Money loaned to someone by a bank or building society to fund the purchase of a property or to replace an existing loan on a property already owned (Remortgage).
A recommendation made by a mortgage adviser about which mortgage is most suitable for you. The adviser or firm they work for should be regulated by the Financial Conduct Authority. Bank of Ireland offer a free mortgage advice service on their own residential mortgages.
- Annual Percentage Rate of Charge (APRC):
This shows the overall cost of borrowing, taking into account the term, interest rate and other costs.
- Approval in Principle (AIP):
The AIP process uses some basic details about you and the property. It checks whether you can borrow the amount you’ve asked for against a lender’s lending policy and credit reference agency checks. An AIP is a conditional decision to lend based upon the findings. If accepted, you can complete the rest of the application which goes into more detail.
Amounts owed under the mortgage that have not been paid and are overdue.
- Bank of England Base Rate (BBR):
The rate set by the Bank of England. Banks and building societies use the Bank of England Base Rate to set the interest rates they pay on deposits, or charge on loans.
The person(s) responsible for paying back a debt such as a mortgage or loan.
- Buy to Let mortgage:
A loan secured on property which, in most cases, is let out to tenants to live in as their home. The loan can be used to buy a rental property or replace an existing mortgage.
This is the amount that you owe under the mortgage with interest being charged on this sum.
- Capital and Interest mortgage:
Also called a Repayment mortgage, is where your monthly payment is used to pay off some of the loan you borrowed (see Capital) and the interest charged by your lender. The interest is calculated using your mortgage rate e.g. if you borrowed £100,000 on a mortgage rate of 4.5%, your monthly interest would be £375 per month (£100,000 x 4.5% / 12). In the early years of your mortgage term, most of your monthly payment will be the interest charged with a smaller amount paid towards the loan. Over time, this shifts so that more of your monthly payment is capital, with a lesser amount paid towards the interest. If you make all of your payments on time, you’ll have paid your mortgage off by end of your term (not including any fees to close your account).
Where there is more than one property linked to the sale and/or purchase of a property. The purchase transaction for each property within the chain is dependent on the others completing successfully. Also see Completion.
- Change of Parties (COP):
Also referred to as a Transfer of Equity (ToE), this is the process of adding or removing someone from a mortgage using a solicitor or licenced conveyancer. The lender will assess how the change impacts the current mortgage, and that those remaining or being added to the mortgage will still meet their lending policy.
Completion happens when the money used to buy a property is paid to the seller’s solicitor or legal conveyancer. The legal firm completes all the necessary paperwork, ensuring the transfer of any monies are paid to the seller or their mortgage lender. After this, the keys to the property are handed to the buyer.
This term is also used when someone replaces an existing mortgage with a new one from a different lender, known as a Remortgage.
The legal process involved in buying and selling a home, carried out by a legal practitioner (solicitor or licensed conveyancer) who specialises in property transactions.
- Credit score:
Credit scoring is used by lenders as part of the underwriting process to assess whether to give a loan. Your credit score will be based on your credit history, which takes into account your past reliability in repaying loans, mortgages and credit cards etc.
- Debt consolidation:
Repaying one or more existing debts (loans, credit cards etc), with one single loan.
Legal documents that demonstrate ownership of a property or piece of land. Historically, each property would have held a bundle of deeds relating to it, however, now most information is stored electronically by the relevant land registry, meaning there is a limited amount of actual paperwork.
A percentage of the purchase price which the buyer pays on exchange of contracts.
- Early Repayment Charge (ERC):
A charge that may be payable during the Promotional period of a mortgage or loan when the outstanding balance is paid in full, or a lump sum payment is made to reduce it. The ERC is calculated as a percentage of the amount being repaid. The details will be in the lender’s Offer of loan.
The amount that would be left after selling the property and paying off any outstanding mortgages, fees and charges.
- Exchange of contracts:
The point at which both buyer and seller sign their copies of the contract and these are exchanged by their respective legal representatives. The buyer usually pays a Deposit at this point and the date of Completion is agreed. In England, Wales and Northern Ireland, this is when everybody is legally bound to the transaction. In Scotland, the process is called ‘missives’ which is an exchange of letters between the legal representatives once the terms of sale have been agreed. In all areas on the UK, as soon as the agreement becomes legally binding, the buyer should take out building insurance as they’re responsible for the property.
