Help with mortgage language

ABI
This is the regulatory body for the British insurance industry.

Ability To Pay
A method of working out the creditworthy-ness of a customer, by estimating how much he or she will have left to make payments on a loan or mortgage after other deductions have been made from gross income.

Accident, Sickness And Unemployment Insurance
Insurance cover arranged by the borrower to protect against inability to meet mortgage payments. Unemployment cover is restricted to cover certain events only. Exclusions to this insurance include dismissal due to professional misconduct or taking voluntary redundancy. The accident and sickness cover does not cover any act of self-injury or any injury related to the use of alcohol or drugs.

Accountant
A chartered or certified person in charge of public or private accounts.

Added To Loan
The additional costs associated with arranging a mortgage that include a high loan to value fee or arrangement fees, which can be added to the amount you borrow. Fees that may be added vary by lender.

Additional Principal Payment
An extra payment each month to help reduce a debt.

Additional Security
When lending exceeds a certain loan-to-value, lenders may require additional security. The simplest form of additional security is a single mortgage loan-to-value, however other security such as cash or shares may be accepted as security.

Add-On Interest
Interest a borrower pays to the lender for the duration of the loan.

Adjustment Date
Date on which interest rates change for variable rate mortgages.

Administration Charge (General)
Any fee charged by bank or other financial institution to cover costs beyond day to day running of an account. This typically involves banks sending letters to customers to tell them they have gone overdrawn.

Administration Charge (Mortgages)
Some lenders will reserve a proportion of the fee charged for the valuation to cover their own costs. If an application does not proceed, this part of the valuation fee may not be refunded, even if the valuation has not taken place. See valuation fee.

Advance
Amount of your mortgage/loan. See also Cash Advance

Agreement In Principle (AIP)
This means you have been accepted for a mortgage or other financial product, but it will depend on issues such as a valuation report and confirmation of employment.

Agricultural Tie
The restriction placed on certain rural properties that requires the land adjoining a residence to be actively used for farming.

Alimony
see Maintenance Payments

Annual
Any payment or report which is due once each year.

Annual Bonus
A bonus paid annually on an endowment mortgage which is dependent on the performance of the investment fund being used to repay your mortgage.

Annualised Percentage Rate (A.P.R)
An explanation to identify the true cost of borrowing and a standard in order to provide a method of comparing costs of different loans. Initially mortgage lenders were not obliged to quote an APR due to its inappropriateness in comparing mortgage loans. APR was designed to reflect the cost of different types of hire-purchase contracts that were quoted on flat and fixed basis giving headline rates which were often half the APR. It is a legal requirement that a true APR figure be provided with any loan.

Annuity Mortgage
Another term for a capital & interest repayment mortgage.

Applicant
Someone who applies for a mortgage, or other financial product.

Applicant Type
A method of classifying applicants by status or other market segment. Common types for mortgages applicants might include first time buyer, self employed, or buy to let.

BACS
BACS Limited is a constituent of APACS which is the automated clearing house responsible for bulk clearing of electronic payments between bank accounts by means of a direct debit, direct credit or a standing order.

Bailiff
A court official, who may repossess goods or property belonging to any person or business which fails to maintain their credit payments, and who does not come to any agreement to pay with their creditors.

Balance Outstanding
The money outstanding on a credit card, or on any other credit arrangement.

Balloon Payment
A credit agreement in which the monthly instalments are not large enough to repay the loan at the end of the term. As a result the final payment due is the lump sum of the remaining principle.

Bank
An establishment for the custody, loan, exchange, or issue of money, authorised by the Bank of England under the Banking Act of 1987

Bank Of England
The central bank for the United Kingdom, based in the City of London. The Bank of England is responsible for setting base rates, and is currently governed by Eddie George. One of the first acts of chancellor Gordon Brown after the Labour Government came to power in 1997 was to make the Bank of England independent from the UK government, following the advice of US Chairman of the Federal Reserve, Alan Greenspan.

Bank Of England Base Rate
Prevailing rate of interest set by the Bank of England

Bankrupt
A person who has done any of the acts that by law entitle his creditors to have his estate administered for their benefit. A bankrupt person is unable to hold a bank account or apply for credit in excess of £250 without the court?s permission. Wages of a bankrupt are usually collected by a supervisor.

Bankruptcy
The process of declaring an individual bankrupt. Bankruptcy remains on credit records for seven years and limits a person?s ability to borrow.

Bankruptcy: Discharge
A debtor is discharged from bankruptcy after a period of approximately three years and his debt is treated as paid, however credit referencing agencies normally identify former bankrupts for up to 15 years after their discharge.

Base Rate
The minimum lending rate was abolished in 1981, and so the banks introduced the base rate, used to refer to the mortgage lender?s standard variable rate.

Basic Annual Income
The annual income earned that is guaranteed regardless of the individual?s or his or her company?s performance. This is important when establishing a borrower?s ability to pay, especially for sales people, or other employees where a significant part of their salary package is made up of commissions, bonuses or share options.

Basis Point
A basis point is 1/100th of 1%. For example the difference between a loan at 9.00% and a mortgage at 9.12% is 12 basis points.

BBA
Trade organisation of banks - The British Banking Association
Before-Tax Income
An individual?s total (gross) income before taxes are deducted.

