Copy of `Charles Conran Financial Services - financial terminology`
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Charles Conran Financial Services - financial terminology
Category: Economy and Finance > Finance
Date & country: 11/11/2007, UK
As part of your mortgage there are many fees involved for example, arrangement fees, higher lending charges, booking fees, etc. At times these fees can be added to the loan and form part of the loan.
Income that is in addition to [basic income].
The fee charged by Charles Conran Financial Services to pay for administration of a mortgage application and is normally only payable once the mortgage has completed.
The amount of money that is forwarded from the mortgage lender to the solicitor.
The term often given to reflect an applicant or application that has had previous problems with credit for example late payments, defaults, bankruptcy, county court judgements, mortgage arrears, etc.
Some [lenders] are no longer basing the decision on how much to lend an [applicant] purely on a set [income multiple] but they are looking at all aspects of the clients financial situation to determine how much they are willing to lend somebody, for example they will looking at salary, bonuses, [income], [outgoings], credit score etc.
Annual Percentage Rate (APR)
APR is a figure that is used to compare different rates not only does it take into account the interest rate paid over the term of the mortgage but also other fees such as booking fees, arrangement fees, redemption costs, solicitors fees, etc. Legally it must appear on all illustrations and quotes.
Person applying for a mortgage or other product.
The process of applying for a mortgage or other product.
A form used to record relevant details about an applicant including personal and financial details.
The estimated value given to a property by a surveyor
The increase in value of a property (or other object) due to changes in market conditions
The amount that a repayment has fallen behind schedule, this is often measured in months or monetary value.
The transfer of an asset, or mortgage from one owner to another.
The amount left to pay on a debt.
When a person or company has its assets assigned to a court-appointed trustee who in turn redistributes the assets to the persons or companies [creditors].
The rate of interest that is set by the Bank of England. (This is reviewed on a monthly basis and can go up, down, or remain the same)
Basic Salary paid by a company before any tax deductions and not including any bonuses, overtime, commission or other benefits.
The person named to receive proceeds or benefits
A fee charged by a mortgage lender often to guarantee a rate or to guarantee funds for a particular product.
An infraction or violation of a legal obligation
A short-term secured loan which is often used to cover or bridge the gap between the purchase of one property and the sale of another. The rates of interest charged are often high, hence why this is a short term and not a long term solution to any gaps.
A person that acts as middleman between two parties.
A mutual society whose principal purpose is to supply mortgages and savings accounts.
An insurance policy to protect a building and is designed to pay for any costs that occur through damage or destruction to a building. Most mortgage lenders will insist that buildings insurance is in place by exchange of contracts it will be a condition of the mortgage that it is in place.
Buy to Let
A mortgage that is taken out by an applicant(s) when the property to be purchased will be rented out to a third party.
The maximum rate of interest that can be charged in a certain period
The amount of money available to an individual, often used in the context of how much money available as a deposit.
Capital & Interest Mortgage
A mortgage whereby the borrower repays both the capital and the interest of the mortgage through their monthly payments. This is often called a repayment mortgage.
A mortgage that sets a maximum rate of interest that a lender can charge for a certain period of time.
An amount of money paid to a borrower by the lender it is often an incentive used by the lender and is usually paid on commencement of the mortgage to help towards fees and other costs.
The minimum rate of interest that can be charged in a certain period
An asset that is used to guarantee the repayment of a loan. In the case of a mortgage this is the property on which the mortgage is secured. If the borrower fails to repay the loan according to the terms of the loan then the asset may be seized by the lender.
Payments that an individual is contracted to pay e.g. mortgage payment, maintenance payments, loan payments, etc.
Areas that more than one resident has access to e.g. gardens, halls, etc.
The day on which the purchasers solicitor allocates the purchase funds accordingly, they will pay the purchase price to the vendors solicitor and pay other associated costs like stamp duty. It is the day that the purchaser becomes the legal owner of the property.
Insurances that the lender requires a borrower to have in place as a condition of the mortgage, the most common one being buildings insurance.
An insurance policy that is required to be taken out with the lender.
Insurance that covers the possessions in your home, i.e. electrical goods, furniture, etc.