- Financial Conduct Authority (FCA):
The FCA regulates the financial services industry in the UK, including mortgages. It aims to protect consumers, protect and enhance the financial markets, and encourage effective competition in the interest of consumers.
- Financial Ombudsman Service (FOS):
An independent ombudsman, set up by parliament to help resolve individual disputes between consumers and financial businesses.
- Fixed rate mortgages:
These mortgages fix the interest rate you pay for a set period of time – known as the promotional period. When this period ends the interest rate charged will switch on to a Variable rate.
In England, Wales and Northern Ireland, this is a legal title proving ownership of a plot of land and all structures within it. The most common type of other property ownership is Leasehold. Land and property ownership is different in Scotland to the rest of the UK. Visit the UK Government website for details.
- Funds transfer:
This happens at Completion via a solicitor or licensed conveyancer, when the money for the purchase or sale of a property is transferred from one financial institution to another.
A funds transfer also takes place when:
- A lender sends money directly to an existing customer if they want to borrow more money (see further loan below) or
- When a customer is sent surplus funds (normally via a solicitor or licensed conveyancer), if they Remortgage to a new lender and borrow more than their existing mortgage balance.
- Further loan (also known as a further advance):
An additional loan to your existing mortgage, taken after the main mortgage has completed. It is also secured against the property and may have a different term and interest rate.
- Higher lending charge:
A fee which may be charged when the amount borrowed is more than a given percentage of the value of the property. In these cases, the lender will use the fee to purchase an insurance policy to protect them against financial loss, in case you don’t meet your mortgage payments. The fee is usually payable in full upon Completion. You would still be liable for any mortgage shortfall debt if, after possession, the sale proceeds are not enough to repay your outstanding balance.
A document provided to you at the start of your application, specifying the most important details of the mortgage. It allows you to compare it with mortgages from other lenders.
- Initial interest:
The amount of interest charged from the day your mortgage begins up to the first of the following month. For example, if your mortgage stated on 20th January and your first payment is due on the 1st March, in addition to paying a full month’s payment to cover February, you’ll have to pay interest to cover the 20th – 31st January.
The charge applied to your loan when you borrow money from a lender. This will be charged as a percentage set by the lender, known as your interest rate.
- Interest rate:
The percentage figure that determines how much interest you pay.
- Interest only mortgage:
With this type of mortgage, you only pay the interest on your mortgage every month, and you pay back the amount you initially borrowed at the end of the mortgage term. If you choose an interest only mortgage it’ll be your responsibility to ensure you’re able to repay the capital at the end of the mortgage term.
- Joint mortgage:
A mortgage taken out by more than one person. All those named on the mortgage will be jointly and severally responsible for repaying the loan.
- Land Register:
The official record of land ownership in the UK. The organisations responsible for keeping and maintaining the register are:
- England & Wales – Land Registry
- Scotland – Registers of Scotland
- Northern Ireland – Land and Property Services.
A legal title in England, Wales and Northern Ireland where the land is owned under a lease between the leaseholder and the freeholder. The lease gives the leaseholder the right to use the land for a fixed period of time, subject to the conditions of the lease which may include payment of ground rent to the freeholder. The most other common type of property ownership is Freehold.
The bank or building society that lends money for loans and mortgages.
- Life insurance cover:
Insurance which pays out on the death of the policy holder. Policies can run alongside your mortgage and will pay off some or all of your mortgage balance if you die within a specified term of the insurance policy.
- Loan to Value (LTV):
The LTV is the amount of your existing loan as a percentage of the value of your property. For example, if your outstanding mortgage balance is £75,000 and your property is worth £150,000, your current LTV would be 50%.
- Local Authority search:
A search of the local area as part of the conveyancing service. This highlights anything that may affect the property or surrounding area, such as planned road building and planning permissions.
A loan used to purchase, remortgage or maintain a home, land etc. You repay the loan by making regular payments over an agreed amount of time. The property is then used as collateral to secure the loan. This means if you don’t keep up the repayments, the lender can make you sell the property so they get their money back. You’ll still have to pay the difference if the sale of your property doesn’t cover the outstanding balance owed (which is known as a ‘shortfall’).
