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


Collusion
The action of two or more people to break the law.

Commission
A percentage of the sale price which the selling party receives. This can be an estate agent in relation to a property, a broker selling you a mortgage or other products and even a dorr to door salesman selling you a nice new set of double glazing.

Commitment
A promise by a lender to make a loan with specific terms for a specified period.

Commitment fee
The fee a lender charges for promising to make a loan.

Common area
An area inside a housing development that is owned by all residents.

Common law
A body of laws based on custom, usage and rulings by courts in various jurisdictions.

Comparables
Properties used as comparisons to determine the value of a certain property.

Comparative market analysis
An estimate of the value of a property based on an analysis of sales of properties with similar characteristics.

Competent
A term for a buyer who is 'legally fit to enter into a sales contract'.

Completion
This is the date when the buyer's solicitor forwards the funds for the purchase of the house to the seller's solicitor. Once the seller's solicitor has received the funds, the buyer legally becomes the owner of the property and can move in. The mortgage must be effective before this date in order for the funds to be transferred. The buyer must also pay stamp duty, if applicable, and register their name with the Land Registry.

Completion date
The point at which contracts have been exchanged and legal transfer of the property from the seller to the buyer is finalised. The buyer can take possession of the property from this day.

Completion statement
A statement, prepared by the seller, stating exactly how much the buyer should be paying on completion.

Compound interest
The interest paid on the principal balance in a mortgage and on the accrued and unpaid interest of the loan.

Compulsories
This is shorthand for compulsory insurance. Some lenders, at least for certain mortgages, insist that you take out their buildings insurance – which is not usually the most cost effective on the market.

Conclusion of missives
Scottish term for exchanging contracts.

Condition of the sale
This is a legally binding clause in the contract of the property sale. A buyer may insist upon the removal of the ridiculous garish carpets in a house, as a condition of the sale, or insist that some minor repair work is completex before the transaction is finalised.

Conditional insurance
The borrower must sign up to one or more insurance policy with the lender in order to take out a specific mortgage. Check that the insurance premiums are competitive.

Contents insurance
This protects your belongings and possessions that are not part of the fabric of your house. Contiguous lots Pieces of property that are adjoined.

Contingency
Provision within a contract that renders an agreement incomplete until a designated event such as a survey or inspection occurs.

Contract
A legal document between two parties confirming any sort of agreement such as terms of sale, employment or service.

Contract for deed
A contract in which the seller agrees to defer all or part of the purchase price for a specified period of time.

Contractual liability
The terms of a contract to which you must abide. There may be financial or even criminal penalties which you incur if if you do not meet your contractual liabilities.

Contractual lien
A voluntary obligation such as a mortgage or trust deed.

Contribution
An amount of money paid into an account. This can be a 'one off' payment or on a regular basis.

Conventional loan
A long-term loan a lender makes for the purchase of a home.

Conveyance
The transfer of title of property.

Conveyance tax
A tax imposed on the transfer of real property.

Conveyancer
A specialist in the legal aspects of buying a house. This may be a solicitor but not all solicitors are skilled conveyancers, so be sure they undertake this type of work regularly as it is complicated and very important.

Conveyancing
This is the legal work required for buying and selling a property. The conveyancing process essentially involves the transfer of 'good title' or ownership from one party to another. It is a fairly complicated and longwinded process that involves untangling the legal jargon found in the title deeds, and checking the background of your property with the local authority and title searches.

Conveyancing fees
A solicitor will charge you a basic fee for undertaking the conveyancing work associated with the purchase of your property. This covers their time spent on taking your instruction, advising you, working on the contract refinements, liasing with the other party's solicitor, explaining the contract to you, obtaining your signature, exchanging contracts, investigating the title deeds, and basically dealing with all other related matters.

Cooperative mortgages
Any loans related to a cooperative residential project.

Cooperative project
A project in which a corporation holds title and sells shares representing individual units to buyers who then receive a proprietary lease as their title.

Copy statement
This is an additional statement of your mortgage account. You are usually charged by your lender when you request a copy of an annual statement previously issued or when you request a statement outside of the normal annual statement period. Costs £10 - £20

Council of Mortgage Lenders
An institution that sets out code a code of good practice which mortgage lenders volunteer to stick to - they are not regulated by the government.

Counter cheque
A cheque withdrawal made over the counter, issued by the cashier.

County Court Judgement
Whenever someone fails to pay for something and is subsequently taken to court, the magistrate may issue a County Court Judgement against that individual to pay the outstanding debt. This may well affect your ability to raise finances in the future.

County Court re issue fee
This fee will apply when county court papers are re-issued by your mortgage lender to solicitors within three or six months of the issuing of the original information. Costs £25 - £20.

Credit
A measurement of a person's ability to pay bills on time. Several companies track individuals' credit histories by detailing late or missed payments on loans, credit cards and other debts.

