Mortgage Glossary




A

B

C

D

E

F

G

H

I

J

K

L

M

N

O

P

Q

R

S

T

U

V

W

X

Y

Z

A

Annual Percentage Rate
(APR)

The cost of credit paid by consumers expressed as an annual rate, which includes
apitional fees paid to obtain a loan.

C

Conveyancing
Conveyancing is the legal transfer of the title of a property from the seller to a
buyer. It is possible in England for a conveyance to be carried out personally, but
it is more common for each party to hire a solicitor or a licensed conveyor to carry
out the legal business on their behalf.

County Court
Judgement

County Court Judgements are juridical orders that can be acquired in the event of
outstanding debt arrears in order to make the debtor pay up

D

Deposit
A sum of money that is paid by the home buyer and is combined with a mortgage to
reach 100% of the property value so the property can be bought. For example, on a
house worth £100,000, the buyer may have to put down a deposit of 20%
(£20,000) and the mortgage would then be for the remaining 80%
(£80,000).

E

Equity
The difference between the total market value of your property and how much you owe
the mortgage lender.

Equity
Loan

An equity loan is money borrowed in order to ‘top up’ a mortgage so that the buyer
can afford 100% of the property. This means the total money spent could be 10%
deposit, 70% mortgage and 20% equity loan. In the UK they are issued by the
Government in order to assist the growth in the housing market through schemes such
as the Help to Buy Equity Loan

Equity
Loans

F

Financial
Advisers

People who are licensed to provide both individuals and businesses with
financial/investment advice for their portfolios.

Financial Services Authority
(FSA)

The UK’s independent financial body that protects your rights by regulating financial
services.

Fixed
Interest Rate

A fixed interest rate is one that is set on a loan and cannot change for a set amount
of time.

H

HomeBuy
A scheme whereby a range of home buyers are able to obtain home ownership at reduced
costs due to individual circumstances.

HomeBuy
Agent

People who work with housing associations and support individuals throughout the
application process for affordable housing.

HomeBuy Agents

Homebuyer’s
Survey

An assessment carried out on the property specifically tailored for the buyer,
involving a property valuation.

Property valuation

Household
A single person or a group of people living in shared accommodation.

Housing
Associations

Non-profit making organisations, who provide communities with affordable
accommodation in areas where it is required most.

Housing Corporation
A Government funded public body that provides grants for affordable housing.

I

Indemnity
Fund

Economic protection against a possible future loss of money. For example, with the
NewBuy scheme, the government and
building firms pay an agreed amount into a fund that can be used to reimburse
mortgage lenders in the event that the borrower cannot keep up with payments and the
lenders lose out on money.

NewBuy

Inflation
A general economy wide increase in prices.

Interest
A rate paid regularly to pay for money lent.

Interest-only Mortgage
Arguably a more risky type of mortgage which demands no payments other than to pay
the interest on the loan. At the end of the loan time however, borrowers have to
repay the full amount borrowed. In the short term Interest-only mortgages are cheaper
and easy to handle, but borrowers need to ensure they will be able to pay the money
borrowed back at the end of the mortgage term. This can be handled by selling the
property at the end of the term, but falling into negative equity could leave the
borrower short when it comes to paying back. Alternatively, there are some
Interest-only backed mortgages that take a portion of the interest payments the
lender pays and invest them, in order to generate enough capital to pay off the
amount borrowed at the end of the mortgage term. The risk taken here for the borrower
is whether or not the investment will produce enough money to pay off the entire loan
at the end of the mortgage term.

L

LCHO
Low Cost Home Ownership Schemes.

Leasehold
Purchasing a leasehold property means that the buyer will own the property but not
the land that it stands on. Usually, leasehold properties are flats. The main
difference between these and freehold properties (where buyers own both the property
and the land) is that the lease only extends for a certain amount of years, at which
point the property will revert back to the landlord’s ownership. People who have
owned a leasehold property for over two years have a right to a 90 year leasehold
extension under the use of a section 42 Notice.

Loan to Value Mortgage
This is the most common type of mortgage, especially in the case of first time
buyers, in which the deposit and mortgage loan are presented as a ration. So a
£200,000 property could have a £150,000 mortgage with a £50,000
deposit, the mortgage is at 75% with a deposit making up the remaining 25%.

M

Mortgage
A mortgage is simply a loan taken out from a bank or building society that is used to
pay off the majority of the price of a house. This then has to be paid back to the
lender with interest, usually within 25 years. The property itself is used as
security for the lender, meaning that if the borrower falls behind on payments or
cannot pay the mortgage off, the lender has the right to repossess the property in
order to reimburse themselves for their loss. Usually a mortgage will be a Loan to
Value (LTV) mortgage.

N

Negative
Equity

Negative equity is a state where the asset (in the case of mortgages, the property)
is valued at less than the outstanding debt from the loan. If the lender has to
repossess the asset in this case, they may not get the full amount they lent back,
and could demand some reimbursement from the borrower to make up their losses.

P

Payday Loan
A payday loan is a loan designed to be used in the short term, for if the borrower
needs to acquire some cash quickly to, for example, pay off bills that they cannot
afford to until their next pay day. The APR on these loans is often incredibly high,
as they are only meant to cover a short amount of time.

Property
Value

How much the property is worth at any given point, most importantly at the times of
buying and selling. Many percentages are worked out from this so, for example, if a
12% deposit is required for a house with a property value of £120,000, the
buyer would need to put down a deposit of £14,400.

Public Sector Tenant
A tenant who rents off a public body, such as a council or a housing
association.

S

Shares
A share is a part ownership. Two or more parties, in the case of the Help To Buy Equity Loan for
example, the buyer and the Government/housing association, own a percentage of an
asset.

Help
to Buy Equity Loan

Staircasing
A new term meaning to buy shares of a property in stages, usually until full
ownership is acquired.

R

Rent Arrears
If you have rent arrears, it means you are behind on payments or otherwise unable to
make payments on a loan or mortgage.

Repossessed
If a buyer falls behind on payments or cannot pay off the debt of a mortgage, the
lender has the right to take the property away from the borrower and sell it on in
order to get their money back.

V

Variable
Interest Rate

An interest rate on a loan that can fluctuate compared to the base rate that the
lender uses.

Mortgage

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