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


Full status mortgage
A full status mortgage is for people who wish to make a lender aware of any previous arrears or debt problems they may have had. If they do not make the lender aware of these facts and they are latetr discovered, his could lead to all sorts of problems and the borrower could even be forced to sell the home. If you have a bad credit record some lenders will regard lending you money a high-risk activity. Many will not lend you money at all and when you can get a loan, you will undoubtedly have to pay a higher rate of interest than you would otherwise.

Full with profit endowment
The most expensive endowment plan with the highest guaranteed returns. This type of endowment guarantees an annual growth and also to pay off the full loan at maturity which is the cause of the added expense. It also has built in life cover. The future growth of your investment is assumed to be at a certain rate, which determines the level of your premiums. The portion of your premium that is being invested is pooled with the premiums of other investors. Annual bonuses are added to the maturity value each year and are dependent on the performance of the investment fund. There is a possibility that the bonuses will take the maturity value above the level required to pay back the loan. This would result in a tax-free cash surplus, which you can spend on whatever tickles your fancy.

Further advance
You can sometimes have the facility to borrow further funds once you have been paying your mortgage for a set period of time, especially with a flexible mortgage. A fee is charged by your lender to cover the cost of assessing the merits of your application. Costs £50 - £100

Further advance legal fee
A fee that is normally charged when you apply for a further advance of money on your mortgage. This covers the necessary administration to ensure that the lender's legal charge over the property is maintained when further money is lent.

Government insured mortgage
Loans in which the government promises to make good on the insured portion, should the borrow default on the loan. Generally, government loans do not require large down payments. They do, however, have strict eligibility requirements.

Grace period
A specified amount of time to make a loan payment after its due date without penalty.

Gross income
Your total income before tax and expenditures.

Ground rent
This applies only to leasehold properties and is a sum paid annually to the freeholder by the leaseholder.

Guarantee mortgage
A loan guaranteed by a third party, such as a government institution.

Guaranteed death benefit
Policies where the company will pay out a certain amount when you die.

Guarantor
The guarantor is responsible for payments if you default. If a lender is concerned about your ability to repay your loan, they may require you to find a guarantor for the loan.

High street lenders
Providers of mortgage products who can be broadly split into two groups - the building societies and the banks. Banks are profit-making businesses that return a portion of their profits to shareholders in the way of dividends. Building societies on the other hand, are mutually owned organisations, which exist not for profit but for the benefit of the members. They claim that this allows them to return profits to their customers in the form of cheaper products.

HM Land Registry
Government organisation that keeps records of properties in England and Wales. Transfer of ownership must be registered with the HM Land Registry.

Homebuy loan
A homebuy loan is one which is used to buy a property under a homebuy scheme. Homebuy scheme Homebuy schemes are often run by housing associations looking to sell of their property and are a type of initiative aimed at encouraging home ownership amongst those people who may not ordinarily have the means to purchase their own home. Generally, you will have to obtain a mortgage for 75% of the property value, while the RSL (Registered Social Landlord) will front the rest of the money. The RSL will retain there share and if you sell the property they will keep the same proportion of the sale proceeds, including any gains that are made.

Homebuyers report
This type of survey is prepared for you and gives details of the basic state of repair of the property. It almost always provides a basic valuation as well. A surveyor will only inspect those areas of the property that are reasonably accessible or visible. They will then write a report on the property.

IFA
- Independent Financial Advisor In theory, these intermediaries should look at the entire financial market before making a selection and offer unbiased advice and access to all suitable financial products. they sometimes still have access to special deals

Impact fees
Fees collected from developers of new homes to pay for schools, parks and other facilities.

Incidence of interest calculation
The frequency that the outstanding interest and ongoing mortgage repayments are calculated. Charging interest on the outstanding balance of your loan at the end of each day, means you reap immediate benefits of any repayments you make, since you will be charged interest on a smaller debt each day. As long as you are making payments on time, the more often interest is calculated the better for you. This is a common feature of flexible mortgages, but is not restricted solely to them. When interest is calculated annually, repayments are not updated to include the reduction in capital that arises from the payments you make throughout the year.

Income multipliers or multiples
The size of the mortgage that lenders offer, will often be worked out by multiplying your income each year by a set percentage.

Indemnity
Applies to insurance policies and means the insurer will basically make sure you are no better or worse off in the event of a claim, taking into account wear and tear.

