Adverse Credit The term used if the borrower has a poor credit
history. This could include previous mortgage or loan arrears,
bankruptcy or CCJ's. Other terms used to describe an adverse
credit mortgage include:
Bad credit mortgage Poor credit mortgage Non status mortgage
Credit impaired mortgage No credit mortgage Low credit score
mortgage
APR (Annual Percentage Rate) The interest rate reflecting the
cost of a mortgage as a yearly rate. The APR provides home
buyers with the ability to compare different types of mortgages
based on the annual cost of each.
Arrangement Fee The fee you pay your Lender in return for them
providing you with a mortgage. Usually paid on completion or
with your application, these fees usually apply when you take
out a fixed rate, discount or cashback mortgage.
AST (Assured Shorthold Tenancy) A form of tenancy that gives the
landlord the right to repossess their property after a set
amount of time laid out in the tenancy agreement. New tenancies
are automatically ASTs unless otherwise stated.
Assured tenancy The landlord can charge a market rent (the
current rate for similar property in that area) and take back
the property under certain conditions, as set out in the Housing
Acts of 1988 and 1996.
Bridging Loan/Finance Short term loan to enable the purchase of
one property before the sale of another essentially releasing
funds that are required for the purchase. You should always
consult a professional before considering any bridging finance
as it could be a solution that is worse than the problem.
Brokers Fee A fee charged by an intermediary or advisor for
locating the most appropriate mortgage for the borrower.
Buildings insurance Insurance you can take out when you buy a
property that will cover the cost of any damage to the house and
or contents..
Buy to Let A mortgage meant for those who wish to purchase a
property to rent out to others. The decision on whether you are
able to repay this type of mortgage is often based up on the
future rental income from the property rather than the personal
income of you the borrower.
CCJ (County Court Judgment) A judgement reached in the County
Court generally realted to non payment of a loan, mortgage etc
debt in general. If you pay off the debt, the CCJ will be
satisfied and a note is put on your records that states this.
Chain A housing 'chain' made up of a number of buyers and
sellers, essentially the line of buyers and sellers involved in
each house move.
Charge Any right or interest, especially with a mortgage, to
which a freehold or leasehold property may be held. Basically a
charge is the claim the lender has on the property until the
mortgage or loan is satisfied.
Completion The term used when the seller and buyer exchange the
finances required to buy a property through their respective
solicitors. At exchange of contracts a deposit, usually 10%,
will have been paid. At this point the buyer becomes legal owner
of the property.
Conveyance The legal process in which ownership of the property
is transferred from the seller to the buyer. Generally
undertaken by a solicitor, or licensed conveyancer.
Early redemption fee If you decide that you want to sell your
property or remortgage then you will be redeeming you mortgage
early. Most lenders charge a penalty fee, especially during any
period of a fixed, capped or discounted rate. Be sure you are
clear about any potential penalties when you are about to take
on a mortgage.
Equity and negative equity The amount of value in a property
that isn't covered by a mortgage - simply take the amount of the
mortgage from the valuation to work out the equity. vThis is
where the money you owe on the mortgage is greater than the
value of your property.
Exchange of contracts The contract is a written agreement that
lays out the terms between the buyer and the seller. When both
parties exchange contracts, usually weeks before completion, the
deal becomes legally binding. Often a deposit of around 10%, is
paid at this stage.
Fixed Rate A set interest rate on a mortgage fixed for a period
of time. This varies from lender to lender.
Freehold If you are the property owner outright then your
property is freehold. Most houses are freehold wheres many flats
are leasehold, since you are not the owner of the whole building
containing the flats.
Gazumping If you are in the process of purchasing a property and
your offer has been accepted but the seller gets a better offer,
before you complete, and takes it then, you've just been
'Gazumped'.
Interest Only Mortgage A mortgage whereby the borrower is only
required to pay inerest on the amount borrowed during the
mortgage term. It is the borrowers responsibility to ensure that
enough funds will exist (either through an investment policy or
other means) to repay the full mortgage at the end of the term.
Intermediary A mortgage broker or advisor who finds the most
suitable mortgage for a borrower and arranges the mortgage on
their behalf.
