Glossary - Mortgaging Financial Jargon Explained

Below is an easy to understand breakdown of all the major abbreviations, their definitions and legal jargon ...

• ADVANCE
  Used to describe the amount of money the lender agreed in order to purchase your property.
   
• APR (Annual Percentage Rate)
  Shows the true, total cost of borrowing and allows you to compare offers from different lenders, as the APR translates the interest rate together with related set-up costs into an equivalent annual interest rate.
   
• ASU
  Accident, Sickness and Unemployment also referred to as MPPI - Mortgage Payment Protection Insurance. This is an insurance policy designed to provide a regular income to pay the mortgage, should the borrower become unemployed or be unable to work due to an accident or sickness.
   
• BASE RATE
  The Bank of England base rate, set by its monetary policy committee every month, determines lending rates in the UK. Directly or indirectly, all mortgage rates are linked to the present or past base rate.
   
• CAPITAL
  The amount you have borrowed on your mortgage and on which interest is charged.
   
• COMPLETION
  The point at which the money to buy your new home is released to the seller and ownership is legally transferred to you and you can then move in.
   
• CONVEYANCING
  The legal side of transferring ownership of a property from one person to another. It deals with obtaining the title deeds from the seller, negotiating and agreeing the contract for buying your home as well as the mortgage deed etc.
   
• CREDIT SCORING
  A process used by some, but not all, lenders to determine whether you are a good risk to offer a mortgage too.
   
• CREDIT SEARCH
  This is a search your lender will carry out to determine whether you have any CCJ, Defaults or outstanding credit card bills.
   
• DEPOSIT
  The amount of money you put towards the purchase of the property.
   
• EQUITY
  The total value of your property less the amount of any outstanding loans secured against it. i.e. if your house is worth £100,000 and you have a mortgage of £65,000, you have £45,000 equity.
   
• FREEHOLD
  The term used to indicate ownership of a property and the land on which it stands where both belong to the owner indefinitely.
   
• GAZUMPING
  This is where the seller accepts an offer and agrees the sale only to accept a bigger offer before exchange of contracts has taken place.
   
• INTEREST
  The money you are charged for borrowing.
   
• LEASEHOLD
  The term used to describe the arrangement by which property is let by lease by a landlord to a tenant for a fixed period of time.
   
• LEGAL FEES
  The fees charged by a solicitor or other qualified individual to carry out the legal work associated with buying a house.
   
• LTV (Loan To Value)
  A percentage figure indicating the amount you are borrowing compared to the property value. i.e. a mortgage of £65,000 on a property of £100,000 value is said to be 65% LTV.
   
• MIG (Mortgage Indemnity Guarantee)
  This is an insurance that covers the lender if your property gets repossessed and the lender does not get all its money back. It protects the lender, not you. You would still be responsible for reimbursing the insurance company if they have to pay out to the lender. It is usually you who has to pay the one-off premium as part of the lender's conditions, but most lenders allow it to be added to the overall mortgage debt, and is collected when the mortgage is redeemed in the future. Recently the threshold for triggering a MIG premium has been raised from 75% LTV to 90% LTV. This means that anyone with at least a 10% deposit will probably escape it.
   
• MORTGAGEE
  A building society or bank that lends money against the security of a charge over the property purchased.
   
• MORTGAGOR
  The person who borrows money, usually to buy a property.
   
• NEGATIVE EQUITY
  Is when the property value is lower than all the loans secured against it.
   
• SEARCHES
  These are checks carried out during the Conveyancing process were enquiries are made at the Land Registry, the Land Charges Register and Local Authorities to ensure there is nothing to cause concern about title to land and the future sale ability of the property.
   
• STAMP DUTY
  A government tax on buying your new home costing more than £60,000. The amount is calculated on the whole purchase price and rises as the price of your home increases.
   
• SUBJECT TO CONTRACT
  A provisional agreement made between buyer and seller, before exchange of contracts, which allows either side to back out without penalty.
   
• SVR (Standard Variable Rate)
  This is the standard variable mortgage interest rate that is offered by all lenders. It is usually the rate that customers revert to after a fixed, capped or discount period ends. The rate will usually change in line with the Bank of England Base Rate but is not linked to it.
   
• TERM
  The length of time your mortgage/loan is to be repaid.
   
• TITLE DEEDS
  The legal documents which set out the ownership of a property.
   
• VALUATION
  An independent assessment of the value of a property carried out by an approved surveyor. Paid for by the customer, the valuation is used by the lender to decide how much they are prepared to lend. Many customers also choose to arrange a more comprehensive survey for their own purposes before they decide to buy a property.
   
• VALUATION FEE
  A fee paid by the borrower for the lender's inspection of the property.
   
• VENDOR
  The person selling the property.