(If there’s anything we’ve missed or something else you’re unsure on, just let us know)
A.
Agent: The sales agent or the estate agent who is listing the property for sale act as the negotiators between the seller and the buyer.
AIP (Agreement in Principle) / DIP (Decision in Principle: A formal agreement from a lender confirming how much they are able to consider lending, based on a credit check.
Amortisation: The process of paying off debt by regular payments of capital and interest over time.
Annual Percentage Rate (APRC): The overall cost of borrowing, including interest and fees, expressed as an annual percentage.
Arrangement fees: These can usually range anywhere from £495 – £1,999 but can of course be more, or less. They usually average around £999. Arrangement fees can be added onto the mortgage, so you avoid paying them upfront, which is a great idea. However, to avoid paying interest on that amount, you can pay them off once you complete.
Assured Shorthold Tenancy (AST): The most common form of tenancy agreement. Typically a 6 month contract. A tenancy can only be an AST if all of the following apply: you are a private landlord or housing association, the tenancy started on or after 15th January 1989, the property is the tenant’s main accommodation and you do not live in the property.
Auction: Rather than using an agent and leaving a property on the market until a buyer is found, taking a property to an auction is a quicker way to sell.
There are two types of property auction; the ‘traditional’ auction method and the slightly more flexible ‘modern’ method.
The modern auction offers buyers more flexibility and a bit more time. The auction usually runs online for up to 30 days and you can submit your bid anytime during that period. Should you win the auction, you must pay your reservation fee (usually 5%) which covers the agent and auctioneer. You then have 56 days to complete the purchase. You must exchange contracts and pay a 10% deposit within 28 days and from there you get another 28 days to complete.
The traditional method is straightforward. As the winning bidder, you must exchange contracts and pay your deposit (normally 10%) on the day of the auction. If you pull out of the purchase, you lose your deposit as contracts have already been exchanged. You must then settle the balance owed within 28 days.
Automated Valuation Models (AVMs): ‘Automated Valuation Models use one or more mathematical techniques to provide an estimate of value of a specified property at a specified date, accompanied by a measure of confidence in the accuracy of the result, without human intervention post-initiation.’ https://www.rics.org/profession-standards/rics-standards-and-guidance/sector-standards/valuation-standards/automated-valuation-models
B.
Booking fees: These aren’t as common as arrangement fees but can still apply. They can vary from anywhere around £199 to £1,000’s depending on the lender. The only real difference between these and arrangement fees is that booking fees normally need to be paid upfront on application and can sometimes be non-refundable.
Broker: A person or a company that organises and executes financial transactions on behalf of another person or people.
Buildings Insurance: Mandatory for freehold properties, this is an insurance policy that protects you against the cost of repairing or rebuilding your home if it is damaged or destroyed. It covers the structure of your home (e.g. the roof, walls and windows) and any permanent fixtures and fittings, such as fitted kitchen units and bathroom suites. This needs to be purchased before completion of your new property and usually be in place for exchange of contracts.
C.
Capital Raising: When you apply to raise additional mortgage funds, on top of your existing mortgage balance usually via remortgage or a further advance.
Cashback: An incentive offered by lenders following the completion of the mortgage. For example, if they offer £300 cash back, once you complete, they will send you £300 to your nominated bank account.
CCJ (County Court Judgment): You may get a county court judgment (CCJ) or high court judgment if someone takes court action against you (saying you owe them money) and you do not respond. CCJ’s make it very difficult for you to get a mortgage.
CHAPS: (Clearing House Automated Payment System) Just the one-off fee for the same day transfer of the money from the bank (normally via the Solicitor), usually about £35 but again this varies from lender to lender.
Completion: (Purchasing) Quite simply, the whole process is complete. So the money is transferred and the keys are available to pick up!
Consumer Buy-to-Let: You fall into this category if you are an ‘accidental landlord’. For example, if you moved in with your partner and rented out your property, you would need to make sure the mortgage on your property is accepting of consumer Buy to Lets.
Contents Insurance: An insurance policy (not mandatory) that covers your possessions, for example, furniture, carpets, TVs and bicycles.
Contractor: If your employment isn’t a permanent setup and instead you have an end date on your contract then you’re classed as a temporary contractor or a fixed term contractor.
(There are various ways that contracts are set out and paid but we have a lot of experience in finding mortgages for contractors).
Conversion: A property has changed from an office, for example, to a flat. The exterior retains much of its features but the interior changes and becomes habitable.
Conveyancer: A Solicitor who specialises in the legal aspect of transferring property from one person to another. They will help you through the process of buying, selling and remortgaging.