Indemnity Guarantee Premium
Additional one-off fee paid to the lender to protect them against the borrower defaulting. Independent Financial Advisor In theory, these intermediaries should look at the entire financial market before making a selection and offer unbiased advice and access to all suitable financial products. they sometimes still have access to special deals not on offer elsewhere because they may subscribe to a mortgage panel along with other advisers and brokers. Together they convince lenders to provide special packages in return for their continued custom. The only trouble is that they have to deliver a certain level of business over a year to remain on the panel, so they may favour some products over others.

Independent surveyors report
A survey will tell you exactly what work needs to be done to the building and whether there are any problems with the property you didn't know about. This can help avoid unpleasant and costly surprises after you have moved in. As the buyer, it is your responsibility to find out what you are committing yourself to. The seller has no liability whatsoever once the purchase is complete.

Index tracker mortgage
The interest rate tracks an index such as the base rate or LIBOR and often has a set percentage added to it.

Individual Savings Account
Tax-free savings plans that allow the individual to invest in cash, stocks or shares or insurance.

Inflation
Sustained increase in price or earnings levels, commonly measured by changes in the Retail Prices Index (price inflation) or changes in the index of National Average Earnings (earnings inflation).

Insurable title
Title to property that a company agrees to insure against defects and disputes.

Insurance 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.

Interest accrual rate
The rate at which interest accrues on a mortgage.

Interest only mortgages
With an interest-only mortgage, your monthly repayments to the lender consist only of interest on the total loan amount. The interest payments will vary depending on the interest rate being charged by the lender at the time. This type of mortgage involves paying the lowest possible monthly outlay to the lender, as no capital is included in the repayment. Instead of repaying the capital, regular payments are put aside in a suitable investment or savings plan. This grows cumulatively and assumptions are made regarding its growth in order to calculate a monthly repayment figure. If you are fortunate, the investment will accumulate at a higher rate than is required to pay back your loan on time, resulting in a cash surplus at the end of the term. This is not always the case however, and sometimes there can be a cash deficit at the end of the term.

Interim interest
Any payment due for the period from the day the mortgage began up to the first payment date.

Intermediaries
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.

Intermediary
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.

Introducer
Inform borrowers about certain mortgages and ‘introduce` them to the lender. Introducers receive a fee for passing on new business.

IPT
Insurance premium tax. Tax on all UK general insurance under Government control, currently charged at 4% (1/1/2000) of the premium.

Joint income
The total gross income of the mortgage applicants.

Joint liability
The responsibility of two or more people to fulfill the terms of a home loan or debt.

Joint mortgage
A mortgage shared jointly between two people with the agreement that if one dies, the other automatically inherits their share.

Judgement lien
An court-ordered monetary judgment against a current or previous property owner which has not been paid.

Land certificate
Proof of ownership of a property with no mortgage on it. It details the boundaries of the property and the covenants affecting it.

Land registry
This is a government department which registers and all the details of any land transactions and issues to do with ownership of property in England and Wales.

Land registry certificate
This is a copy of the property entry in the land registry database concerning a property transaction or ownership.

Land registry fees
A charge incurred when buying a home for registering the title of a property under your name. This is usually dealt with by your solicitor / conveyancer.

Late charge
A fee a lender imposes on a borrower when the borrower does not make a payment on time.

Late payment
A payment a lender receives after the due date has passed.

Lease
The lease is a document which contains the rights and the covenants (rules) on behalf of both the landlord and the tenant which regulate the use of the property.

Leasehold
When you buy a leasehold property, essentially you are buying nothing more than the right to occupy a building for a given length of time. You will have to pay ground rent and maintenance in addition to a one-off payment that buys ownership of the lease until sold or it runs out. The amount of alterations you can make to the property varies accordance with the lease and you may well have other conditions imposed upon you by the landlord. As a rule, look to buy a lease with over 50 years remaining.

Legal fees
The charges paid to a solicitor. Lender The building society, bank, mortgage company or mortgage broker with whom you take out your mortgage or other loan.

Lenders arrangement fees
Fee for arranging a loan passed on to the buyer by lender. Lenders basic valuation The lenders assessment of the value of a property before authorising any loan against it.

Lenders fees
Administration costs incurred by a lender to secure a loan, paid by the applicant.

Lenders legal fees
Fees incurred by the lender when arranging a mortgage passed on to the buyer.

Lessee
The individual or company to whom a lease is granted.

Lessor
The individual or company who grants a lease.