Benefit Period
Time frame in which the interest rate of a mortgage is discounted. (See fixed or capped)

Billion
An ?English billion? is traditionally a million million (1 000 000 000 000), although a billion now virtually always refers to the ?American? billion, which is one thousand million (1 000 000 000).

Biweekly Loan
A loan that requires payment every two weeks, therefore reducing the term and cost.

Black Listed
Colloquial term for someone with a poor credit score, originating from Gentlemen?s clubs, which used to ?black ball? people they did not want as members. Technically, there is no such thing as being ?blacklisted?, although some people clearly have better credit scores than others. Simply being declined for a credit application does not mean that someone is blacklisted, it just means that they do not meet the criteria for that particular institution at that time.

Bonus
Any payment made to an employee as a result of good performance by the individual, a team, or the company as a whole. Bonuses can make a significant supplement to salaries, especially in sales related organisations. However, they are taxable like any other income, and are not always taken into account by lenders when making credit decisions. If you receive an unexpected bonus, make sure you allocate a reasonable amount to enjoy, and also put aside a substantial proportion for long term saving.

Booking Fee
A fee charged by a lender to secure mortgage funds, payable at the time the loan application is submitted and normally applies only to special offer loans, such as fixed or capped rates. See fee, arrangement fee, fees added to loan, conveyancing fee, land registry fees, IGP, stamp duty and valuation fee.

Branch Banking
Banking on the High Street. See telephone banking, internet banking post office banking, mobile phone banking.

Breach Of Contract
Failure to fulfil the term and conditions of a contract.

Breach Of Covenant
Failure to obey a legal agreement.

Bridging Loan
Short term loan used as coverage when buying a new property before selling an existing one.

Broker
A third party individual who attempts to find the best available financial or other package. Brokers could be affiliated with a larger network in finance, or they may be independent.

Broker Fee
A fee charged by an intermediary to the applicant for negotiating a loan. If a loan has not completed within 6 months of the date of introduction to a lender, the maximum fee that a broker may retain is £300, under the Consumer Credit Act.

Brokerage
Term used to describe the act of a broker. See broker

BSA
Trade organisation for building societies - the Building Societies Association.

Building Society

Building societies are mutual organisations owned by their members and regulated by the Buildings Societies Act. The Building Societies Commission lays down restrictions on their lending criteria, so they are less able to help with certain categories of loans.

Buildings Insurance
An essential insurance policy which covers the structure of the building. Where the property is leasehold the buildings insurance will normally be arranged by the freeholder and the cost charged on to the leaseholder within the service charges payable. See uninsurable, contents insurance.

Buy To Let Mortgage
A mortgage for a property which the owner intends to let out to students or other tenants. See commercial mortgages.

Cancellation Clause
A clause in a loan agreement that allows a lender to ask for the outstanding balance at any time.

Cap And Collar
See capped rate.

Capital
A sum of money. See market capitalisation, capital invested, capital advanced, capital employed, capital gains

Capital And Interest
A mortgage where the borrower pays an amount each month to cover the loan and the interest charged on it; also known as a repayment loan. There are two main types of capital and interest mortgage, constant net payment and gross profile.

Capital Raising
The act of remortgaging a property based on a higher value compared to the original purchase price. The capital raised is the amount left over after repayment of the original loan is deducted from the new loan. Some lenders will also take into account home improvement projects as part of the remortgage, if they are likely to significantly raise the value of the property.

Capped Rates
The mortgage interest rate will not exceed a certain value during a certain period of time, although it will fluctuate above and below the current level. Some capped products will have a ceiling and a floor between which the rate payable may move; such loans may be known as cap and collar mortgages.

Cash Back (Mortgages)
An incentive payment made by the lender to the borrower upon completion of a mortgage. Payments made as cashbacks can be treated as gifts and are subject to capital gains tax.

Cash Back Mortgages
Cash back mortgages provide you with a single lump sum of cash immediately on completion. The amount of cash is usually calculated as a percentage of the overall loan amount, though it can be a set figure. The percentage of the loan that is given as cash back can be as high as 5%, though amounts in the region of 1 to 3% are more common.

Cash Buyer
Person or persons who do not need a mortgage in order to buy a property and who do not have a property to sell.

Cash Deficit
In relation to a loan, this is money still owed to the creditor at the end of the repayment period of an interest only mortgage

CAT Standard
These are a set of standards proposed by the government aimed at ensuring a certain level of standard amongst financial products. Whilst they are a sign that a lender or provider is a reputable business and offers products that are of a certain quality, a CAT mark does not ensure that a product is the most suitable one for you.

Centralised Lender
A general term applied to mortgage lenders, but not to high street banks and building societies, who mainly operate wholly from a head office location.

Charge
Security the lender relies on when granting credit.
Circumstantial Lending
The process of lending to customers whose personal circumstances are less than ideal, due to lower income, credit problems or other issues.

CML
Council of mortgage lenders.

Collection
Steps taken by a lender to bring a person?s payments back up to date.

Commercial Mortgage
Where the loan is granted for commercial purposes, and is usually secured against commercial property, though residential property may be used. With a commercial mortgage there is a higher rate of interest, as it is a higher degree of risk for the lender.

Commission Amount
Amount of money deducted from overall price to reflect the cost of providing the service.