Credit Reference Agency: An independent organisation that securely holds data about you – including things like your credit applications, accounts, and financial behaviour. There are three main credit reference agencies in the UK: Experian, Equifax and TransUnion.
Credit Score: A score given to you by a credit reference agency based on how likely you are to repay anything you borrow, considering your history of using credit and managing finances. It’s usually heavily dependent on the last 12 months conduct but lots of other factors impact this score. A poor credit score could impact your ability to get a mortgage, loan or credit card.
D.
Day rate contractor: Someone who is paid a daily rate. Usually setup as self employed and under a temporary contract.
Default: A warning sign that someone can’t afford your repayments on a loan or credit agreement. A default occurs if the lender decides to close your account because you’ve missed payments.
Deposit: The cash deposit you pay upfront when buying a property.
Down Valuation: This occurs when the Surveyor values the property at less than the price the buyer has agreed to pay. It can also occur when remortgaging a property; if you estimate your property to be one figure, but the Surveyor disagrees and values it to be less.
E.
Early Repayment Charge (ERC): A fee charged by the lender if you pay off the mortgage early.
Energy Performance Certificate (EPC): An EPC gives a property an energy efficiency rating from A (most efficient) to G (least efficient) and is valid for 10 years.
Equity: The difference between the value of the property and the amount owed on the mortgage. For example, if your property is worth £200,000 and your mortgage is £150,000 then you have £50,000 of equity in that property.
Exchange of Contracts: What is the exchange of contracts? Exchange of contracts (or to exchange) is when both parties swap and sign the relevant contracts. The contracts confirm that one person is selling and one person is buying the property.
This is the point where, as the buyer, you will be asked to put down your deposit. It’s a crucial stage of buying a home as once the contracts are signed, you will be legally bound to buy that property.
F.
First Charge Mortgage: A traditional and more standard mortgage, where the lender providing the loan has the right to the first charge of the property. In the event of repossession, they can attempt to recover the money owed to them first.
First charge: When a mortgage lender takes the first charge, in the event of possession, they have the legal right to the money they’ve lent before anyone else.
First mortgage payment: Depending on when you complete, it’s normal for the bank to charge you a different amount for your first mortgage payment.
Often it can be a month and a half for your first payment or even half a month.
They will always write to you in plenty of time advising when it will be taken and how much it will be. So just make sure there’s enough in your account for then.
Following your first payment it will return to the standard monthly amount and date shown on the offer documents.
Fixed rate mortgage: A mortgage where the interest rate remains the same for a set period.
Fixed term contractor: Your employment contract is fixed in place for a certain period and is not a permanent position.
Flying Freehold: When you own a freehold property, but a portion of your property extends (or ‘flies’) over land you do not own. Normally public land but can be another person’s land.
Freehold property: You own the property and the land it’s built on.
Full mortgage application (FMA): Once you’re ready to apply for a mortgage then we’ll submit the full mortgage application. It refers to all details being submitted to the lender and a hard credit check.
Further advance: Taking further borrowing from your existing lender. Normally at a different rate to your existing deal.
G.
Gazumping: Completely legal; this occurs when the seller of the property you’re buying accepts a new higher bid from another person prior to you exchanging. So, your offer could have already been accepted by the seller. It could even be a similar offer to yours but they may be able to complete sooner. In that case, consider yourself ‘gazumped’.
Gazundering: ‘Gazundering’ is when a buyer lowers their offer at the last minute, just before contracts are exchanged.
Green Mortgage: A specialist mortgage product offered by some lenders usually available for new build properties only. Green mortgages can be cheaper than conventional mortgage products. Strict criteria applies.
Ground Rent: Simply put, ground rent is a fee charged on leasehold properties as a condition of that lease, for the land your home sits on. It’s normally charged annually.
H.
Hard Credit Check: Will leave a footprint on your credit file visible to other lenders. Should you have multiple hard searches in a short space of time it can have a negative impact on your credit score.
High-rise flat: A flat or apartment which is in a building standing 7 floors or more or over 18 metres in height is considered high-rise.
Houses in Multiple Occupancy (HMO): HMO is a type of tenancy agreement where there are at least 3 people renting a property, who are not from the same household (family, for example). They still share facilities such as a kitchen and bathroom but will be responsible for their own rental payments and not each other’s. Commonly, Students will rent on a HMO basis.
I.
Income multiple: Lenders base their mortgage amounts on a multiple of your income. So when they say they can consider you for up to 5x income, for example, it just means they will take your annual income and multiply that by 5 to give the maximum mortgage amount.
Independent Mortgage Advice: Tricky one these days, but an independent broker, very simply, is a broker who is not tied to just one or two lenders but instead can access a wide range of lenders. Therefore they can cater to more specific situations and in most cases, achieve better deals.
