Copy of `Mortgage terms - Mortgage glossary`

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Mortgage terms - Mortgage glossary
Category: Economy and Finance > Mortgage
Date & country: 08/11/2007, UK
Words: 391


Acceleration clause
A provision that gives the lender the right to collect the balance of a loan if a borrower misses a payment.

Access
Any means by which a person can enter property.

Actual age
The number of years a structure has been standing.

Add on interest
The interest a borrower pays on the principal for the duration of the loan.

Addendum
An addition or change to a contract.

Additional principal payment
Extra money included in the monthly payment to help reduce the principal and shorten the term of the loan.

Additional security fee
An up-front, one-off fee paid to the lender to protect against the borrower defaulting on the loan. This is usually charged on mortgages of more than 75% of the property value. Also known as Indemnity Guarantee Premium and Mortgage Indemnity Premium.

Adjustment date
This is the date on which the interest rate changes for a variable rate mortgage.

Administrator
A person given authority to manage and distribute the estate of someone who died without leaving a will.

Administrators deed
A legal document an administrator of an estate uses to transfer property.

Advance
Loan from a bank or building society in the form of a mortgage.

Adverse possession
The acquisition of title to property through possession without the owner's consent for a certain period of time.

Adverse possessory title
If a piece of land is occupied without permission for at least 12 years, the occupier can become the legal owner.

Adverse use
The access and use of property without the consent of the owner.

Affiant
A person who makes a sworn statement.

Affidavit swear fee
Charged when a mortgage lender is required to swear an affidavit (written legal statement) to a solicitor in connection with mortgage arrears.

Affiliate tradesmen
Your insurance provider may insist that any repair work on your home is carried out by a tradesmen with whom they have negotiated favourable rates and who have been approved as meeting certain standards of workmanship.

Agency closing
The process in which a lender uses a title company or other firm as an agent to complete a loan.

Agreement in principle
The first document provided by an mortgage lender which shows any prospective seller that you can actually get a mortgage to cover the purchase price. It also provides a handy reference for some of the key features of your mortgage, and what your repayments will be for the introductory offer period, if there is one.

Alienation clause
A provision that requires the borrower to pay the balance of the loan in a lump sum after the property is sold or transferred.

Amortisation term
Expressed in months, this term states how long it will take to pay off a mortgage.

Amortization schedule
A schedule of how mortgage debt is changed over time.

Amortization tables
Mathematical tables lenders use to calculate a borrower's monthly payment.

Annual bonus
A bonus paid annually on an endowment mortgage which is dependent on the performance of the investment fund you are using to repay your mortgage.

Annual mortgagor statement
A yearly statement to borrowers that details the remaining principal and amounts paid for taxes and interest.

Annual Percentage Rate
This is an indicator used to compare interest rates. It takes into account the costs involved in setting up the mortgage, any discount periods, how often interest is calculated and calculates what the average rate of interest will be over the life of the loan. All lenders that comply with the consumer credit act must ensure that the the borrower is informed of the APR.

Annualised payment scheme
Although the borrower pays interest at a variable rate, which can change from month to month, the lender charges a set amount of interest each month and then adjusts the balance at the end of the year.

Application
A document detailing a potential borrower's income, debt and other obligations to determine credit worthiness.

Application fee
The fee a lender charges to process a loan application.

Applied or nominal interest rate
The rate used to calculate the interest due.

Appointed representative
Salesperson, company or organisation that advises on the investment products specific to one life assurance or investment company.

Appraisal
A professional evaluation of the value of a home or other piece of property. It is often required by a lender.

Appraisal fee
The fee an appraiser charges for an estimate of the market value of the property.

Appraisal report
A detailed written report on the value of a property based on recent sales of comparable sites in the area.

Appraised value
A surveyor`s estimate of the value of the property.

Appreciation
An increase in the value of a home or other property.

Approved tradesmen
Your insurance provider may insist that any repair work on your home is carried out by a tradesmen with whom they have negotiated favourable rates and who have been approved as meeting certain standards of workmanship.

APR
This is an indicator used to compare interest rates. It takes into account the costs involved in setting up the mortgage, any discount periods, how often interest is calculated and calculates what the average rate of interest will be over the life of the loan. All lenders that comply with the consumer credit act must ensure that the the borrower is informed of the APR.

Arrears
These are the sum total of late or overdue payments for a mortgage, ground rent and maintenance charges, or any other regular payment. Some insurance policies will automatically be voided if you fall into arrears.