Completion
The moment at which all the legal formalities of the purchase or mortgage are finalised and the funds are drawn down from the lender, and usually into the solicitor?s account.

Completion Date
The official date for completion of a sale of a house, when keys are actually transferred.

Compound Interest
Interest on the interest.

Conclusion Of Missives
This is a Scottish term for exchanging contracts

Conditional Insurance
An insurance policy that has to be taken out as a condition of obtaining a loan. It must usually be taken out via the lender?s agency. See compulsory products.

Constant Net Payment
A form of capital and interest repayment mortgage, where the monthly repayments remain the same throughout the term.

Contents Insurance
This is the insurance of property within your home i.e. furniture, clothing, personal possessions etc. Whilst lenders will be keen to offer contents insurance to borrowers, it is not essential that you should have it from them, or at all. Some policies offer a wider, all-risks wording, whereas others offer much lower premiums for more basic cover. Make sure you are aware of whether your contents policy includes items in your cars, on student property, or when you are travelling; and ensure you do not end up paying twice. Contents cover is a separate type of insurance to buildings insurance, which covers the structure of your property.

Converted Flat
A flat that has been converted from part of a larger property.

Conveyancing
The legal documentation relating to the transfer of ownership of a property.

Conveyancing Fee
A fee charge by a solicitor or licensed conveyancer for arranging the necessary legal work in transferring the ownership of a property. The total cost of the legal work also includes profit cost, stamp duty, land registry fees and disbursements. See fee, arrangement fee, fees added to loan, booking fee, land registry fees, IGP, stamp duty and valuation fee.

Co-Ownership
Shared ownership, a method of purchasing property in partnership with a housing association, where the borrower purchases part of the property and rents the rest from the housing association. The minimum purchase amount is 25% of the property value, and the rest may be bought in blocks of 25%. This arrangement is ideal for those whose personal circumstances prevent them from being 100% homeowners.

County Court Judgment (CCJ)
A county court judgment is a judgement for debt in the county court. This debt does not appear in the credit register if this debt is settled within 30 days of the date of the judgement. Very few lenders are willing to offer loans to anyone with an outstanding or unsettled judgement, and even if the judgement has been settled many lenders are likely to refuse a mortgage or other credit application.

Credit (Borrowing)
The process whereby a financial institution lends a sum of money to an individual or a business entity for the purpose of (a) house buying [a mortgage], (b) a major purchase (a loan), (c) general expenses (a credit card or overdraft).
Credit Agencies
Companies used by lenders to establish the financial situation of an individual or company.

Credit Averse
If a borrower has been bankrupt or has outstanding county court judgements they would be described as credit adverse.
Credit Check
Where an enquiry is made on the credit history of an applicant, normally by reference to one of the major credit agencies such as Equifax, CCN or Westcott Data.

Credit Checking Agency
A service used by lenders to establish a level of risk involved in leading money.

Credit File
A record held by a credit reference agency on an individual or a company. You can inspect your own credit file by writing to the agencies.

Credit History
The history of a borrowers financial record.

Credit Limit
The maximum amount of borrowing allowed on a credit card at any one time.

Credit Rating
Rating used to establish risk involved in lending money. This is used in conjunction with credit history and financial status.

Credit Reference Agency
Companies that hold credit information one file.

Credit Scoring
A generalised way of assessing the credit application, carried out by scoring the answers given on an application. It is important that there are no missing answers on an application otherwise the result for the question becomes a negative.

Credit Worthy
A description of someone who is deemed by a lending institution to be a low risk to lend to (colloquial term). As with blacklisting, there is no such thing as a ?perfect credit score?, or someone who is ?completely credit worthy?, as there is always some element of risk involved when loans are made, and different institutions use different criteria when evaluating such risk.

Creditor
Person or company to whom a debt is owed.

Criteria
A lender?s (or other financial provider?s) standard terms and conditions for acceptability of credit or other applications. These will differ according to the financial product being offered. For non-credit applications, criteria might include being a UK tax payer (for ISA?s), or certain age ranges for young persons? accounts.

Critical Illness Insurance
Insurance cover for major illness, diseases and other potentially fatal medical conditions.

Daily Interest
Where interest is applied on a daily basis instead of the usual monthly time frame.

Data Protection Act (1988)
Regulations introduced to protect the transfer of personal data within and between different organisations. Remember that every time you apply for a store loyalty card, credit facility or magazine subscription, you are handing over substantial amounts of personal data for organisations to trade in. Whilst this data may enable them to make special offers which ?may be of use to you?, it also means more opportunity to sell you products or services you would not otherwise have bought. If you are not the kind of person to say no easily, make sure you always tick the ?no marketing material? box.

Debt
Funds owed to lender.

Debt Consolidation
Replacing a number of existing loans with a single loan from a new lender which may reduce your monthly payments by spreading out a larger loan over a longer period of time, and reducing the interest rate being paid.

Debt-To-Income Ratio
A method used by lenders to establish is a person is qualified to receive a mortgage or loan.

Deducted From Loan
Replacing a number of existing loans with a single loan from a new which may reduce your monthly payments by spreading out a larger loan over a longer period of time this may also reduce the interest rate.

Deed
This is the document that proves you own the property. It will also show any land boundaries

Deed Of Covenant
The document expressing the terms of a covenant (a binding agreement), which may typically be imposed by a lender to restrict certain activities, such as use of a house for commercial purposes, or sub-letting.