Inflation: Inflation is the term we use to describe rising prices. How quickly prices go up is called the rate of inflation.
Interest only mortgage: Your monthly payment just pays for the interest on the money you’ve borrowed and not for any of the actual money (capita)you’ve borrowed. So, at the end of the mortgage term, you still owe the money you originally borrowed.
Interest rate: The amount charged by a lender on the money borrowed, expressed as a percentage.
J.
Joint borrower sole proprietor (JBSP): A JBSP mortgage is where two people are named on the mortgage, for affordability purposes, but only one person is named on the deeds to the property.
Joint Mortgage: A mortgage held by two or more people.
Joint tenants: A form of ownership of land or property. You have equal rights to the whole property. If one person dies, the property automatically goes to the other owner.
K.
Key Facts Illustration (KFI) / European Standardised Information Sheet (ESIS): Sometimes just referred to as the illustration, these contain everything relating to a mortgage product. Monthly payment, details relating to fees, the term, any early repayment charges etc.
L.
Land Registry Fee: A fee to be paid by a buyer to register the ownership of a property with HM Land Registry.
Leasehold property: You own the property but not the land or ground the building stands. As a result, you’re usually liable for an annual ground rent charge and sometimes a service charge, too.
Legal fees: These vary so much from Solicitor to Solicitor so it’s a good idea to do some research and also understand how much is due and at which point. All expect a deposit upfront then the balance is usually due when you want to exchange and then complete. It’s at this point that your deposit is paid along with any other taxes or charges due.
Level 1 Survey: Formerly known as a Mortgage Valuation, this is the minimum requirement by a lender and will simply place a valuation figure on a property and confirm it’s of a suitable security for the mortgage.
Level 2 Survey: Formerly known as a Homebuyer’s Report, it will identify and list the risks, and explain the nature of those problems. The surveyor gives an opinion on both the market value of the property and the reinstatement cost at the time of the inspection.
Level 3 Survey: Formerly the Full Structural, this is the most comprehensive and the most expensive survey. It will identify risks, explain the nature of the problems, and explain how the buyer may resolve or reduce the risk. The survey looks at cellars, attics, under carpets and behind furniture as well as the performance of services such as heating and drainage.
Lifetime tracker: A tracker rate mortgage which runs for the full term of the mortgage.
Listed buildings: According to Historic England there are around 500,000 listed buildings which fall into 3 different categories:
Grade I: This means the property is of ‘exceptional interest’. Only around 2.5% of listed buildings are Grade 1 listed
Grade II: The property is important and considered of more than special interest. Around 5.8% of listed buildings fall into this category.
Grade II*: The building is of special interest. Most listed buildings (around 92%) fall into this category.
Loan to income (LTI): This is the amount of the loan relevant to your income expressed as a ratio. If your income is £50,000 and the loan is £200,000 then it’s a 4x LTI.
LTV (Loan-to-Value): The ratio of the mortgage amount to the value of the property. For example, if the property is worth £200,000 and the mortgage is for £150,000, the LTV would be 75% as 150,000 is 75% of 200,000.
M.
Maisonette: An apartment or flat, usually over one or two floors, which is self-contained and in a larger house with its own entrance from the outside.
MIP (Mortgage in Principle): This is just something that a mortgage broker can issue based on an affordability assessment and not considering credit checks. Normally in the form of a fancy looking PDF document.
Mortgage term: The overall term or life of the mortgage, for example 25 years or 30 years.
Mortgage: A loan secured against a property.
Moving costs: Don’t forget to factor moving costs into your budget. A van, a moving company if needed etc. One that gets forgotten a lot. And one that can easily add a fair chunk onto your cost!
N.
New build: A property that is brand new, normally built from the ground up and hasn’t been lived in by anyone yet. Some lenders can define it slightly differently and certain timescales can apply.
NHBC: A warranty provider who issues 10-year building guarantees to some new build homes. These warranties cover any defects that occur after construction.
O.
Offset mortgage: A type of mortgage product where the lender offers a savings account that’s linked to your mortgage. The amount of money in your offset account will determine how much interest you’re charged. For example, if your mortgage is £200,000 and you have £100,000 in the savings account, the lender will only charge you interest on £100,000 of your mortgage. Rates tend to be higher than your average fixed rate but plenty of benefits to such a mortgage. We can talk through your options with you!
Outstanding Balance: Your mortgage balance as it stands on the day.
Overpayment: Or to overpay, is when you make another payment to your mortgage lender, over your standard monthly payment amount. A great option to consider.
P.
Porting: When you keep your existing deal but just transfer it to a new property. It sounds like a piece of cake but there are lots of conditions to consider.
