges which the borrower
has to pay during the loan period. The APR is therefore
always higher than the headline rate, and is a realistic
representation of the cost of the mortgage over time.
The UK's core interest rate, set by the Bank of England.
The lender’s Standard Variable Rate (SVR) is
higher than the Base Rate, but is often adjusted by
reference to it.
An agreement by members of a profession or trade to
establish a central compensation fund which consumers
can draw on in cases of fraud or insolvency.
Insurance cover which protects the holder against
damage to the property itself (although it can be
linked with contents insurance in a combined policy).
The amount insured may vary from the purchase price/valuation
of the property depending on the type of location
of the property. The valuer will usually provide a
rebuild cost for insurance purposes.
Buy To Let
The practice of buying a house or flat for investment
purposes. Income is provided by the tenants' rent,
and capital growth (if any) by the property's increasing
This is the amount of money that you borrow.
Capital and Interest
In the context of mortgages, a capital and interest
mortgage is also known as a repayment mortgage. It
involves paying all of the interest plus repayment
of a little of the capital each month; an interest
only mortgage involves only paying off the interest.
Capped Rate Mortgage
A mortgage which allows your interest rate to climb
no higher than a specified level, usually for a specific number of years of the loan.
A mortgage that provides a borrower with an immediate
lump sum payout on top of the sum borrowed to buy
the property. This has to be paid for one way or the
other, so cashback mortgages will typically be at
a higher rate than other mortgages and will usually
have early repayment charges for several years.
The final stage of the house-buying process, which
comes after exchange of contracts. The sale must proceed
after Exchange, but Completion occurs when the property's
agreed sale price (less any deposit already paid)
safely reaches the seller's bank account.
This is shorthand for compulsory insurances. Some
lenders, at least for certain mortgages, insist that
you take out their buildings insurance which needn’t
necessarily be the most cost effective on the market.
Our Mortgage Advisors will assist you to select out these
products if you wish to (although sometimes of course,
the mortgages can be so good that it outweighs the
potential disadvantage of taking the compulsory insurance).
Insurance cover which protects the personal belongings
your home contains. In the case of rented accommodation,
the landlord is responsible for insuring those contents
which he owns, but not those owned by his tenants.
Normally carried out by a solicitor or licensed conveyancer
on the buyer's behalf, conveyancing includes proving
the property is really owned by its seller, making
sure that all the loans secured on it are discharged,
establishing its legal boundaries and searching local
planning information for upcoming developments which
could affect the property's value.
A local authority charge which replaced the Community
Charge in 1993/94. Generally speaking, the more valuable
your property is, the higher your Council Tax bill
will be, although the amount for an identical property
can vary considerably between different local authorities.
In rented or buy to let accommodation, the tenants
are usually responsible for the Council tax.
County Court Judgment
If a County Court rules against you for defaulting
on a debt, that ruling is listed on your credit record.
Having such a judgment listed against you may mean
you are turned down for future loans, or be expected
to pay a higher rate than other customers. The Scottish
equivalent of an English CCJ is a Decree.
In the context of insurance, cover describes the specific
risk a given policy protects you against. Life cover
protects your family against the financial consequences
of your death. Buildings cover against damage to your
property, and so on.
Credit Reference Agency
When assessing your application, a mortgage lender
will study your credit records. These records are
held centrally by credit reference agencies, and contain
information from many different aspects of your life.
Statistical techniques are used in Credit Scoring
in order to measure the likelihood that an application
for a loan will be a good credit risk. Lenders will
use this system when making decisions about your application.
A bank account linked to a cheque book and/or debit
card. In exchange for instant access and the ability
use cheque or debit facilities, most pay little or
no interest on the balance they contain.
The interest on your mortgage is calculated on a daily
basis so that as soon as you make a capital payment,
your interest will be reduced.
This term has been replaced by Legal Charge Document.
Please see Legal Charge Document
for the definition.
In the context of mortgages, the deposit is the initial
lump sum payment which the buyer must contribute to
the property's total purchase price.
A method of saving which pays regular, usually variable
interest based on the amount invested.
These are the fees your solicitor will pay on your
behalf (these fees are passed onto you) during the
instruction of buying or selling your property –
they include: HM Land Registry fees, stamp duty and
A mortgage which has an interest rate below the lender's
standard variable rate (SVR), Bank Base Rate or Libor
rate, typically for the first few months or years
of the loan. The rate payable may move up and down,
but the discount on SVR remains constant.