- Mortgage deed:
A mortgage deed, also known as a legal charge, is a legally binding document between you and your mortgage lender. It confirms your agreement to the conditions of your mortgage and how and when it will be repaid.
- Mortgage Offer:
The document that’s issued by a lender outlining the basis of them granting a mortgage loan. It also confirms the names of all borrowers, the property address, how much is being borrowed, for how long, and any fees or Early Repayment Charge (ERC) that have to be paid. If you apply through us, you’ll need to sign and return the acceptance part of the Offer to proceed with the loan.
- Mortgage Payment Protection Insurance (MPPI):
An insurance policy designed to provide a regular income to pay your mortgage, if you become unemployed or unable to work due to an accident or sickness.
This is a sum of money paid to your mortgage account in addition to your normal monthly payment, with a view to paying off your mortgage earlier or to reduce your monthly payments.
- Part repayment and interest only:
Part repayment and part interest only mortgages allow you to pay off the capital and interest on one part of your mortgage, and only the interest on the other part. On the interest only part of your mortgage, it’ll be your responsibility to ensure that you can repay the capital at the end of the mortgage term.
Porting is the process of moving your mortgage from one property to another whilst staying with the same lender. This normally takes place when you’re moving home or selling a rental property and want to move your mortgage to a new one. A new application is needed to do this, which means you’ll need to meet your existing lender’s lending policy. If you have a mortgage with us, visit our moving my mortgage page for more details.
The person(s) buying a property.
When you pay the mortgage off in full including any interest, fees and charges.
When you pay off your existing mortgage with a new one from a different lender, using the same property as security. When you change to a new mortgage rate with the same lender it’s known as switching.
- Residential mortgage:
A residential mortgage is a loan borrowed from a bank or building society to buy a house or other property for you to live in. The loan is secured against the property at the appropriate land registry and is repaid over an agreed period of time.
- Solicitor/Licensed Conveyancer:
A qualified and regulated person handling legal matters, including conveyancing.
- Stamp Duty Land Tax:
A government tax you’ll have to pay if the price of the property you’re buying is above a minimum amount (specified by the government which can change at any time). The percentage you pay varies according to the value of the property and is paid on a sliding scale. Visit UK Government website for details.
- Standard mortgage valuation:
The most basic type of report produced for mortgage lenders. It details whether a property is suitable to lend on and how much it’s worth. Any significant problems with the property will be mentioned for the lender to review.
You can request other reports that go into more detail about a property for your own peace of mind. For example, a Building Survey will highlight any structural problems with a property. Visit the Royal Institute of Surveyors (RICS) website for more details.
When you change to a new mortgage rate with the same lender, using the same property as security. If you pay off your existing mortgage with a new one from a different lender it’s known as remortgaging or refinancing.
- Under offer:
When a seller accepts the buyer’s offer, usually by verbal agreement through an estate agent. At this point no one is legally tied to sell or buy the property. This takes place at Exchange of contracts.
- Variable rate mortgages:
Variable rate mortgages are linked to a lender’s Standard Variable Rate (SVR) or the Bank of England Base Rate (BBR). This means if the interest rate your mortgage is linked to goes up or down, so will your monthly mortgage payment. The difference between the SVR or BBR and the interest rate you take out is called the ‘differential’.
- Standard Variable Rate: A lender’s SVR is normally the interest rate you go on to when your fixed, tracker or discounted rate has finished. You may also be able to take out a mortgage on a lender’s SVR. There’s usually no charge to pay off your mortgage early or make lump sum payments when you’re on an SVR. Each lender will set their own SVR. When a lender changes its SVR, they must write to all their customers affected by the change to let them know.
- Bank of England Base Rate Tracker: Tracker mortgages have an interest rate set above the BBR for a specific amount of time. As it tracks the BBR, it means if the BBR goes up or down, so will your monthly payment.
- Discounted rate mortgages: Working similar to tracker mortgages, except these mortgages have an interest rate set below a lender’s SVR for a specific amount of time. This means your mortgage payment will go up or down in line with the lender’s SVR.
The seller of a property or piece of land.