Product term: The number of years that the mortgage product lasts for i.e. 2 years, 5 years etc.
Product Transfer or Product Switch: Taking a new deal from your existing lender. Like remortgaging but a lot simpler.
Q.
Q…Nothing we can think of.
R.
Redemption fees: Some lenders charge a redemption fee which is just an ‘exit fee’. A redemption fee is just a one-off admin fee.
These charges can typically range from £65 – £225. There’s no real reason for these fees anymore – it’s just a money maker for the banks and building societies, but it’s factored into the overall cost; so sometimes it is worth going with a lender who charges one.
A lot of lenders don’t tend to charge them, and they’re only paid when you leave a lender.
If you repay the mortgage in full or leave the lender and remortgage to a new lender, that’s when you’re charged. If you’re remortgaging, they normally just get added onto the new mortgage balance, so you rarely pay them in ‘cash’.
Remortgage: The process of switching to a new mortgage deal, usually with a new lender.
Repayment mortgage: A capital and interest repayment mortgage is the standard option for most residential homebuyers. Your monthly payment will go towards the interest you owe and the money you’ve borrowed. So, at the end of the mortgage term your mortgage will be repaid and the loan settled.
Restricted covenant: a contract between 2 landowners. One landowner promises the other landowner not to carry our certain acts on their own land.
Right to buy: A government help to buy scheme where a council tenant is offered the chance to buy their property at a discounted rate.
S.
Searches: Carried out by your solicitor, they check the local area to see if any future developments or historical problems might affect the property you’re buying.
Second charge mortgage: It’s still a loan secured against a property but instead of the lender having the first charge, they will only have the second charge. In the event of the lender taking possession of your property (sometimes referred to as repossession), the first charge lender will take what they’re owed, and only then can the second charge lender take what they’re owed. If there is anything left to take!
Section 106: Local area laws. For example, a new house can only be occupied by a person with a local connection.
Self employed: Lenders will normally class you as self employed if you own more than 20% of the company that you’re drawing an income from. Or if you’re employed by yourself…!
Semi-Detached: A property joined to one other property.
Service Charge: Payable by the tenants and leaseholders for services to the building or development. Services such as repairs, maintenance and cost of management.
Share of Freehold: Usually associated with flats. It’s where you purchase the flat and own the building but the ownership of the land the flat stands on is split between you and the other flat owners.
For example, take a standard house split into two flats (upstairs and downstairs) and you’re buying downstairs. You own the downstairs portion of the building and the land ownership is then usually split in half between you and upstairs.
There are underlying leases to these agreements still.
With a share of freehold, you’re jointly responsible for the upkeep of the building and you don’t normally have to pay ground rent.
Shared Ownership: A government help to buy scheme whereby you only buy a share in a property. For example, you can buy a 25% share of a property and you’ll pay rent on the remaining 75%.
Soft Credit Check: Doesn’t leave a footprint visible to other lenders on your credit file (you can see them), so does not impact your credit score.
Staircasing: The process of buying a larger share under the shared ownership scheme. Should you own a 25% share and then buy a 50% share, it’s called staircasing.
Stamp duty: A tax paid on the purchase of a property over a certain value.
Standard Variable Rate: Set completely at the discretion of the mortgage lender, this is the reversion rate following an initial deal period. As the name suggests, it’s a variable rate so it can change at any time.
Studio flat: A flat or apartment consisting of a single large room serving as the bedroom and living room, with a separate bathroom. (Lenders sometimes have an issue with these properties if they’re under 30 square metres.
Survey: A survey will determine if the property is a good security for a lender’s investments. Property surveys are carried out by professional Surveys to determine the value of a property. They can include what repairs (if any) are required. They can also highlight any structural damage or faults such as damp and the cost of rebuilding the property (for insurance purposes).
T.
Tenants in common: A form of ownership of land or property. You can own different shares of the property. If one person dies, the property does not automatically go to the other owner if you die.
Tenure: The term tenure refers to the various ways that you can own a property. Typically, it can be freehold, leasehold, or leasehold with a share of the freehold.
Terraced House: A property that is connected to three or more properties.
U.
Unencumbered property: A property without a mortgage.
V.
Valuation fees: Some lenders charge a valuation fee, but a lot of them don’t. They average around the £100-£300 mark, are paid on application and are non-refundable if the valuation is carried out. N.B. These valuation fees vary with some lenders depending on the property value.
Variable rate mortgage: A mortgage where the interest rate can fluctuate over time.
Vendor: The person or people selling a property.
Vendor: The person selling the property.
W.
…Windows?
X.
X-ray.
Y.
Yield (Gross): The annual rental income as a percentage of the property’s value.
Z.
Zero percent mortgage rate: Yeah right!