Arrears breakdown
A month-by-month breakdown of any arrear balance and charges for your mortgage. A fee for this service is often added to your account once you have been sent the breakdown. Costs £10 - £30

Arrears fee
This is charged on a monthly basis to cover additional administrative costs where your mortgage account is one or more monthly payments in arrears. Costs £15 - £45. You may well be charged arrears fees in connection with other products.

Assessed value
A determination by a tax assessor of the value of a home in order to calculate a tax base.

Assumable mortgage
A mortgage that can be transferred to another borrower.

Assumption
When a buyer assumes the loan payments and obligations of the seller. If the buyer defaults, however, both the buyer and seller are responsible for the debt.

Assumption clause
A clause stating that the seller has passed to the buyer full responsibility for the mortgage on the property. Often, an assumption fee must be paid to the mortgage lender.

ASU
A form of income protection incorporating cover for loss of earnings arising from accident, sickness or unemployment. Is usually paid out in the form of a monthly tax-free income to cover a portion of lost earnings and is usually restricted to two years from the date of the first payment.

Available funds
The difference between the initial amount you wish to borrow (initial mortgage balance) and up to 90% of the value of your home (Loan Limit). This is the amount you can take as extra borrowing throughout the term of your loan.

Bailiff
An official representative of the courts, who may call round to repossess your possessions or house if you cannot keep up on your mortgage repayments and fail to reach an agreement with your lender to ammend your repayments.

Balance breakdown
This is a fee that can be charged by your lender for a month-by-month breakdown of your account balance, over and above the information contained in your Annual Statement. Costs £15 - £30

Balance sheet
Forms part of the annual report and is the statement of a value for a company's assets and liabilities and the end of the financial year (balance sheet date). It shows a company's financing through external debt, profit generation and the issuing of share capital.

Balloon mortgage
A mortgage in which monthly installments are not large enough to repay the loan by the end of the term. As a result, the final payment due is the lump sum of the remaining principal.

Balloon payment
The final lump sum payment due at the end of a balloon mortgage.

Bankruptcy charge
This is an investigation carried out by the Land Charges Registry to check if a purchaser is or has ever been bankrupt. Most mortgage lenders will insist on this search being carried out and it usually carries a small charge.

Basic valuation
This is carried out for the purposes of mortgage and is prepared for the lender. A survey will also help you to find out independently whether the price is reasonable. Your mortgage lender will almost certainly insist on a basic valuation to make sure that the property is worth the amount you are paying for it. They want to ensure that you will be able to sell it again and therefore that it is a safe investment. Although it is often referred to as a survey, it doesn't go into nearly as much detail as a homebyuyer or full survey would do.

Basis point
A basis point is one one-hundredth of one percentage point. For example, the difference between a loan at 8.25 percent and a mortgage at 8.37 percent is 12 basis points.

BBA British Bankers Association
This is the trade organisation of the banks.

Benefit period
A time period over which the interest rate of a loan is discounted, fixed or capped, for example.

Biweekly mortgage
A mortgage that requires payments every two weeks and helps repay the loan over a shorter term.

Blanket insurance policy
A policy that covers more than one person or piece of property.

Blanket mortgage
A mortgage that covers more than one property owned by the same borrower.

Bonuses
Payments life assurance companies add to a 'with-profits' endowment. Usually made annually, possibly with a final (terminal) bonus when the endowment comes to the end of its term. Bonuses aren't guaranteed and the amount awarded can change each year.

Boundaries
These are the areas around a property which identify the start and end of the land and ownership.

Breach of contract
The failure to perform provisions of a contract without a legal excuse.

Breach of covenant
The failure to obey a legal agreement. Breach of warranty A seller's inability to pass clear title to a buyer.

Bridging loan
This is a short term loan provided by a bank or building society which covers you if you need to pay for your next home, while still waiting for the money to come through from the sale of your current home. If you do require one of these, you must ensure that the funds to repay the loan will be in place when the loan period expires.

Broker
Brokers and other intermediaries attempt to arrange suitable financial products or policies for you. They can be fully independent, part of a network that uses a panel of providers, or tied to certain institutions in which case they can only sell their products.

Building society
Building societies are mutually owned organisations, which exist not for profit but for the benefit of the members. The idea of this is that the society is able to offer cheaper products to its members, though this is not always the case.

Building survey
Also known as a full survey, this is the fullest and most comprehensive of the options open to the property buyer. It involves an extensive investigation of the property and a thorough examination of all the major aspects and minor details that are visible. There is some flexibility as you can request the surveyor to concentrate on specific features of the property. It is most suitable for larger, older homes with more potential for problems and those more than 75 years old, property over three stories in height, buildings of unusual construction (such as thatched, timber etc.), or if you plan to extend, convert or renovate the property. A full structural survey can cost you anything from £400 to £1000.