A legally binding agreement between two or more people or parties.
A property often a flat, maisonette, or apartment that has been formed from the division of a larger property.
The legal procedure in which the ownership of a property is transferred from one owner to another.
County Court Judgement (CCJ)
A county court or higher court rules a bad debt. This is registered and will show up on any credit search and may affect your ability to obtain credit.
An agreement to borrow (often monetary) and pay back at a later date or over a certain period of time.
The procedure carried out by a lender which looks at an applicant`s credit history often with a dedicated credit agency.
A history of an persons past and current credit commitments showing how a persons account has been kept up to date with these credit commitments. It will also show past adverse credit.
Credit Reference Agency
An organisation that collects and holds information on a persons credit history. Lenders will normally approach one or more of these agencies to obtain details on an applicant`s credit history.
A report compiled by a credit referencing agency which outlines an individuals credit history. This report can be obtained by an individual who wishes to find out their credit history. The two main agencies that lenders use are [Experian] (link to www.experian.co.uk) and [Equifax] (link to www.equifax.co.uk).
An assessment carried out by a lender to assess the likelihood that an applicant will keep up the repayments on a loan. The lender looks at an applicants credit history and other aspects relating to the applicant (e.g. income, voters roll registration, etc) and gives that applicant a score, based on that score they agree to lend or not or whether to restrict the loan amount in any way.
Critical Illness Cover
An insurance policy that is designed to pay out in the event of the diagnosis of a critical illness, the definition of a critical illness can vary from one provider to another (although most providers offer a similar definition), a list of illnesses will be shown in the Key Facts Document.
Current Account Mortgage
An account whereby the borrowers mortgage account and current account are one single account. This mortgage will allow the borrower to make overpayments and underpayments. It allows the borrower to manage their mortgage and current account as one single account. Very similar to having a bank account but with a rather large overdraft!
Interest on a debt or savings are calculated on a daily basis, i.e. interest on the balance on a certain day has interest calculated on that balance. Other types of interest calculations are monthly and yearly.
An amount owed by an individual or party to another.
A procedure whereby a number of different loans held by an individual or party are collected together into one single loan.
The procedure by which unpaid debts are obtained by a creditor or third party company from a Debtor.
Refers to the access to flats by way of a [communal] balcony.
Decreasing Term Assurance
An insurance policy that pays out a lump sum under the terms of the policy (typically on death of a policy holder) during the term of the policy. Decreasing term refers to the fact that the benefit decreases throughout the term. It is often set up to protect a capital & interest mortgage.
A signed legal document that shows your ownership of a property, usually held by the mortgage company or solicitor until the mortgage on a property is fully repaid.
Deeds Release Fee
A fee charged by a lender to cover administration involved in returning the deeds to your solicitor, this is often charged when the mortgage is fully repaid to the lender (including re-mortgaging to a new lender).
The failure to keep up the repayment of a mortgage or other loan. This can be registered on your Credit report and could affect your ability to obtain a mortgage or other credit.
When the value of an item (e.g. property) goes down in value.
A person that is financially reliant on another, often a child.
In relation to a property purchase the deposit refers to the amount of a borrowers own money used to purchase a property.
The decrease in value of an object due to market conditions.
The expenses that are incurred relating to the conveyancing process.
A fee charged by the lender on the repayment of the mortgage to cover administrative costs of the borrower leaving the lender.
The time when a person who has been declared Bankrupt has been relieved of this status by a court of residual liability, this is often after a certain number of years. At this stage the person is able to apply for credit again.
An interest rate that has received a discount from a lenders standard variable rate this is often for a certain period of time, after this time the rate will revert to the standard variable rate of the lender.
Home Condition Report
Document prepared by the vendors` solicitor/conveyancer setting out the legal terms under which both parties have agreed the property will be sold. This is checked by the purchasers` solicitor/conveyancer and altered if necessary.
Searches carried out by the solicitor/conveyancer to ensure that there are no issues with drainage. There will be a fee to the solicitor for this which may form part of the disbursements.
