Jargon Buster

Annual Percentage Rate is a rate which can allow you to compare mortgages like for like. It takes into account the initial incentive rate, associated fees, as well as the lenders standard variable rate for the full term of the mortgage.

This is a fee charged by the lender for setting up a new mortgage. Often they can be added to the mortgage upon commencement and interest would be payable on this but some may need to be paid at point of application. The total to pay method of calculation establishes the best value mortgage over a period of time and takes into account any fees.

Most people will pay their mortgage by direct debit however it can be paid at any time during the calendar month. If the payment is not made then the mortgage will fall into arrears, failure to clear arrears can force the lender to take action (see Repossession).

There are government bodies and charities set up to assist those who are in financial difficulty such as the citizen’s advice bureau.

Base rate can refer to the Bank of England Base Rate or a lenders own rate (standard variable rate or SVR) which it charges customers who are not in an incentive rate period. Most tracker mortgages track the bank of England base rate for a specific period of time.

The Bank of England meets on the first Thursday of every month to determine the base rate for the month ahead although individual lenders can change their own rate at any time if they deem it necessary.

A bridging loan is usually short-term borrowing used to bridge a gap in funding until your house sale goes through.  

For example, bridging loans can be used if you buy a property at auction and need the cash immediately but haven’t yet sold your current home. Be mindful that as a secured loan, a bridging loan will be secured on your property meaning if you struggle to keep up with repayments your home could be at risk. 

A Building Society is run for the benefit of members rather than shareholders. Whereas banks can borrow money from other financial institutions, building societies are limited as to how much they can borrow and often use their savers’ money to lend to individuals and businesses.

Is compulsory on all mortgages. The lender is entitled to charge a fee for not taking buildings insurance with them as they will need to cover themselves in the event of the policy not paying out. Our insurance brokers will ensure that savings made will more than compensate for the fee that the lender may charge.

The cheapest insurance may not always be the most suitable as you need to ensure that the quality of cover is in place in the event of a claim. Generally mortgage clients will opt for contents insurance as part of their buildings insurance policy to maximise cover, our brokers will be happy to discuss the various levels of cover available.

Buy to Let or BTL mortgages are for those looking to purchase or remortgage a property to rent out or to let. These will often incur higher charges and fees than residential mortgages but are readily available on an interest only basis to enable the landlord to maximise profit from the rental income. Buy to let mortgages are generally quicker to arrange than residential as the emphasis is on the property rather than the individual. Generally the most competitive deals are available through brokers as this is specialist lending the lenders encourage clients to use brokers for consistency of applications.

Most forms of Buy-To-Let mortgage are not regulated by the Financial Conduct Authority.

CGT is only payable on property which is not your main residence, but may be payable by landlords who buy and sell property. Speak to us for more information on Capital Gains planning.

Generally have not been popular over recent years due to interest rates being so low however as rates do start to increase their popularity may increase also. Your rate may increase but will not go over the capped (or ceiling) rate irrespective of any interest rate increases the Bank of England may make.

In the same way that capped rates have a higher limit, a collared rate has a lower limit where the rate will not go below. Again, these have not been very popular due to interest rates being static over the last few years but that could well change.

This can be by way of a Cash back mortgage, where the lender will give you a percentage of your mortgage balance in cash on completion. Or a Cash back incentive where the lender will offer a fixed sum of money as part of the mortgage deal. Both are popular with those buying properties as it can be a relief against fees which can be expensive.

The fee the lender charges you to send the money needed to buy the property to the solicitor you have chosen to represent you and the lender. This fee can be anywhere from £25-£50 and in many cases can be added to or deducted from your mortgage advance.

There may be additional chaps payments needed to complete the purchase when your conveyancer sends the funds to the vendors solicitor, so be sure to check this out with them first.

Is the legal process carried out by a solicitor to buy or remortgage a property. Searches or Disbursements will be payable on purchases and in some instances stamp duty land tax is payable so it is worth speaking to us to ensure you are aware of all of the costs involved.

When paying for a conveyancer or receiving quotes for the Conveyancing fee you must be aware that the conveyancer will need to be registered with a lender to enable them to release the funds to that solicitor. The solicitor will in most cases represent both the applicant and the lender though if your chosen conveyancer is not on that particular lenders panel you may be charged additional fees so that the lender can find a suitable conveyancer to represent them.