Deeds Release Fee
This fee is charged by the lender for releasing the deeds of the mortgaged property and returning them to the owner or his solicitor, usually when the mortgage has been repaid.

Default
When a payment or a series of payments are missed.

Default Notice
A letter served by a creditor to the borrower to say that a credit agreement has been breached, and that action must be taken by the individual to prevent the creditor seeking repayment via a County Court Judgement.

Deferral Period
A time period on a loan during which no repayments need to be made. This is particularly popular with student and graduate loans, to enable young people to finish their studies, or to travel, before having to start making repayments. ?Buy now, nothing to pay until next year? type offers in furniture and other stores also operate with deferral periods.

Deferred Interest
A type of loan where some or all of the interest owed by the borrower is added to the amount outstanding which therefore causes the borrower to owe much more than originally borrowed.

Delinquency
Not making payments at the correct time.

Delinquent Loan
A loan whereby the borrower is behind on payments. If payments are not brought up to date within a set time frame the lender may foreclose proceedings.

Dependant
An individual who depends financially on another person.

Direct Lenders
Lenders who operate on lower overheads, through use of call centres, mailing houses, or internet based operations, instead of an expensive branch-based network. Although direct lenders.

Discharged Bankrupt
Person whose period of bankruptcy has ended.

Discharged CCJ
A county court judgement that has been paid.

Disclaimer
Any written notice designed to discharge liability of a company, for providing inaccurate information in a leaflet.

Discount Period
Time period in which reduced payments are offered.

Discount Purchase Price
The price of a property which has been reduced below the open-market value, such as in the case of a right-to-buy purchase or a builder?s discount. Under right to buy legislation, properties are not offered at the open market value, but at a discount, and if the property is resold within a three-year period, some or all of the discount will have to be repaid.

Discount Rate
The mortgage interest rate is lower than the current normal standard variable rate, but only for a certain period of time. Usually shown as a fixed percentage reduction to the lender?s normal variable rate e.g. 2.00% discount for 2 years.

Draw Down Facility
An additional borrowing opportunity that is agreed with a lender but the amount of which has not yet been lent to the borrower. These may be used either to guarantee the availability of future money for a specific purpose such as home improvements, or simply to give the borrower access to further funds without additional checks on their ability to make payments.

DSS Payments
Income received from the department of social security towards the payment of mortgage or rent. They are used by a lender only in exceptional circumstances to confirm ability to service a loan. Benefits are only paid after the first 39 weeks of an income support claim.

Early Redemption Payment
Penalty charged by a lender for withdrawing from a mortgage before the date specified in the mortgage conditions. These penalties are usually associated with fixed or discounted loans.

Early Repayment Period
Period in which charges are levied by the lender when the mortgage loan is repaid before the end of the full term.

Earned Income
Income that is earned from employment, as opposed to investment income from property or securities.

Effective Gross Income
Total income, including extra income that the lender considers when assessing a loan application, such as bonuses, rent payments, alimony or share dividends.

Employed
Refers to a person who has an open-ended contract of employment and has income tax and National Insurance contributions deducted from their salary.

Employee
A person who works for a company, government body, or other organisation, as opposed to someone who does not work (un-employed), or someone who works for their own company (self-employed).

Employer
Any business, government body, or other organisation which has one or more staff members.

Employer's Reference
A written statement from an employer confirming the borrower?s employment, giving details of salary and length of service. This is essential in assessing an employee?s ability to repay the mortgage.

Employment Status
The individual?s employment position. That can be either employed, self-employed or unemployed; full time or part time.

Endowment
A life assurance policy into which you pay monthly premiums. The proceeds are free from all taxes as long as the policy conforms to all the qualifying rules. See also: with profit, unit linked, unitised with profits.

Equity
The share that you own in your home, i.e. The property value less the mortgage loan outstanding.

Equity Appreciation
Increase in the equity you have in your home.

Exclusive Products
Particular mortgage lenders fund and administrate certain mortgage products that are only available whilst such mortgage products are funded and administered by a particular mortgage lender, they are available only from certain mortgage brokers or other particular distribution channels.

Existing Liabilities
Loans and other repayments which are taken into account by lenders when you apply for a mortgage.

Extended Redemption Penalty
When a redemption penalty continues beyond capped and fixed rates.

Extension
An addition to any existing property in order to provide more space. Major extensions should always be drawn up by an RIBA registered Architect, and will require planning permission from the relevant local authority. See also: overdraft extension

Fee
The amount charged by a lender, broker or other middleman for arranging a mortgage or property purchase. See arrangement fee, booking fee, Conveyancing fee, land registry fees, fees added to loan, IGP, stamp duty and valuation fee.

Fee Indemnity Guarantee Premium (IGP)
Fee indemnity guarantee premium (IGP) an insurance premium which insures the lender against any loss of money, e.g. If you default on your loan or get repossessed. This usually applies only if you borrow more than 70 per cent of the price asked for the property you are buying. Even though you have to pay for the insurance premium, it does not mean that you are covered by the insurance, the lender is.

Fees Added To Loan
The additional costs that are associated with arranging a mortgage and are incorporated into the amount you borrow, they may include indemnity guarantee premiums and arrangement fees. These fees that may be added vary with lender, and therefore care should be taken when the sum of the loan and any costs added to the loan may cause the total advanced to exceed a given loan to value ratio. See fee, arrangement fee, booking fee, conveyancing fee, land registry fees, IGP, stamp duty and valuation fee.