Credit agencies
Companies such as Equifax or Experian that are often used by lenders to assess your financial background and determine the level of risk involved with lending you money.

Credit averse
When a borrower has a poor credit history, has previously been declared bankrupt or has outstanding County Court Judgements, they are often described as credit averse. People with averse credit ratings often have to pay higher interest rates on a mortgage.

Credit checks
These are checks made when you try to borrow money or purchase goods on hire purchase, and are used to determine the risk of lending you money. They will examine your credit history and check for payment defaults and what you owe to other financial organisation. A credit agency is often used.

Credit history
If you have a history of bad debts, county court judgements or bankruptcy to your name, you may not be eligible for a mainstream mortgage. To help ensure you are a good credit risk, a lender may require references from your existing lender, bank or landlord. In addition to this, many lenders will make use of the services of one of the two large credit agencies, Experian and Equifax. These offer a credit inquiry or a full credit application, which show details of any existing credit arrangements or county court judgements against you.

Credit period
The time frame for which the lender agrees to provide you with credit.

Credit rating
The degree of credit worthiness assigned to a person based on credit history and financial status.

Credit reference agency
When assessing your application, a mortgage lender will study your records. These records are held centrally by credit reference agencies, and contain information for many different aspects of your life.

Credit union
Nonprofit cooperative organizations that provide banking and financial services, including mortgages, home improvement loans and home equity loans, to their members.

Creditor
An individual or institution to whom a debt is owed.

Curable defect
A deficiency in a property that is easy or inexpensive to fix, such as chipping paint.

Currency swings
These affect foreign currency mortgages. In pound sterling terms, the value of the capital outstanding on your mortgage can rise or fall dramatically if there is movement in the value of either the currency of the loan or UK pounds sterling. If the value of the pound increases, you should benefit from lower repayments, as the value of the foreign currency you have borrowed decreases. Less sterling is required to buy the same amount of foreign currency necessary to meet the repayments and vice versa.

Daily interest
Interest on the homeloan is calculated and applied on a daily rather than a monthly or yearly basis. Can lead to big savings.

Deadbolt lock
Locks that require a key to open from the outside and a turn button from the inside.

Debt
Money owed to a lender.

Debt to income ratio
A ratio used by lending institutions to determine whether a person is qualified for a mortgage. Debt-to-income is the total amount of debt, including credit cards and other loans, divided by total gross monthly income.

Decreasing term assurance
A life insurance policy that pays out a lump sum in the event of death. The amount paid out can be calculated so that it fall in line with your outstanding mortgage debt – meaning that over time the borrowers premiums also fall. This type of policy is well suited to providing cover on a repayment mortgage.

Deed of covenant
This is a document which confirms that the buyer of a property will comply with the rules and conditions affecting the property which can be found in the Title Deed or Lease.

Deeds
These are the documents which contain all the information about a property such as the owner and the rules affecting the property. These are often held by the mortgage lender to ensure they can take possession of the property should you default on the repayments. Take note of the deed number to speed up your solicitor or conveyancer when buying or selling the property as it can take a lender several weeks to find the correct one.

Deeds release fee
When you are selling the house, your solicitor will need to inspect the deeds. You will be charged a fee of between £25 - £45 for this.

Deferred interest mortgage
Interest is not paid during the deferral period. When the period is over, the accumulated interest is added to the original loan. Some lenders add this interest to the total of your loan to give a new loan figure and new interest payments. Others calculate your interest payments on the original loan as normal and then spread the repayment of the deferred interest over a set period of time. The latter method is better for you, as adding the deferred interest to the loan means you end up paying interest on the deferred interest!

Delinquency
Being late with loan payments.

Delinquent mortgage
A mortgage that involves a borrower who is behind onpayments. If the borrower cannot bring the payments up to date within a specified number of days, the lender may begin foreclosure proceedings.

Dependants
Person(s) who depends on another for financial support.

Detached
Refers to a property which is not attached to another on either side and is therefore free standing.

Direct debits
A payment made from your account automatically to pay bills etc, usually amounts that vary, e.g. A gas bill.

Direct lenders
Provide financial services over the telephone and through the internet. Lower overheads resulting from a lack of high street premises and centrally streamlined processes mean that the overall costs are much lower and part of this saving is used to deliver cheaper products. Add to this the convenience of arranging a mortgage outside working hours from your own home, and it is easy to see why these new operations are finding favour.

Disability insurance
An insurance policy which covers an individual's ability to produce income.

Discharge
Paying of the remainder of a mortgage.

Discharge fee
Covers the administration costs of transferring the property ownership documents from the mortgage lender to the borrower.

Discount period
The time at the beginning of a mortgage life span when you are offered reduced repayments. Can be useful to help you overcome the often significant outlay involved with buying a property.

Distressed property
Property that is in poor physical or financial condition.