We work with many leading legal firms to ensure the work is carried out at competitive prices with excellent service, please ask us for details.

Many confuse completion with their mortgage coming to an end. Completion is actually when the mortgage begins or you complete on your purchase or remortgage application. In this instance completion can be compared to commencement.

This is required from your current mortgage provider if you no longer wish to live in your current residential mortgaged property and are seeking to let it out. This is common where clients wish to move home and are unable to sell their current residence (see Let to buy).

This is often taken by clients in conjunction with the compulsory buildings insurance when applying for a mortgage. Contents covers possessions and furniture and with some policies cash and personal effects that are taken out of the property. Our specialist brokers can advise on the various types of cover available.

A County Court Judgement is recorded on your credit report and will be picked up on a credit search by all lenders. They must be declared when applying for any credit at the outset. They will be removed from your credit report after 6 years irrespective of them being settled or not.

By settling a CCJ, you are increasing your chances of getting a mortgage but this may not guaranteed. As a CCJ is classified as adverse credit, the interest rates and fees may be higher than high street lenders.

This is for those with missed payments or defaults on their credit reports. This kind of mortgage can be a stepping stone towards clean credit and residential high street rates. Due to the increased risk, these mortgages are normally more expensive in terms of fees and interest rates. (Also see Sub-prime or adverse credit mortgage).

Is the major reason for a mortgage being approved or declined. It provides a profile of a client’s credit worthiness; it is used by all lenders as the foundation of their lending decision. The better credit has been maintained the more likely a mortgage is to be agreed on better terms.
Experian and Equifax are the major credit reference agencies used by banks and building societies.

Prior to applying for a mortgage it is prudent to obtain a copy of your credit report so your broker can tailor the best deal for you. Credit reference agencies may have introductory offers to help clients obtain this information; speak to your broker for further details.

A mortgage where the current account or in some cases savings account is linked to the mortgage account to minimise interest charged. Funds paid into the current account will in some instances not earn interest but will offset the interest charged against the equivalent part of the mortgage to over pay into the capital to reduce the term.

As the interest is charged daily this can maximise salaries etc. which will be paid into your current account then drawn down over the course of that month.

We have the ability to show these savings using sophisticated calculators so please enquire for more details.

Is a legal document that a mortgage lender will require from another lender who has a secured loan against a property. This ensures that your mortgage lender will remain first charge in the unlikely event of repossession, in that they will receive their money first, and the other secured loan lender will remain second charge.

Although this fee has various names from lender to lender it exists in the same format across all of them. Irrespective of whether you are in an Early Repayment charge (ERC) period the lender will charge a fee for formally ending the mortgage account.

Although no interest is payable on this for the duration of the relationship with the lender it is added to your final redemption figure and does vary in size from lender to lender but will always be included within the Key Facts Illustration or mortgage offer.

A default is where unpaid debt is passed on to a debt collection agency, who will in turn contact the individual regarding repayment of the debt. They will be removed from the credit report after 6 years irrespective whether they have been settled or not.

By settling a default, chances of getting a mortgage will improve but this may not guaranteed. As a default is classified as adverse credit, the interest rates and fees may be higher than high street lenders. Some defaults that been recorded in error can may be removed from the credit report (unlike CCJ’s), in the event of this contact our brokers who will be able to assist you.

The amount of money a client has to contribute towards the purchase of a property. Deposits can also take the form of equity where property is already owned. The larger deposit available the lower risk it is to the lender therefore more competitive terms is generally granted.

Proof of this will be required on all applications. Gifted deposits from family and friends are acceptable however these are subject to letters, declarations, ID checks and proof of source of funds.

Is a mortgage incentive rate whereby the lender gives you a discount or reduction off their standard variable rate for a specified period of time. For example, a 2 year discount of 1.5% would mean a variable rate which would give a discount of 1.5% from that lenders base rate.

This deal will often come with an early repayment charge period and doesn’t guard against rate increases, which could happen, even the bank of England base rate didn’t increase. 

