Advance
This is the mortgage amount.
Annual Percentage Rate (APR)
This is the figure that tells you the total cost of a loan. It takes into account the amount of interest you pay, most other charges, and when and how often interest and charges must be paid. The APR is a yearly percentage cost which is always worked out in the same way so you can compare costs. A loan with a high APR will cost you more than a loan with a low APR.
Arrangement Fee
A charge by the lender or broker to cover the cost of administrative work involved in setting up your mortgage.
Arrears
Mortgage or rent payments that haven’t been made by the date you agreed in your contract. (missed payment).
Bankruptcy
An order made under the Insolvency Act 1986 against an individual debtor (not a limited company) which signifies that he/she is unable to pay his/her debts. As a result of bankruptcy, bankrupts cannot trade or act as a company director.
Base Rate
The rate of interest set by the Bank of England, reviewed on a monthly basis.
Buy to Let
Buying a property for the sole purpose of renting it out.
CCJ
County Court Judgement for a debt in the County Court. If you have not settled in full within 28 days of the judgement, your CCJ should appear on every credit search made about you for the next six years. Payments made after 28 days will be shown in the register as being satisfied as long as the credit agency receives a satisfaction certificate.
Completion
The final stage in the purchase of a property or remortgage of a property.
Conveyancing
The legal process of buying and selling a property.
Credit Check
An enquiry about your credit status. It will show details of your credit history and information about credit agreements you may have with other organisations. Two of the largest UK credit reference agencies are: Experian, Consumer Help Service, PO Box 8000, Nottingham, NG1 5GX and Equifax, Credit File Advice Centre, PO Box 1140, Bradford, BD1 5US.
Defaults
Payments on a credit agreement that haven’t been made according to a creditor’s payment requirements. Over time, defaults can lead to County Court Judgements.
Discount Rate
Your payments are variable, but they are set at less than that lender’s standard rate for the mortgage product for a period of time typically 2 to 3 years. At the end of the period, you are charged the lender’s standard rate for the particular mortgage product.
Early Repayment Charge
Early repayment charges may be payable if you pay off all or part of your mortgage before the end of the mortgage term.
Endowment
A long-term savings and investment policy (that may be linked to a mortgage) intended to produce a lump sum to pay off the capital at the end of an interest-only mortgage.
Equity
This is the amount of money you would have if you sold your home. To calculate this, subtract the value of your outstanding mortgage and any secured loans from the current value of the property.
Fixed Rate
Your payments are fixed for a period of time typically this ranges from 2 to 5 years. At the end of the fixed rate period you are charged the lender’s standard rate for the particular mortgage product.
Freehold
Ownership of the property and the land it’s on.
Higher Lending Charge
If the amount you borrow is more than say 90% of the value of the property, you may be charged a higher lending charge.
Individual Voluntary Arrangement (IVA)
An IVA is a less formal alternative to bankruptcy, and its flexibility will vary from case to case. An IVA will enable an individual to pay the whole of the debt or a part over a period of time. It is a way of working with your creditors to achieve a way forward rather than suffer the stigma of bankruptcy.
An IVA is a formal insolvency procedure and was a new concept introduced by the Insolvency Act 1986. It was designed to be an alternative to bankruptcy in that the debtor could avoid bankruptcy or alternatively have a Bankruptcy Order annulled through a voluntary arrangement.
Leasehold
You own the property but only have permission to occupy the land for a set period.
LIBOR
This is the ‘London Interbank Offered Rate’ and is the rate at which banks borrow and lend money to each other.
Loan to Value
The mortgage expressed as a percentage of the value of the property. For example, if you have a mortgage of £85,000 on a property worth £100,000, then the LTV would be 85%.
Mortgage
A mortgage is a loan secured against the value of your home.
Negative Equity
When your home is worth less than the value of the outstanding loan secured on it.
No Credit History
If you have no previous or existing credit agreements it may be difficult to obtain credit or a mortgage because lenders are unable to assess whether you are a reliable payer or a good risk.
Remortgage
When you take out a new mortgage without moving home.
Repossession
When you fail to keep up with repayments on a mortgage or remortgage, a lender can take possession of your home and sell it to recover the debt owed.
Right to Buy (RTB)
Under the Right to Buy scheme, you may be able to buy your council property at a price lower than the full market value. This is because the length of time you have spent as a tenant entitles you to a discount.
Self Employed
An individual who operates a business or profession as a sole proprietor, partner in a partnership, independent contractor or consultant.
Stamp Duty
Band Normal Additional Property
Less than £125K 0% 3%
£125K to £250K 2% 5%
£250K to £925K 5% 8%
£925 to £1.5M 10% 13%
All over £1.5M 12% 15%
Valuation
An assessment of the value of the property to confirm it is suitable security for the lender.
Variable Rate
Your payments go up and down as the mortgage rate changes (mortgage interest rates tend to move in line with the base rate set by the Bank of England, but there is sometimes a delay). Lenders set their own standard variable rates of interest.