Document needs list
A list of documents a lender requires when a potential submits a loan application. The required documents range from paycheck stubs to credit card statements.

Drawdown date
The date when the loan should be made.

Due dilligence
This is a process that will be undertaken by a mortgage lender to assure themselves that the risk of lending you the substantial amount of money required to purchase a house is minimised. Involves checking your personal details/ status and that of the property you wish to buy. The term is used in other industries to, to indicate a period of research, or checks to ensure the suitability of an undertaking of some sort.

Due on sale clause
Standard language in a mortgage which states that the loan must be paid when a house is sold.

Early repayment period
A period of time that applies to certain types of loan during which a charge will be made if the loan is repaid in full or in part or its terms are varied at the borrower's request.

Effective age
The age of a structure estimated by its condition rather than its actual age.

Eligibility criteria
These are criteria which you must satisfy before an account or service application can be progressed.

Employment status
A term used by lenders to describe potential borrowers' working arrangements. Self-employed applicants are sometimes seen as a greater risk than employees. Many specialist lenders and mortgages have emerged in recent years designed specially for different types of employment status.

Encumbrance
A problem with the title to a property that does not affect the transfer of ownership.

Equity linked mortgage
The lender takes ownership of a stake in the equity of the property. This means that they lend you less than the full amount that is required to buy the home. Interest is only charged on the amount that they lend you and not on the full value of the property. When you sell the property, the lender receives payment in proportion to the amount of equity that they own, and therefore benefits from any increase in the price of the property.

Equity release
Equity release or home income schemes allow you to generate either a lump some or a regular income in return for allowing the lender to take ownership of a portion of your home. These are often used by people in later stages of life who have paid of all or most of their mortgage and who are looking to raise funds without borrowing money.

Escrow account
An account a lender or mortgage servicer establishes to hold funds for the payment of expenses such as homeowners insurance and property taxes. Also known as an impound account.

Essential repairs
Work that needs to be carried out on the property before the mortgage completes.

Euro mortgage
A mortgage taken out by those paid in Euros to avoid the need to exchange currency.

Examination of title
An inspection by a title company of public records and other documents to determine the chain of ownership of a property.

Excess
Applies to an insurance claim and is simply the first part of any claim that must be covered by yourself. This can range from £50 to £1000 or higher. Increasing your excess can significantly reduce your premium. On the other hand, a waiver can sometimes be paid to eliminate any excess at all. Always check the excess in your policy.

Exclusions
These are events, instances or possessions which are not covered by your household or other insurance policy. This can be confusing as the main policy may seem to imply that such events, instances or possessions are covered only to excluded in the small print of the policy. Moral: Read the small print.

Executor
A person appointed to carry out the instructions in a will. If there is no will, a probate court will appoint anexecutor.

Existing liabilities
Expenses taken into account by a mortgage lender when assessing an applicant`s ability to repay the loan. These include loan repayments, maintenance payments etc.

Extended redemption penalty
This is where the redemption penalty continues beyond a fixed or capped rate period, effectively tying you in to the much higher variable rate for a period of time after the fixed or capped period. As a result you get stuck paying an uncompetitive rate that eats into the gains you may have made from having the fixed rate or capped ratein the first place.

First charge
If your property is collateral for more than one property and the borrower defaults on payments, the lender with a first charge has the option to repossess the home.

First mortgage
The original loan taken out to purchase a home.

First time buyer
A person who does not already own a property and is therefore not part of a chain.

Flexible mortgage
A mortgage that allows borrowers to make overpayments when they have spare cash, and reduce or miss payments altogether when times are tight. Often useful for self-employed people whose income varies from one month to the next. The most flexible form of mortgage is a Current Account Mortgage (CAM), which can potentially save you money by linking your current account and mortgage together.

Flood plain
Flat, flood-prone areas located along waterways.

Flying freehold
A flying freehold occurs when part of a freehold property overhangs part of a different freehold property or land and is usually formed when a property is split into two or more freeholds.

For sale by private treaty
The sale of property by private treaty is the most common method employed by estate agents and involves preparing descriptive details of the property and quoting a definitive asking price. Details can then be viewed by potential buyers and viewings arranged.

Forbearance
A course of action a lender may pursue to delay foreclosure or legal action against a delinquent borrower.

Foreign currency mortgage
It is possible to get a mortgage for your home in the UK in a mortgage denominated in a foreign currency. It sometimes gives you the opportunity to borrow money at a lower rate of interest than is possible in the UK. You do this by choosing a currency whose country has lower interest rates than we have here. Lower interest rates should mean lower repayments of both capital and interest or a shorter mortgage term. The mortgage does not have to be in any single currency. There are lenders who will allow you to spread your mortgage across a range of different currencies. This could be seen as spreading the risk

Fraudulent
Involving criminal deception or dishonesty.

Freeholder
Owner of the freehold on the property.