A charge the lender will impose if you wish to redeem (or make overpayments, subject to terms and conditions) a mortgage whilst in an incentive period. This is normally a percentage of the mortgage balance on completion and is fully explained in Section 10 of the KFI or mortgage offer. These may be waived if looking to move home and retain the current mortgage deal (see Porting).

Popular in the 70’s and 80’s endowment polices were an investment vehicle which would eventually be used to repay an interest only mortgage. Many of these endowments were mis-sold leaving the client with a short fall to repay their mortgage at the end of the term. As a result they become widely unavailable and many decide to convert their mortgage to a capital and interest repayment mortgage.

This is the difference between the value of the property and the mortgage secured against it, these funds are usually used when moving to a new property (also see deposit).

If the value of the property is less than the mortgage secured against it, this in known as negative equity which means if a property is sold, the difference will have to be paid using the clients own resources.

Also known as lifetime mortgages are aimed at the retired or those on low or no income but who own property with large amounts of equity tied up in it. These applicants don’t want to sell their home but want access to finance in the form of a lump sum or a monthly income. The money that is released is secured against the home and will be payable on the eventual sale of the property whenever this may occur.

This is when the transaction of buying a property becomes legal. Prior to exchange of contracts, gazumping or gazundering can occur and upon exchange of contracts, deposit monies must be paid by the buyer and buildings insurance must be in place even though the completion hasn’t yet occurred. In England and Wales exchange of contracts and completion often occur on the same day but in certain instances such as auctions, the buyer must exchange contracts upon agreement to buy the property.

In the instance of failing to complete on the purchase once exchange has taken place, deposit monies would be lost. The biggest reason for this occurring is the inability to obtain finance after exchanging contracts, placing even more importance on using a specialist mortgage broker in the first instance.

The lender will fix the interest rate for a specified period of time where clients will know exactly how much they are paying each month, making budgeting of outgoings a lot easier. The interest rate cannot change whilst in the fixed rate period, regardless of any interest rate changes the Bank of England may impose.

A freehold property is where the client owns both the land and the building, in some cases a lease on land may have been granted (see Leasehold) however when this lease expires the building will revert back to the freeholder.

When the property overhangs another freehold, for example a shared access way where there is property above it, this is known as Flying Freehold.

Most residential mortgages from high street lenders are flexible. Flexible features include the ability to make overpayments and in some cases underpay and take payment holidays. Daily Interest is a feature of flexible mortgages and can help the applicants to minimise interest charges and repay the debt more quickly.

This is where additional funds are borrowed from the existing lender but do not change the deal currently held. This will often be done within an incentive rate period to allow the client to borrow additional funds without incurring an early repayment charge.

You should always speak to us first as remortgage options may be more financially beneficial so it is worth checking all options prior to applying for a further advance.

Gazumping is when a vendor accepts a higher offer on a property from a new buyer after previously agreeing a price with another prior to exchange of contracts. Often the legal work and mortgage application can take some time in between agreeing to a purchase and actually exchanging contracts so it is essential you employ mortgage brokers and conveyancer who can get the purchase to exchange of contracts as quickly as possible.

Gazundering is similar to gazumping but is where the buyer reduces their offer prior to exchange of contracts in the hope that the vendor will decide the sale is too far progressed to deem it justifiable in remarketing or looking a new buyer.

An annual charge payable to a freeholder from a leaseholder under the terms of the lease. This can take many forms and is payable on leasehold properties which include the vast majority of flats in England and Wales.

Is a third party who guarantees to meet the monthly mortgage repayment if the client is unable to. This is more common with first time buyers who expect their incomes to increase in the near future, for example newly graduated students.

This was a government backed scheme designed to help those buy property with only a 5% deposit. Since the credit crunch lenders generally asked for larger deposits from applicants which many simply didn’t have. By indemnifying lenders the government insisted that they lend to those with only 5% and this has resulted in many more mortgage applications and increased house sales. The help to buy scheme is no longer available.

This is an indemnity policy taken out by the lender in some instances to protect them against the applicant defaulting on the mortgage. It is only charged where loan to value exceeds certain levels and will be shown in section 8 of the KFI or mortgage offer.