Fixed-rate, capped-rate, cash-back, discount rate and other incentive
mortgages commonly carry early repayment charges
that can in some cases persist long after the initial
special rate itself has expired. This can make it
prohibitively expensive to move to a rival lender
in the first few years of the loan. Our advisors will issue you with a Mortgage Illustration, which will clearly define such charges is section 10.
A term used by lenders to describe potential borrowers'
working arrangements. Self-employed applicants are
sometimes seen as a greater risk than employees are.
But many specialist lenders and mortgages have emerged
in recent years designed specially for different
of employment status, and The Online Financial Solutions Ltd online website has a wide variety of these
in its database.
A mortgage funded by an insurance-based savings plan,
which may give you a bonus payment or additional returns
by the end of the loan's term if it performs well.
Exchange of Contracts
The terms of a property's purchase become legally
binding for both parties when contracts are exchanged.
The buyer is then committed to buying, and the seller
to selling. As a buyer, you should normally ensure
that you are covered by building insurance from this
date, because even if the property were damaged badly,
you would still have to buy it, at the contracted price agreed.
A service which offers no advice, but merely
carries out the customer's instructions.
The Online Financial Solutions Ltd is authorized and
regulated by the Financial Conduct Authority. The
financial advice on regulated and non-regulated products.
A mortgage which fixes your interest rate at a specified
level, typically for the first few years of the loan.
A mortgage which allows borrowers to make overpayments
when they have spare cash. Other features could include
the option to reduce or miss payments altogether when
times are tight, and to re-borrow any overpayments.
Not all flexible mortgages offer all of these features.
Often useful for self-employed people whose income
varies from one month to the next. The most flexible
form of mortgage is a Current Account Mortgage (CAM),
which can potentially save you money by linking your
current account and mortgage together.
With freehold ownership, you own both the property
and the land on which that property stands. (See ‘Leasehold’
also). This is the most secure and highest type of
In addition to your initial advance, this is further
borrowing against your property.
An annual fee that is paid by the leaseholder of a
property to the freehold owner of that property.
A person who promises to act as a Guarantor –
that is be answerable – for the debt of another
Higher Lending Charge - HLC
This is an insurance premium which you have to pay
for some mortgages, usually when the Loan To Value
is higher than a certain figure. It protects the lender
to some extent if you default on the mortgage for
any reason. It is important to understand that although
you have to pay the premium, the lender benefits from
any payout, and that if the payout doesn’t cover
their costs they may seek further money from you.
With many mortgages you can add the HLC to the loan,
unless this takes your Loan To Value over a certain
figure. The insurer may pursue the defaulter for reimbursement
of any monies which have been paid out in respect
of lenders claim.
A professional surveyor will carry out a survey on
a property which will result in a report stating the
condition of a property and whether or not any repairs
are necessary. This should not be confused with a
‘full structural survey’ which is generally
carried out on older properties. The Homebuyers report
will provide a reasonably detailed and informative
report and has a slightly higher outlay than a basic
Home and Contents Insurance
A joint term, referring to both buildings cover and
contents cover. The two policies may or may not be
bought from the same insurer, but buying them together
can sometimes save money or make life simpler.
In the context of mortgages, a lender's estimate of
the monthly payments you would have to make under
a particular loan arrangement, together with the costs
to set it up.
Impaired credit mortgages are specialist loans for
customers whose credit problems disqualify them from
using mainstream lenders' standard products. Some
lenders specialise in loans like these, which are
also known as adverse credit loans.
This could be an individual, a firm or an organization
which helps customers to choose a mortgage and introduces
mortgage applications to lenders. These include: mortgage
brokers, estate agents, independent financial advisors,
accountants, solicitors and life assurance companies.
A charge for the administration that is involved in
setting up your mortgage is required.
The premium which a borrower must pay a lender in
return for use of the lender's money.
Interest Only Mortgage
With a mortgage like this, your monthly repayments
cover only the interest element of the loan. You will
normally need a repayment vehicle, such as an ISA,
endowment or a personal pension, to repay the capital.
A mortgage loan funded by contributions to an Individual
Savings Account. The ISA aims to
repay the loan's capital at the end of its term, but
the interest element must be paid separately as you
go along. It's important to remember that past performance
is not necessarily a guide to future performance.
The Freehold owner of property or land allows that
property or land to be leased by a tenant for a fixed
period of time.
Legal Charge Document
The formal written document which lists exactly who
owns a property and enables transfer of a property's
ownership from seller to buyer. A mortgage lender
will record details of their mortgage on these deeds
(which means they can take ownership of the property
if you default on the loan payments).