Feuhold
This is the equivalent of a freehold under Scottish law.

First Charge
A legal charge used to secure the main mortgage. A lender with a first legal charge over a property has a first call on any funds available from the sale of the property. See also: second charge.

First Time Buyer
A person that is purchasing a property for the first time. Some lenders offer preferential lending terms to first time buyers. A borrower who has owned a property before but has sold this prior to buying again may be offered first time buyer terms by some lenders but this is dependent on the lender.

Fixed Rate Loans
Offer a fixed rate of interest for a set time frame.

Fixed Rates
A loan where the initial payments, for a certain period of time, are based on a specific interest rate. The rate payable will not change during that period regardless of changes in the lender?s standard variable rate.

Flat Over Shop
Residential habitation situated above retail premises. Some lenders will not lend on this type of security because it is seen as having limited appeal to prospective purchasers and therefore have a lower value compared to an otherwise similar property. Any property that is located above commercial property usually takes longer to sell than properties which do not have any commercial element. A flat above a take-away restaurant is more difficult to arrange a loan on than a flat above a book shop.

Flats
A self contained flat that has been converted out of part of a larger property, is known as a converted flat. A flat which has the freehold of the land on which it is built, is known as a freehold flat. A flat designed and build as such; a self contained residential unit contained within a larger structure containing several self contained units or flats all sharing a common entrance, is known as a purpose built flat a studio flat, is a flat comprising a single habitable room, plus bathroom and possibly separate kitchen. Many lenders will not lend on these properties as they are considered more difficult to resell.

Flexi
An abbreviation for flexible. Flexible mortgages are offered by some lenders and allow you to make overpayments in order to repay the mortgage early or save for a special event.

Foreign Currency Mortgage
It is now possible to get a mortgage for your property in the UK in a mortgage denominated in a foreign currency. It sometimes gives you the opportunity to borrow money at a lower rate of interest than is possible in the UK.

Fraudulent
Deception or dishonesty.

Freehold
Land or property which is owned outright, as opposed to leasehold where the owner has the right to occupy the land or property for a given period of years only. See also: Feuhold.

FSA
Financial Services Authority

FTB
FTB see first time buyer

Full Status
A loan where complete checks are made on the borrower?s credit history and income.

Full Structural Survey
This is very important it will tell you if there is any problem or faults with the property you are buying.

Gearing
Corporate borrowing. A company with high gearing has a substantial exposure to debts.

General Conditions
A number of standard rules and conditions that apply to a mortgage, and are presented to the borrower in booklet.

Ground Rent
When you are a leaseholder you will probably have to pay ground rent to the person that owns the land you property stands on.

Guaranteed Earned Income
Is income that you receive along with your basic salary that is not part of your normal basic pay under the terms and conditions of your employment but which you are guaranteed to receive.

Guarantor
Is a person who agrees to guarantee that a loan will be paid. The guarantor is therefore fully liable for the repayment of the borrowed amount should the borrower default.

High Lending Charge
This is an insurance your lender takes, to cover them self?s in case you don?t pay and they need to repossess you property

High Loan To Value Fee
An insurance premium which insures the lender against any loss of money, should you default on your loan or get repossessed. This only usually applies if you borrow more than 75 per cent of the price asked for the property you are buying. You are not covered by the insurance premium, even though you have to pay for it, the lender is. This is also known as indemnity guarantee premium.

High Street Lenders
Mortgage providers based on the high street. These are mainly banks and building societies.

Holiday Home
A property that will not be your main address or place of residence.

Home Equity Loan
A method releasing capitol from people homes.

Home Improvements
Work carried out to improve your home. Previously mortgage interest relief was given on loans for home improvements in the same way as for house purchase. Loans taken out before its abolition still receive this relief but this is lost if you move lender.

Homebuyer's Report
A less stringent report than a full structural survey.

Homebuyer's Valuation Fee
This is the fee paid for a full thorough, inspection of the property you are thinking of buying. This is frequently referred to as an option valuation fee.

House Or Flat Buyer's Report
A more thorough survey than the simple valuation carried out on the property by the lender. If your lender does not offer this as an alternative to the basic valuation, you can negotiate with the surveyor carrying out the valuation for the fuller inspection and this may cost you less than a separate inspection.

Housing Association
A body of trustees or company that is established for the purposes of providing, building, improving or managing, or facilitating, or encouraging the construction or improvement of, housing accommodation. It does not trade for profit. Anyone wanting help with housing puts his or her name down on the housing association list which acts in the same manner as council house lists.

IG Premium
An insurance premium which insures the lender against any loss of money. This usually applies only if you borrow more than 70 per cent of the price asked for the property you are buying. Even though you have to pay for the insurance premium, you must remember that you are not covered by the insurance, the lender is.

Indemnity Guarantee Premium (IGP)
An illustration is an example of the monthly cost of a mortgage and other expenses associated with the loan such as set-up costs.

Illustration
Specialist loans for those aren?t applicable for standard loan products.

Impaired Credit
Is a way of motivating the people to take out a loan with the lender by offering deals such as cashbacks

Income
Provides protection if you are unable to make payments on an outstanding agreement.