Sometimes referred to as a tie-in period, it is the length of time a specified interest rate is applied. For example, a 2 year fixed rate guarantees the rate to be fixed for 2 years after which the rate would revert to the lenders Standard Variable Rate. Clients are usually tied-in for the length of the incentive period, meaning if they were to redeem the mortgage it would be subject to an Early Repayment Charge (see ERC).

With this method of repaying your mortgage you only pay the interest each month for the full mortgage term. At the end of the term, you will need to repay the entire loan in one lump sum. This is far more commonly used for buy-to-let mortgages than residential mortgages in recent years.

Interest Only mortgages should only be taken where a clear repayment strategy is in place and not to keep the monthly payments more affordable. Please enquire with us if you would like more information on portfolio planning and a fact sheet on Buy To Let & Taxation.

Most forms of Buy-To-Let mortgage are not regulated by the Financial Conduct Authority.

The interest rate is the charge made by the bank for lending money. It can be charged on a daily, monthly or annual basis. If for example a borrower took a mortgage for £100,000 on a rate of 5% annually this would mean the borrower had to pay the lender £5,000 per annum in interest.

Lower interest rates will make mortgage payments cheaper so are very popular but only the most credit worthy applicants can benefit, due to the reduced risk being taken by the lenders or the higher levels of security being offered by the borrower.

Is where the ownership of a property passes to the surviving owner on the death of the other joint owner and in doing so avoiding probate or any instructions set out in the will of the deceased.

Where there are joint applicants on a mortgage, even should the relationship break down or one of the owners leaves the property, both remain jointly and severally liable for the repayments. Even in the event of death, the debt would pass to the surviving applicant and would need to be maintained under the original conditions of the loan.

This is a quotation for a mortgage set out in a standardised form to enable borrowers to compare mortgages on a like for like basis. Although the Key Facts Illustration or KFI documents the actual features of the mortgage, it doesn’t constitute an actual mortgage offer, which will come once all the relevant checks and referencing has taken place and been deemed acceptable by the lender.

The KFI will show all fees and charges made for the arrangement of that mortgage and will show the impact changing interest rates will have on the payments. Your broker will go through the KFI document with you prior to applying for the mortgage and will explain each section in detail and any questions you have can be raised at this time.

Is the record where property ownership is maintained. A land registry search will be carried out by lenders and conveyancer to establish ownership prior to a mortgage transaction being completed.

When a property is being rented out the owner or landlord must have a specific type of insurance to cover the building. This is different from regular buildings insurance so it is essential to get specialist advice in setting up this type of cover, as policies set up incorrectly could be invalid, meaning non pay-out in the event of a claim and wasted premiums from the policy owner.

A leasehold property in simple terms is a property that the buyer is purchasing for an agreed period of time which is known as the length of the lease. Once the lease expires the ownership of the building will pass back to the freeholder. This can result in the value of a leasehold property reducing in value as the length of time remaining in the lease approaches its end.

Leases can be extended if agreed by the freeholder who owns the land that the building is built upon, although this will often come at a cost to the leaseholder seeking the extension. Lenders will often have minimum length remaining on lease requirements prior to lending which can affect the resale value of leasehold properties, so please seek guidance from your mortgage broker on this issue. The leaseholder may have the right to extend the lease under certain circumstances. 

Is when a homeowner is seeking to let their currently mortgaged residential property in order to buy a new home. A client may look to transfer their current property to a Let to Buy or seek Consent to Let from their current lender. Let to Buy will involve maintaining two mortgages simultaneously, and involves specialist mortgage advice as some lenders will not allow this. Let to Buy is not to be confused with Buy to Let mortgages.

The LIBOR or London Inter-Bank Offered Rate is the rate at which banks lend to each other and is in certain mortgages linked to an incentive rate offered by a lender or linked to their own standard variable rate. This will be documented in your KFI given to you by the lender prior to application.

Life Insurance is a policy which pays out an agreed amount of cash on the death of an individual within certain timescales, and often polices are set up to cover mortgages. Although not compulsory, any applicant arranging a mortgage through Baltic Mortgage Solutions will be required to sign a disclaimer form if they do not arrange adequate protection to cover the mortgage in the event of death.

See Equity Release

This is a ratio which is calculated using the loan amount required against the value of the property. Due to the higher risk involved with higher loan to value mortgages, the interest and fees applicable are usually higher. To qualify for lower interest rates, applicants generally have to reduce their loan to value in multiples of 5%. Your broker will explain the how a varying range of deposits will impact you repayments.