A property agent who can help landlords locate suitable
properties for purchase, and who finds tenants to
occupy those properties and can manages the rental
process which follows.
Loan to Value
This is the amount you want to borrow divided
by the purchase price. In other words, it reflects
the size of your deposit. Generally, the lower the
loan to value, the safer the lender will view the
London Inter Bank Offered
Rate - LIBOR
The interest rate at which leading banks lend to one
another. Sometimes used as an alternative to base
rate in setting the benchmark for a tracker mortgage.
There are separate LIBOR rates for different periods
up to a year but either “1” or “3”
months LIBOR is what is normally used in setting mortgage
Lump Sum Repayment
An amount of money that you pay into your Mortgage account
on top of your normal monthly payment.
The wholesale markets in which banks and other financial
institutions lend money to one another. Mortgage lenders
often borrow money in these markets, particularly
for funding fixed rate mortgages.
A long-term loan that you secure on a property.
An agent who shops around for the best
mortgage deal on behalf of his clients. This could be from the whole market or from a limited panel of lenders.
The legal document that exists between a lender and
the borrower which secures the loan against your property.
Mortgage Payments Protection
An insurance that will help protect you against loss of
income by helping you meet your mortgage payments
if you are unable to work due to accident, sickness
If the loan amount outstanding exceeds the market
value of the property held as security, it is known
as ‘negative equity’. You should ensure
that you can afford your mortgage in the event of
house prices falling – a time when this situation
After tax has been deducted.
A mortgage repayment bigger than the one needed to
meet the loan's minimum requirements. Mortgages that
allow these without charges are often useful for people
whose type of employment means that from time to time
they receive significant bonuses or other influxes
A short break from regular mortgage repayments, sometimes
offered with flexible mortgages. This can sometimes
be a useful feature for self-employed people or others
with irregular income
The process of transferring your existing mortgage
product onto a new mortgage for your new property
In the context of insurance, a premium is the regular
sum you pay to keep your cover in force.
The process of switching your mortgage loan from one
lender to another without moving house
When you pay off the outstanding balance of your mortgage
When you switch your existing mortgage to another
A mortgage loan funded by simple monthly repayments,
calculated to repay capital and interest over
a specified term.
The means by which a mortgage loan's capital is repaid.
Examples include endowment policies, ISAs, and personal
Lenders will charge this fee for discharging a mortgage
when it has been paid in full
A local authority search is an examination of local
planning records to uncover details of any upcoming
developments near the property which could affect
its future value or existing restrictions on the site.
On taking out a mortgage the lender will register a charge against your property.
If you should default on your mortgage, the lender
can ultimately repossess your property to recover
their money. The loan is hence said to be "secured"
on the property.
Purchase price of property
Rate of SDLT
–Up to £125,000
Over £125,000 - £250,000
Over £250,000 - £925,000
Over £925,000 - £1,500,000
Example: A purchase of a house for £275,000. Under the new rules the SDLT is calculated as follows:
0% on the first £125,000 = £0
2% on the next £125,000 = £2,500
5% on the final £25,000 = £1,250
Total SDLT payable = £3,750
Standard Variable Rate
A mortgage lender's main interest rate. Fixed-rate
and discount loans usually switch to SVR when the
special offer period expires. Conversely, tracker
mortgages switch to a fixed percentage above Bank
Of England Base rate (or LIBOR).
A shorthand term for the borrower's credit record
and employment situation. See "Non-Status Loan".
Generally recommended for older properties, this is
a detailed survey carried out on your prospective
property on your behalf.
The process of cashing in an unwanted endowment policy
with the insurer who sold it to you. Doing this often
produces a poor return for the money invested to date
in the policy's early years. You should seek independant
financial advice before considering this.
An expert examination of the property you are considering
buying, aimed at discovering any structural flaws
or repairs needed which you may have failed to notice
The period of time over which your mortgage will run.
Typically 25 Years or to expected retirement date
if that comes first.
This will protect your family by repaying your mortgage
should you (or your partner, if the property is jointly
The legal right to ownership of a property
Documents that show the ownership of the property
Tracker mortgages link your interest rate to a benchmark,
such as Bank of England base rate. The rate you pay
moves up and down in line with the benchmark selected.
A mortgage repayment smaller than the regular agreed
sum. Some flexible mortgages have this feature, which
can be useful for people with irregular income.
A basic assessment of the condition and the value
of the property that you are hoping to eventually
buy; a valuation will also provide the lender with
the information they need to decide whether or not
to lend on that property.
For all your mortgage terms enquiries please call
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