Draw Down Facility
A borrower has the ability to increase their mortgage debt or â€˜draw down` additional funds from their mortgage to a certain level. E.g. a borrower may have a mortgage balance of £100,000, but the lender has given them a facility to borrow up to £130,000. If the borrower has a draw down facility then they will be able to take or â€˜draw down` the extra £30,000 (or a proportion of) at either any time or a specified time.
Early Redemption Penalty
A fee charged by the lender for paying off the mortgage or part of the mortgage before a predetermined date.
Anything that has a legal claim over a property and which affects the ownership of that property often a mortgage.
An investment product that a borrower pays into over the course of a mortgage that is designed to pay a lump sum which can then be used to repay a mortgage debt. (it also provides life cover of a certain amount). Endowments can be used alongside an interest only mortgage.
Searches carried out by the purchasers solicitor/conveyancer to ensure that there are no issues relating to the environment around the property e.g. the property is not build on contaminated land. There will be a charge to the solicitor for this which may form part of the disbursements.
The amount of money used as a deposit or the difference between the property value and the mortgage amount. Generally this product is used for the older generation.
The process of releasing equity from a property often through taking out a mortgage on a property that is unencumbered.
The legal term referring the total of a persons personal assets including property, cash, possessions, etc. at the time of death.
Family Income Benefit
Is an insurance policy which is designed to pay out a tax free amount typically monthly or quarterly throughout the term of the policy in the event of death and/or critical illness (depending on the policy). It is designed to replace the income of the individual that has deceased or suffered a critical illness.
Fees Free Mortgage
A mortgage offered by a lender whereby there are no fees to the applicant i.e. they will not have to pay an arrangement fee, booking fee, mortgage valuation fee to start the mortgage in the case of a fees free re-mortgage this will often extend to no fees for legal costs.
Feudal (Scotland Only)
Refers to the ownership of both a property and the land it stands on.
Financial Services Authority (FSA)
The independent body that has been given the responsibility of regulating the financial services industry. The Financial Services Authority report to the Treasury.
A legal right under which the owner of the first charge has the right to decide on what to do with a property if the borrower fails to maintain the repayments i.e. the mortgage lender will in most cases hold the first charge on a property until the mortgage is fully repaid.
First Time Buyer (FTB)
A person that is purchasing a property for the first time. Most lenders define a first time buyer as a person that has not held a mortgage in the last 12 months.
Fixed Rate Mortgage
A type of mortgage where a rate of interest is offered and is fixed for a certain period of time, i.e. it will not change despite in changes to the base rate. This mortgage is often used by people who want stability.
Fixtures & Fittings
Items that are to be included in the sale of the property e.g. carpets, wall lights, curtains, etc.
A mortgage which allows the borrower to make overpayments, underpayments and even take payment holidays.
Freehold (England & Wales only)
Refers to the owner owning both the property and the land it stands on.
An application is classed as full status when they have supplied information to the lender referring to their financial situation e.g. payslips, bank statements, P60`s, etc.
When the lender makes available additional funds (in the form of a new loan) to the borrower which are included in the first charge on the property.
The lenders standard conditions, these are set by the individual lender.
A lender may place a restriction on where they are willing to offer mortgages based on the location of the property.
The total income (often shown annually) before any deductions are made e.g. taxes, pension etc.
The rent paid to the freeholder of a property under a leasehold agreement.
Bonus` and Overtime that are written into your contract. For example annual bonuses or overtime that is always available to take.
A person (other than the borrowers) who guarantees the mortgage repayments in the event the borrower defaults. The guarantor may be requested by the lender to guarantee the entire mortgage or only a proportion.
Higher Lender Fee
A fee charged by most lenders when the Loan to value is above a certain level, typically 90%. It is charged to insure against any risk of the lender losing any money if they need to repose the property and sell at below the mortgage value. This used to be called a Mortgage Indemnity Guarantee (MIG)
Home Condition Report
Forms part of the Home Information Pack. It will provide impartial and reliable information on the condition and energy efficiency of the property. It will be similar to the current Homebuyers report.
Home Information Pack (HIP)
Will be introduced in England & Wales from 2007. The pack is designed to give purchasers all the information they normally only receive after making an offer before. The pack will include the following information.