Is a document your proposed lender will produce based on affordability and credit score, subject to the application being fully underwritten and a satisfactory survey being carried out. It does NOT constitute a mortgage offer.

Is a contract put in the place on completion of a mortgage; it enables the lender legal rights to the property in the unlikely event of repossession.

Is the length of term of a mortgage over which interest is paid. Ideally the term of the mortgage should end before the proposed retirement age of the applicants, however, this is not deemed necessary provided adequate pension provisions are in place or if the mortgage is Buy to Let.

See Equity.

See Current Account Mortgage (CAM).

This is where a client pays a lump sum into their mortgage account to reduce the balance owed and the amount of interest charged moving forward. Overpaying can be beneficial as it can reduce the amount of interest charged each month, or reduce the number of years remaining on the overall mortgage term in capital and interest repayment mortgages.

Overpayments are a feature of flexible mortgages but are not always allowed with every lender, and overpayments within incentive periods may be restricted so contact your broker for guidance.

When a client wishes to move home but retain the terms and conditions of their current mortgage deal, they may be able to port. This is subject to lenders agreement, but they may treat this as a new mortgage application, therefore porting is not always approved.

This is a feature of a flexible mortgage and allows the borrower to take up to 3 months payment break, in some instances, where they make no mortgage repayments at all. The interest charged during the holiday is added to the capital and often the mortgage repayment will increase as a result. Although not suggested as a means of saving money they have been very popular in times of increased expenditure.

Sometimes referred to as the reinstatement value, this is a figure an insurance company will use to determine the full cost to rebuild the property in the event of a disaster. This figure will be established by a chartered surveyor when the property is valued.

Redemption is the term used for repaying or redeeming your mortgage. Sometimes Early Repayment charges are referred to as early redemption charges. Some lenders will charge for redemption of a mortgage even if no early repayments charges apply – see Deeds Fee.

Redemption can also be when a client wishes to redeem the mortgage against their current property and take out a new one with a different lender. The client may wish to release equity from their current property for various purposes (subject to lender agreement), seek a better mortgage deal or a different type of mortgage entirely.

When the incentive period of a mortgage product expires it may be cost-effective to seek a more competitive deal elsewhere, this is likely to occur many times during the term of a mortgage and is knows as rate hopping.

Our brokers will be able to find the most competitive mortgage deals across the whole of the marker to ensure clients will always benefit from the most cost-saving products.

This mortgage is based on paying a combination of capital and interest each month so that the original debt is repaid within a period of time known as the mortgage term. These are the most common and safest way of guaranteeing the repayment of a mortgage debt and can be taken over a term as long as 40 years with certain lenders.

This is the investment required to repay an interest only mortgage. This can be through an investment policy such as an Endowment, ISA or Pension, for example, or could be from the sale of the property being mortgaged, another owned asset, or even a future inheritance.

If a client is unable to keep up with the monthly repayments of a mortgage, and the lender has exhausted all other options, they are legally entitled to repossess the property. This means that the clients will be vacated from the property and the lender will become the owners.

The lender will then look to sell it to recoup the mortgage against it. Clients should make the broker aware if you have ever had any trouble with maintaining mortgage payments or had a property repossessed in the past.

Is the process by which a council tenant buys their home from the local authority, and often requires specialist advice. Our brokers have local knowledge and have been responsible for many of these types of mortgages, so please contact us for more details if this applies to you.

See Deeds Fee.

When buying a property, the purchaser’s conveyancer is required to carry out several searches which are often referred to as disbursements. These are 3rd party searches so will need to be paid for in advance in most cases, and are non-refundable in the event of the purchase not proceeding.

It is wise to ensure that you can obtain the mortgage finance prior to paying for searches, to avoid losing money if the purchase does not proceed.

This is a loan which is offered by a lender, who, in the event of repossession, would have to waive their rights to the sales proceeds until the 1st charge had been satisfied. As this represents an increased risk to this lender in the event of repossessions they are often charged at higher rates of interest than 1st charge mortgages.