Letting insurance
An insurance the landlord might take out to protect his or her possessions in the rented home.

Level term assurance
Life assurance that pays out a set amount throughout the entire agreement if you die during the term.

Liabilities
Basically, liabilities are debts that you have and the regular outgoing payments that you make.The reason you must show your bank statements is usually to help the underwriters identify anything in your current expenditure that may impinge upon your ability to repay the loan. They want to know about any other mortgages, debts, credit cards, HP agreements, loans, overdraft facilities, maintenance and court orders. You will normally have to show three to six months worth of bank statements to help demonstrate that the figures you provide them with are accurate.

Licensed conveyancer
Alternative to solicitors. Specialising in the legal side of buying and selling property.

Life assurance
An insurance policy that pays a lump sum on death. Often taken out with a mortgage to provide money for the loan to be repaid if the borrower dies during the term.

Lifetime cap
A limit on how high the interest rate on a variable rate mortgage can rise over the lifetime of the loan.

Loan commitment
A promise by a lender or other financial institution to make or insure a loan for a specified amount and on specific terms.

Local authority searches
A local authority search is a check with the local authorities to establish if any new developments are planned in the vicinity of the property you are buying and to check the water drainage systems and other social infrastructure. This can highlight any public works such as a new motorway, waterworks or alterations to road systems, as well as anything else that is has had permission to take place immediately adjacent to the property. The local search will also tell you whether there are any planning restrictions that may affect your intentions to renovate or extend the property.

Lock in
Allows the borrower to be assured a given rate of interest for a mortgage. This usually involves paying a fee to the lender. Mortgage rates not 'locked in' are subject to changing market conditions.

Low cost endowment
Designed to accumulate the sum needed to pay after a given period, usually for the purpose of paying off a mortgage. However there are no guarantees and investors may have to increase their premiums to build up enough to pay off their mortgage.

Low documentation loan
Mortgages that require only minimal verification of income and assets. Low-start low-cost endowment Similar to a low cost endowment, the difference being that premiums are lower at the beginning of the loan and then rise in the future. Once again, there are no guarantees.

Low start endowment
This is essentially the same as a low-cost endowment, but premiums begin at a lower level and gradually increase over a number of years - usually between five and ten. The initial premium can be significantly lower than the full premium, but never lower than half (which is a common starting point). Premiums may, for example, increase from 50% to 100% of the final value by 20% per year for 5 years or by 10% per year for ten years. This is another product designed to make it easier to budget over the first few years of home owning, when money is likely to be tighter for many people. As with most products that work this way, you generally have to pay for it in the long run.

Low start mortgage
This is like a repayment mortgage, but with a difference. In the introductory period, only interest is paid back to the lender and not any of the capital outstanding. After this period, the repayments start in earnest. The total amount of interest and repayments over the life of the year are higher than with a normal repayment mortgage, but this sacrifice can be worth it if you need to severely restrict your outgoings during the low start period.

Loyalty bonus
Incentive based schemes for existing mortgage holders. Such as lower interest rates and discounted services. LTV The ratio of your mortgage to the market value of your property. Expressed as a percentage. For example, if you have a mortgage of £95,000 on a property worth £100,000, the loan to value is 95%.

Margin
The lender's 'retail markup' on the mortgage. For example, if the index rate for an adjustable rate mortgage is 5 percent but the lender has a 2.5 percentage-point margin, the rate the borrower will pay is 7.5 percent.

Market value
The price that a piece of property sells for at a particular point in time.

MIG Mortgage Indemnity Guarantee
This is insurance for the lender paid by the consumer in a one-off payment, on 'high' LTV mortgages. This protects the lender in the event that you default on the loan and the sale of the property is not enough to repay the amount that they are owed. Some lenders will insist you pay this if your mortgage is for as low as 75% of the value of the property, but 90% is a more common level. Some lenders will not insist on it regardless of the loan value. You can often add this fee to the loan, but be aware that you will then be paying interest on it until the loan is repaid in full.

Monthly repayment
This is the amount you pay to your lender each month towards the cost of your loan.

Mortgage
The name given to a loan used to buy a property.

Mortgage advance
The money loaned to the buyer, by the lender.

Mortgage application
Forms used to assess whether you meet the lender's underwriting criteria. These criteria are set to ensure that barring any unforeseeable change in circumstances, you will be able to support the mortgage and meet the repayments. Questions relate to such things as income & status, equity, personal details, credit history etc.