Income Protection Insurance
Third party conformation of income.

Initial Rate
The payment of interest to cover the period between the date of completion and the normal date from which an interest payment is due. For example if mortgage payments are normally due on the 30th of a month and the loan completes on 14th march, the first monthly payment may be due one month from 30th march, on 30th April. Any interest due for the period from completion until 29th march will be due with the initial mortgage payment. Therefore, the borrower?s first mortgage payment will normally comprise one full month?s payment plus the initial interest.

Insurance
Accident, sickness & unemployment (ASU) insurance cover arranged by the borrower to protect against inability to meet mortgage payments. This cover should more accurately be described as accident sickness and redundancy insurance as unemployment cover is generally seriously restricted to cover only events that are entirely beyond the control of the insured person. Typical exclusions include dismissal following professional misconduct and any act of voluntary redundancy. The accident and sickness cover will also be subject to major restrictions such as any act of self-injury or any injury related to the use of alcohol or drugs. Buildings insurance covers the structure of the building, which you must have. Where the property is leasehold the buildings insurance will normally be arranged by the freeholder and the cost charged on to the leaseholder within the service charges payable. Conditional insurance policy that has to be taken out as a condition of obtaining a loan, which normally must be taken out via the lender?s agency. Contents insurance this is the insurance of property within your home i.e. Furniture, clothing, personal possessions etc. As distinct from the buildings insurance. Whilst lenders will be keen to offer contents insurance to borrowers, it is not essential that you should have it. Some policies offer a wider, all-risks wording. General insurance companies identify different types of insurance policy as falling into different branches. For instance the life branch covers the insurance of people and is generally known as life assurance. The insurance of property is known as personal lines. Payment protections see accident, sickness and unemployment insurance. Personal lines see general insurance. Terms simplest form of life assurance. The insured person or persons are covered against death within a fixed period subject to the payment of the premiums, which is normally monthly or yearly. If an insured person dies within the policy term the sum assured is paid out. If all insured persons survive the term the premium has been spent and the insurance ends with nothing being paid to the policyholders.

Interest Only
Mortgages where you pay off the interest only.

Interest Only Mortgage
A loan where only payments of interest are paid to the lender during the term of the loan. All mortgages other than capital and interest repayment loans are a form of interest only loan. Some lenders will allow loans to be set up without any specific provision to repay the capital at the end of the period this is known as a pure interest only loan.

Interest Rate
Percentage of your loan that a lender charges each year for lending you money.

Intermediaries
Broker or person who attempts to sort and arrange financial packages for you.

Introducer
Person who introduces a loan to a lender.

Irregular Earned Income
This is any additional income over the basic salary that is of an unusual nature; additional payments to which the employee may be entitled but which are not received on a regular basis.

IVA
Individual voluntary arrangement (IVA)

Joint Application
A mortgage application that involves more than one person as the borrower.

Joint Liability
Two people who are responsible for a loan or debt.

Maisonette
A property comprising of more than one separate living area; used to describe a flat which extends over more than one floor or a flat that has its own entrance at street level.

Mandatory Products
Compulsive items in the financial package that you are purchasing.

Monthly Repayment
This is the amount you pay our lender each month toward the cost of the credit they have given you

Mortgage
The name given to credit used to buy property or loan secured by land.

Mortgage Deed
Legal document establishing a loan on property.

Mortgage Indemnity Guarantee
See high loan to value fee.

Mortgage Subsidy
A payment made by an employer to subsidise the cost of interest payments on a home loan. The amount and extent of the subsidy will vary from employer to employer and these can be calculated in a variety of different ways.

Mortgage Term
Is the length of time before the mortgage loan must be repaid.

Mortgage Payment Insurance (MPI)
This is an insurance cover to protect your mortgage payments.

Negative Equity
A situation that occurs when the amount loaned against a property is in excess of the market value of the property.

Net Profit
The income of a company or self employed business after making full allowance for the expenses of running the business. This should be the amount available to the owners of the business for their own benefit. It is the figure that can be used to calculate their ability to service a mortgage.

Net Profit Declining
This is where the net profit from a business decreases from one year to the next. Many lenders will not lend in this situation, as in the near future, the business may be unable to provide sufficient income to cover the cost of loan repayments. Capital raising remortgages are especially avoided in this situation as the borrower may be seeking funds to shore up a failing business.

New Build
Refers to new properties developed on green field sites. Can refer to a single property or whole estates.

Non Status
A loan granted without making enquiries as to the borrower?s income or credit history.

Not In Employment
Unemployed not in employment or receiving any regular salary.

Notice Of Default
A lender?s initial contact when you have fallen behind on your credit repayments.

Open Market Value
The value of a property on the basis of a willing buyer and willing seller in the open market allowing for a reasonable period for sale.

Other Income
This is income in addition to basic annual salary or, in the case of self-employed, annual net profits.

Outgoings
This includes existing liabilities and, or your debts, other than an existing mortgage such as hire purchase, personal loans, school fees etc.

Outstanding Balance
The amount that is outstanding on your credit

Outstanding Discount
For property purchased under the right to buy scheme at a discounted price, the value of the discount, or a portion of it, that has to be repaid to the local authority if the property is sold within a certain period of time, normally 3 years from date of purchase.