These types of mortgages are often popular with those with adverse credit or who are within an early repayment charge period with their current lender. See also Deed of Postponement

These are mortgages for those planning to build their own home or to finance the building of their own home using skilled professionals. The money is released in stages as the property is being built to allow for the next phase to be finished. Self-build are specialist mortgages so consulting your broker is essential if this is something you are planning to explore further.

Self-Certified mortgages were very popular with the self-employed as the applicant effectively told the lender what they earned without actually proving it. These types of mortgages are not available anymore in light of the credit crunch, meaning all mortgage applications are now subject to full income and affordability evidence being provided.

This enables a client to buy a share in a property that they would otherwise not be able to afford. For example, the client would buy 50% of a property and a housing association would own the other 50% and charge rent for their share. The client then has the option to buy the remaining share in the future.

Stamp Duty Land Tax (SDLT) is a tax levied upon the purchase of a property which is determined by the purchase price irrespective of any discounts involved. It is payable to the conveyancer along with the balance of their costs upon completion of the purchase. The purchase will not be registered at the Land Registry until until stamp duty has been paid, meaning clients would be unable to sell or remortgage the property.

For current rates and a SDLT calculator, see this page:
gov.uk/stamp-duty-land-tax

See Base Rate.

See Credit Repair Mortgages.

For mortgage purposes, a basic mortgage valuation will be carried out by a suitably qualified surveyor who is approved by the lender. This report known as a Level 1 or Basic Survey is for the benefit of the lender and is generally paid for by the borrower and is the cheapest form of survey available. In some instances the lender will offer a free basic mortgage survey, to incentivise their mortgages and make them more appealing to borrowers looking to keep their initial outlay costs to a minimum.

Many remortgage deals will come with incentives such as free basic survey and free legal fees to attract customers looking to remortgage their home to find a more competitive rate than the lenders SVR.

A Level 2 or Home Buyers Survey is more in depth than a basic mortgage valuation and is also more expensive. Although this is carried out by a chartered surveyor who may well also carry out the mortgage valuation this report is a much more in depth document, where the surveyor has gone into much more detail and is likely to flag up any issues which (although wouldn’t necessarily affect resale value) may need to be given extra attention prior to exchange of contracts. As the purchase of a property is a large investment we would always encourage the buyer of a property to get an in-depth survey carried out to ensure value for money on any purchase.

The Level 3 or Full Structural Survey is the most in depth form of survey available and is also the most expensive survey, but this is the only survey which provides the borrower with the option of legal recourse should the surveyor fail to publish anything which later turned out to be an issue.

In some instances when a mortgage survey is carried out, the surveyor will then advise the lender that a full structural report is required and the borrower will have to pay for this if they want to continue with the mortgage application. Many lenders are now asking for damp and timber reports in the wake of widespread flooding, so please speak to us if you are buying a property, to work out the best value for money surveyors and types of report available. We use all the leading firms and can negotiate discounted prices.

See CHAPS fee.

In contrast to joint tenants, tenants in common have a share of the property which can be equal or can be determined by one party providing a larger proportion of the deposit monies for example so would have this interest protected in the event of the resale of the property. This is common with friends who may buy property together or business partners who are not financially connected for any reason other than this purchase.

The legal document which shows who own the property and the land on which it is built.

This is a method of calculation by which all fees and associated monthly payments are added together to find the best value mortgage deal over any particular time. Sometimes the lowest interest rates often come with large arrangement fees which can cancel out the benefit of the lower rate of interest being charged. TTP can ascertain if it is better value taking a deal with the lowest rate, or the deal with the lowest fees.

Is a mortgage product designed to track the Bank of England’s base rate or in some instances LIBOR. The interest rate is a fixed percentage above or below this rate and will increase or decrease when that rate changes. Most lenders’ Standard Variable Rate will also track the Bank of England’s base rate (see LIBOR and Base Rate).

Is the legal process of adding or removing an applicant from a mortgage and the title deeds of the property. This can be done through the existing mortgage lender or by arranging a new mortgage with a new lender, but the legal process must be carried out by a suitably qualified conveyancer. To ensure you get the best value for money when carrying out this often delicate process, you should seek specialist guidance through your mortgage broker.

Mortgage lenders require a valuation to prove that the property is worth the amount you want to borrow.