Mortgage application fee
A charge purely for applying for a mortgage. Paid to the lender upfront at the time of application it is usually between £100 and £300.This type of fee is becoming less common than an arrangement fee. As with arrangement fees, this type of mortgage fee is usually found with the special deals from lenders possibly to restrict the number of applicants by only attracting serious buyers. Some of the time this fee is refunded on completion of the mortgage.

Mortgage arrears
The amount of back pay you owe your mortgage lender for failing to meet your mortgage requirements.

Mortgage broker
An independent agent who shops around for the best mortgage deal on behalf of his clients.

Mortgage cash surplus
Money left over at the end of a mortgage term, over and above the amount required to pay back the debt.

Mortgage code arbitration scheme
An arbitration service between members of the public and lenders.

Mortgage confirmation
When you get a written confirmation of your offer, you usually receive two things. Firstly, there will usually be some form of standard covering letter, thanking you for your hugely valued business and welcoming you into a family of customers that have their mortgage lender in common. In addition to the letter, you will receive a written mortgage confirmation. This will normally set out some of your personal details, some facts about the property, your salary details, your solicitors (if you have appointed them by this stage), and will require a signature.

Mortgage debt
The amount outstanding on your mortgage.

Mortgage deed
This is the agreement which explains the conditions of the mortgage (loan). It is a document to be signed by all parties to the remortgage on your property, and will be sent to HM Land Registry to register the remortgage.

Mortgage incentives
The lender may offer a discount or fee-free period on buildings insurance, accident and sickness insurance, redundancy insurance, or payment protection insurance. This is often done to encourage you to take up the policy, which you are then fairly likely to keep in the longer term. Other common incentives include a free valuation and money towards solicitor's fees.

Mortgage lien
The unpaid balance on the mortgage loan.

Mortgage reference fee
If you apply for a remortgage or a new mortgage, the new lender will want a mortgage reference from your existing lender. You will probably have to pay for this. Costs £20 - £50

Mortgage term
The period over which the mortgage loan is to be repaid.

Mortgage types
For example, repayment or interest. Or fixed, capped, tracker, discount or stepped rate etc.

Mortgagee
A bank or other financial institution that lends money to the borrower. The borrower is considered the mortgagor.

Mortgagor
The mortgagor is another term for the borrower.

MPC
Monetary Policy Committee of the Bank of England. Meets monthly to discuss and alter interest rates etc.

Multifamily mortgage
A mortgage on a multifamily dwelling with more than four families, typically an apartment building.

Net
After the deduction of tax. Net monthly repayment Monthly repayment made to the lender.

New for old
Insurance cover which pays the full cost of replacing damaged or lost property with a similar, new item.

Non profit endowment
This type of endowment guarantees repayment of the loan. There are no annual or final bonuses and you generally have no chance of a cash surplus on maturity. Essentially, there is no benefit other than life cover which is eaqual to the value of the mortgage you have ttaken out. This is seen as an inefficient method of saving the money to pay back and is therefore rarely recommended as a method of repaying a mortgage.

Non status mortgage
Mainly for people whose income is difficult to assess using the standard method adopted by most conventional mortgage lenders. Bonuses, commission and seasonal work can cause income to vary over time or be difficult to guarantee and this may not be considered acceptable in order to get a loan. The main groups of people that opt for self-certification mortgages are: self-employed and unsalaried company directors, contract workers (increasingly common in technology-based industries), commission-based workers (often in sales, recruitment etc.), people with seasonal earnings. The interest rate you are charged will be higher to compensate the lender for the increased risk.

Notice
An official request to vacate a property. A freeholder or landlord may serve you notice on your home for a variety of reasons, including failure to pay rent, breach of lease and in the case of rented property, simply because they want to sell the property.

Notice of default
A lender's initial action when a mortgage payment is late and attempts to reconcile the issue out of court have failed.

One hundred percent mortgage
A loan for the full cost of the home you are buying if are unable to raise a deposit to buy a property. You may have no existing equity, no savings, be using up all you do have on the other costs of the move, or perhaps be saving what you do have so that you can fix up your new home when you do buy it.

Outstanding balance
The amount to be repaid at any point in time.

Overdraft facility
This is a facility on the Bank Account which allows customers to borrow up to a pre determined limit. This limit must be agreed in advance and is subject to status.

Overhanging redemption penalty
An early redemption charge that lasts beyond the benefit period is referred to as an extended or overhanging redemption penalty. These should be avoided where possible.