Overpaid Funds
The amount you have paid over your normal payments

Part & Part
A generic phrase referring to a loan, where part of it is interest only (i.e. The capital never declines) and the remaining part being repaid as under capital & interest arrangement.

Part Endowment
A mortgage that is arranged partly on an endowment basis, the balance of the loan most commonly being arranged on a capital and interest basis.

Payment Default
If you default on your credit repayments, the lender is entitled to repossess your house to recover the debt.

Payment Method
A means by which the mortgage capital is eventually repaid.

Payment Protection
See accident, sickness and unemployment insurance.

Payment Protection Insurance
See ASU accident, sickness and unemployment insurance.

Payment Schedule
A schedule of monthly payments under a loan

Payment Shock
If you have taken out a mortgage on a low rate, the low rate end and the payment jump up the standard variable rate.

Pension Mortgage
An interest-only mortgage where the capital will be repaid from the tax-free cash sum that can be received from the pension fund at maturity.

Percentage Advance
The size of the credit expressed as a percentage to the value of your property

Period
The length of time for which, or end date until, the initial interest rate applies.

Portable
Describes a mortgage that can be transferred from one property to another. This most commonly applies to loans in the category of treasury product.

Previous Lender's Reference
A reference from a lender who has previously lent money to a prospective borrower regarding the conduct of the loan account.

Prime Rate
The best interest rate possible to the lender?s most valuable customers.

Product
A mortgage product offered by a lender.

Prospective Earnings
The anticipated yield which shareholders can expect based on the profit forecast

Protection Products
A policy that protects you from events such as unemployment, injury. The policy can cover both medical and financial maters

Purchase
The acquisition of a property.

Purpose Built Flat
A flat designed and built as a self contained residential unit within a larger structure all sharing a common entrance.

Quotation
A detailed document itemising costs, fees etc. Which will be incurred in taking out the specified loan.

Quotation Regulations
Advertising regulations these are the rules laid down under the consumer credit act 1974 and controlled by the secretary of state. The advertising regulations control all loan advertising and are enforced by local trading standards officers.

Quotations
A quotation is a list of costs involved in the loan on repayment.

Redemption
This is paying off the mortgage, either to move to another property or at the end of the mortgage term.

Redemption Charges
These are any charge levied by the lender when the mortgage loan is repaid before the end of the full term. See also early redemption penalty.

Redemption Statement
The outstanding amount to be repaid on an existing credit arrangement.

Redundancy Insurance
An income protection that covers you in case you are made redundant, it give you a tax-free income.

Redundancy Insurance
This is also known as accident, sickness and unemployment insurance this insurance cover that is arranged by the borrower to protect against the inability to meet mortgage payments. This cover is generally restricted to cover only events that are entirely beyond the control of the insured person. Typical exclusions include dismissal following professional misconduct and any act of voluntary redundancy.

Refinancing
This is where borrowings are rearranging with a different lender, usually to receive more attractive terms or to raise fresh capital.

Regular Earned Income
This is a payment which is not guaranteed but is still a regular part of an employees remuneration. Lenders will normally ask for evidence of such payments being made on a regular basis, e.g. Payslips or p60s covering a period of months or years. See also: guaranteed income.

Regulated Loan
A loan of under £15,000 regulated under the terms of the consumer credit act.

Remortgage
The arranging of a loan on a property in which the borrower already resides. Normally this involves redeeming an existing loan on the property.

Remortgage With Outstanding Discount
This refers to a property that was purchased under a right to buy legislation, where the owner wishes to remortgage whilst there is still an outstanding discount remaining.

Rent Allowance
This is a payment received from an employer to be used towards the cost of accommodation.

Repayment
This is payment made to cover interest or reduction in principal of a loan.

Repayment Period
The amount of unpaid credit on your loan

Repayment Plan
If you fall behind on your payments a lender may try to renegotiate your repayment plan.

Repayment Term
The timer frame that the borrower must repay the lender

Restructured Loan
When a lender offers renegotiated terms.

Right To Buy
This is an option for council tenants to purchase the property in which they live in. The property price is often at a discount, proportional to the length of occupancy.

RTB
This is another name for right to buy and an option for council tenants to purchase the property in which they live in.

Salary
The amount of money you are paid by your employer.

Schedule Of Payments
Schedule of monthly payments under a loan sealing the fee see discharge fee.

Search Fee
Before you buy your property you have to check with your local authority that there are no plans that will effect the value of your property

Second Charge
A legal charge that ranks behind a first charge, possibly to secure a second mortgage, or a guarantee given to secure other borrowings.

Second Home
An alternative to your main residence which is subject to capital gains tax! See also: holiday home.

Second Mortgage
A further loan on a property which ranks after the first charge mortgage.

Secured Loan
A loan that is secured using your property.

Self Build
A property, the construction of which is controlled by the borrower; not a finished unit. Loans on self build properties will normally be advanced in stage payments and are subject to strict limits on loan to value. A qualified architect will need to be involved.

Self Certification
A mortgage loan where the borrower makes a statement of his or her income and the lender makes fewer checks than normal on the accuracy of this statement.

Self Employed
An individual working on own account. For mortgage purposes this will include partners in unlimited liability businesses and professional practices.

Semi Commercial
A property that has at least part commercial use. A semi-commercial mortgage is a loan on security that is not entirely used for residential purposes, e.g. A shop.