Buildings and contents insurance
Buildings and contents insurance can often be purchased together protecting both the building structure and your belongings and possessions inside.

Buildings insurance
Buildings insurance is designed to give you financial protection for the basic structure of your home, such as the walls, roof and foundations. This usually includes any external parts of the property such as your shed, garage, conservatory or greenhouse.

Buy down mortgage
A home loan in which the lender receives a premium as an inducement to reduce the interest rate during the early years of the mortgage.

Call option
A clause in a loan agreement that allows a lender to ask for the balance at any time.

Cap
A limit on the amount the interest rate or monthly payment can increase in an adjustable rate mortgage.

Cap & collar mortgage
This is a mortgage that has both a top and bottom limit set for the interest rate. It is a very safe and risk free type of mortgage, as you are protected against intetrest rate rises above a certain point, but you are losing some of the potential gains if interest rates drop.

Capital
In the context of mortgages, capital describes the original sum borrowed as distinct from interest required on that loan. A repayment mortgage involves repayment of a little of the capital interest each month.

Capital expenditure
The cost of making improvements on a property.

Capital gains
Profits an investor makes from the sale of real estate or investments.

Capital gains tax
A tax placed on the profits from the sale of real estate or investments.

Capital growth
Where the original amount you invest increases over a period of time. Generally this is achieved by interest or dividends being added back to an account for reinvestment.

Capped rate mortgage
As with all variable rate mortgages, the rate follows the lender's SVR up and down. The difference with this type of mortgage is that the rate is guaranteed not to go above the level at which it is 'capped'. This type of mortgage is popular in times of steadily rising interest rates.

Cash buyer
A person or persons who do not require a mortgage in order to buy a home and who do not have a property to sell. Other cash buyers are those with a mortgage arranged and no property to sell or those who have already sold their property.

Cash deficit
In relation to a loan, this is money still owed at the end of the repayment period of an interest only mortgage.

Cashback mortgages
Cashback mortgages provide you with a single lump sum of cash immediately on completion of the mortgage transaction. The amount of the lump sum is usually calculated as a percentage of the overall loan amount, though it can be a set figure. The percentage of the loan that is given as cashback can be as high as 5%, though amounts in the region of 1 to 3% are more common. Various different types of rate can come with cashback - capped, discounted, fixed and variable. There are also a lot of mortgages that award you three or four hundred pounds to go towards your solicitor's fees. Although this is a form of cashback, it would generally be classed as an incentive and not specifically as a cashback mortgage.

CAT standard
These are a set of standards proposed by the government aimed at ensuring a certain level of standard amongst financial products such as mortgages and ISAs. Whilst they are a sign that a lender or provider is a reputable business and offers products that are of a certain quality, a CAT mark does nott ensure that a product is the most suitable one for you.

Caveat
A formal notice, that asks a court to suspend action until the party which filed the challenge can be heard.

Caveat emptor
A legal principle derived from Latin than means 'let the buyer beware.'

Certificate of deposit (CD)
A document which shows that the bearer has a specified amount of money on deposit with a bank, stock-brokerage firm or other financial institution.

Certificate of title
A written opinion on the status of a piece of property based on an examination of the public record.

CHAPS
Clearing House Automated Payment System. An electronic way of transferring money between accounts.

Charge certificate
A certificate from the Land Registry that shows the boundaries of a property and gives details of covenants affecting it.

Chattel mortgage
A lien on personal property used as collateral for a loan.

Chief rent
A payment made on freehold land to the original freeholder for an infinite period. Distinct from ground rent which has a finite period.

Clear title
Ownership of the property is clear, with no legal complexities.

Closing
The final procedure in which documents are signed and recorded, and the property is transferred.

Closure fees
A fee charged by the lender when you pay off the homeloan at the end of the mortgage term.

Co signer
A person who assumes joint liability for a loan. The co-signer of a loan agreement is not necessarily, however, a co-owner.

Code of practice
An agreement that certain professions can sign up to in which they agree to act or serve in a certain way and which therefore protects the consumer in areas (such as estate agency) which are not regulated by an institution.

Collateral
The property or other asset which the lender can sell to repay the loan if the borrower does not keep up the mortgage payments. In most cases, the home is collateral on a mortgage. If the borrower fails to repay the loan, the property will be repossessed.

Collateral security
Additional security a borrower supplies to obtain a loan.

Collection
The series of steps a lender takes to bring a delinquent mortgage up to date.