A
Annual Percentage Rate (APR)
The cost of credit paid by consumers expressed as an annual rate, which includes additional 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.
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.
Homebuyer’s Survey
An assessment carried out on the property specifically tailored for the buyer, involving a 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.
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.
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.