Shared Equity
A method of property purchase in partnership with a builder (vendor) who offers an incentive for the prospective buyer by accepting, say, 95% of the purchase price to be paid on completion and the other 5% to be paid at some stated time in the future. The builder will normally register a second charge on the property until the remaining 5% has been paid. The 5% owing may be on an interest free basis or interest may accrue and be added to the debt. Unlike shared ownership, there is not normally a monthly payment commitment.

Shared Ownership
A method of property purchase in partnership with a housing association. The borrower purchases part of the property and rents the remainder from the housing association. Also known as co-ownership, this arrangement is designed for people who could not otherwise become homeowners. Under most arrangements, the minimum purchase amount is 25% of the property value with the remainder available to be purchased in blocks of 25%.

Simple Valuation
This just tells you the value of the property, it does not tell you if it is structurally sound.

Sitting Tenant
A person having a legal right of occupation, even if the property changes ownership, and who is able to apply to the local authority to set a fair rent. Properties with sitting tenants are generally worth at least 30% - 40% less than their open market value with vacant possession.

Sole Occupancy
A property that is occupied by the borrower and his or her immediate family only. No paying tenants are in residence.

Special Conditions
Specific terms, usually outlined on the mortgage offer document, that apply to a particular loan offer.

Special Status Or Non Status
Where the individual is unwilling or unable to provide the necessary documentary evidence of income and status.

Stabilised Rate
A mortgage where a notional rate is set designed to be a true reflection of the likely average rate over a period. The borrower makes payments each month based on this rate, but the rate charged to the account may vary in line with market conditions. These products are designed to protect borrowers from wildly fluctuating interest rates.

Stamp Duty
All property purchases over £60,000 is taxed 1% by the government. See fee, arrangement fee, fees added to loan, booking fee, conveyancing fee, land registry fees, IGP and valuation fee.

Stamp Duty (Property)
If your property costs more than £60,000 or more you will have to pay a tax called stamp duty, this tax rises as the cost of the property goes up.

Standard Variable Rate
A detached, semi-detached or terraced house or bungalow.

Standing Order
The rate that many mortgages revert to after the introductory offer.

Structural Survey
The widest form of inspection that can be undertaken by a chartered surveyor. In the case of properties with movement, lenders may require a structural engineer?s report. This is a different type of survey carried out by a chartered building engineer and should not be confused with a structural survey.

Studio Flat
A flat comprising a single habitable room, plus bathroom and possibly separate kitchen. Many lenders will not lend on these properties as they are considered more difficult to resell.

Subsidy (Mortgage)
A payment made by an employer to subsidise the cost of interest payments on a home loan. The amount and extent of the subsidy will vary from employer to employer and these can be calculated in a variety of different ways.

Sum Assured
The maximum amount payable under a policy of insurance. If an insurer feels that a policyholder has not declared the full value of goods at risk and a claim occurs, the insurer may reduce the claim by applying average.

Survey
An inspection carried out for the benefit of the mortgage lender to make sure that the property forms a good security for a loan. This inspection and should not be relied upon on when deciding whether to purchase a property or not. Purchasers should be advised to obtain either a house or flat buyer?s report or a full structural survey before proceeding with a purchase.

Survey Fee
See valuation fee, home-buyer?s survey fee.

Telegraphic Transfer
The electronic transfer of money.

Term
The mortgage term is the length of time before the mortgage loan must be repaid.

Term Assurance
This is the simplest form of life assurance. The insured person is covered against death within a fixed period depending up on the payment of the premiums. If an insured person dies within the policy term the sum assured is paid out. If the insured person survives the term the premium has been spent and the insurance ends with nothing being paid to the policyholders.

Thatched Roof
Insurers will normally impose special terms for fire insurance on thatched properties. It is advisable to check that full fire cover is available with an insurer acceptable to the lender before proceeding.

The Council Of Mortgage Lenders (CML)
This board publishes many booklets on buying property and ways to protect the borrowers.

Tied Agents
Most advisers and agents have access to mortgages that you would not normally find on the high street. They may be part of a particular financial organisation or estate agent. Therefore they are not fully independent.

Timber Framed
A method of house construction. Timber framed properties have traditionally suffered from poor damp-proofing and so this restricts the number of lenders willing to accept them as security.

Top Up Loan
A form of second mortgage, used to provide an overall loan in excess of the loan to value ratio allowed by the primary lender. Top up loans will invariably be charged at a higher rate than the first mortgage.

Typical APR
An example of the annual percentage rate for a given mortgage product.

Unemployed
Where the individual is not in employment or receiving any regular salary, not self-employed.

Unencumbered
A property that is owned without borrowing or other legal charge over it.

Vacating Fee
This fee is charged on the release of a property title deeds following redemption of a mortgage advance.

VAL
Is an abbreviation for the term valuation.

Valuation
A surveyor comes out and values your property.

Valuation Fee
A fee paid by the borrower for the lender?s inspection of the property. This is normally paid on application. See fee, arrangement fee, fees added to loan, booking fee, conveyancing fee, land registry fees, IGP, and stamp duty.

Variable Rate
An interest rate that will vary over the term of the loan, normally in line with the general cost of borrowing.

Verification Of Employment
Most lenders will contact your employer to confirm you work their and your pay.