Leasehold If you buy a leasehold property you don't own the
property rather the right to live there for a specified period
of time, however much time remains on the lease. The owner of
the property is called the freeholder or landlord.
Liability This relates more to commercial mortgages. With a
commercial mortgage liability for the repayment of the loan
depends on the legal structure of the business:
A sole trader will be personally liable for the mortgage debt.
Personal assets could be seized if the business defaults.
Partners are jointly liable for the debts of the partnership and
their personal assets are at risk. With a limited-liability
partnership and a limited company, the liability falls firstly
on the business rather than on the individual partners and
directors. The lender may take a floating charge on business
assets in general, rather than simply on the current property
being purchased. The lender may also insist on personal
guarantees as a condition of granting the loan, in which case
the partners and directors may be held personally liable anyway.
Life insurance If you have a joint mortgage, life insurance can
be acquired that will see the mortgage paid of should one of you
pass on.
LTV (Loan to Value) The size of the mortgage as a percentage of
the value of the property i.e. A £90k mortgage on a house valued
at £100k would mean an LTV of 90%.
MIG (Mortgage Indemnity Guarantee) A one off payment made when
you set up a mortgage a kind of insurance policy for the lender.
This offers them protection against the value of the home
falling to less than the mortgage. It is generally only charged
to borrowers with a less than 10% deposit, but this can vary.
Mortgage A loan to buy a property where the property is used as
security against you paying back the loan.
Mortgagee The company or organisation that lends you the money.
Mortgagor The person taking out the mortgage.
Non-Status Where a lender may not require income details from
you or may accept some previous poor credit history i.e. CCJ's
or previous mortgage arrears.
Payment Holiday A period during which the borrower makes no
mortgage payments.
Regulated tenancy A legal right to live in your accommodation
for a period of time. Your tenancy might be for a set period
such as a year (this is known as a fixed term tenancy) or it
might roll on a week-to-week or month-to-month basis (this is
known as a periodic tenancy).You are a regulated tenant if you
moved in before 15 January 1989, you pay rent to a private
landlord and your landlord does not live in the same building as
you.
Remortgage The taking on of a second mortgage to pay off the
first. The most common reasons for doing this are that another
mortgage is available at a better rate or that the value of the
property has gone up allowing for the opportunity to borrow more
money against the property.
Right to Buy For example, a tenant in a council owned property
may purchase the property at a discount depending on length of
their tenancy.
Self Certified Generally when a borrower applies for a mortgage
he or she will be asked to provide pay slips or company accounts
to prove their income. If it is difficult or inconvenient for
you to provide this evidence, you can choose to self-certify
your income. This involves signing a declaration which states
your income sources and amounts. Lenders will charge you higher
rates than average and offer you a limited range of mortgages if
you choose to self-certify your income, in general it's not a
good idea to self-certify just to avoid some paperwork.
Stamp Duty Tax paid by the buyer of a property set at 1% for
properties over £60k, 3% for properties over £250k and 4% for
properties over £500k.
Structural survey The most wide ranging check of the structure
of a property. This is carried out by professional surveyor and
should uncover any defects or faults with the building.
Tenancy A legal written agreement between a landlord and tenant
that sets out the terms of the rental.
Term The period of years over which you take the mortgage and
repay it.
Term Assurance An insurance policy designed to repay the
mortgage on the death of the insured person. Level Term
Assurance covers a principal sum throughout the policy term and
pays out the full amount on death. Reducing Term Assurance is
designed to repay the balance outstanding on a repayment type
mortgage upon death. Term Assurance may also pay out early on
the diagnosis of a terminal illness.
Underwriting The process of evaluating a loan application to
determine the risk involved for the lender. This involves an
analysis of the borrower's creditworthiness and the quality of
the property itself.
Unencumbered Where the property is owned outright and no
mortgages or loans are secured against it.
Valuation A simple check of the property in order to find out
how much it is worth and whether it is suitable to secure a
mortgage against.
Valuation Fee The fee paid by a borrower to cover the cost of
the lender checking that the property is suitable security for
the mortgage.
Variable Rate A type of interest rate the lender can charge. It
goes up and down and your repayments change accordingly.
Vendor The person selling the property.
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