A

APR- Annual Percentage Rate

The APR is a compound interest rate figure used to compare different mortgages. It includes repayments on the loan in addition to any mortgage related fees such as booking and basic valuation fees. The APR shows the true cost of borrowing over the entire term and usually appears on all mortgage illustrations.

B

Building Survey

A full inspection of the property conducted by a chartered surveyor. They will write a detailed report evaluating the soundness of a property. While these are suitable for any house, they are normally carried out with older properties or those that have been poorly maintained, in addition to properties that are due to be extended or altered.

Buy-to-let mortgage

A type of mortgage designed for people buying a property with the intention of letting it out.

C

Capital Gains Tax

A tax on profits made from the sale of assets such as a house, flat or shares.

D

Disbursements

AKA legal fees, these are fees paid by the solicitor on the buyer's behalf. For example, stamp duty, land registry and search fees.

E

Early Repayment Penalty (ERP) / Early Redemption Charge (ERC)

A fee that is sometimes charged if you pay off all or part of your mortgage before the pre-agreed time.

Endowment Mortgage

This is a type of mortgage where monthly payments are made into a life insurance policy. The loan is then paid off in one lump sum at the end of the loan period.

Engrossment

This is a formal, final version of a document prepared by a solicitor for signing following agreement of the final draft between parties.

Equity

This is the difference between the value of a property and the amount of the mortgage still owed to the lender of the property.

F

Fixed rate mortgage

A mortgage in which the interest rate is set for an agreed period of time.

Flexible mortgage

A mortgage which can be increased or decreased.

Freehold

This is where the owner of the property also owns the land on which the property is built.

G

Gazumping

This is when prior to exchange of contracts, a seller accepts a higher offer on a property from a third party when they have already agreed to sell the property to someone else.

Gazundering

This is when a buyer reduces their offer prior to the exchanging of contracts.

H

Home Buyers Report

The homebuyer’s report details the accessible structural condition of the property. This does not include in-depth investigation into water testing, drainage or heating.

Homebuyers Survey & Valuation

This is a property survey that includes a valuation. It should reveal any major faults with the property.

I

Indemnity

AKA MIG, Indemnity Guarantee Premium and Mortgage Indemnity Premium, this is an up-front, one-off fee paid to the lender to protect them against the borrower defaulting on the loan. Usually charged on mortgages over 75% of the house value.

Interest-Only Mortgage

This is a mortgage where the borrower only repays the interest on the loan for the duration of its term. The full loan amount is repaid at the end of the mortgage period.

J

Joint Tenants

This is a type of ownership for to parties in which, if one of them dies, their share of the property will transfer automatically to the other party, giving them full ownership.

K

Key Facts Illustration (KFI)

KFI is a summary of the key information relating to the particular mortgage you wish to apply for and how it applies to you as an individual.

L

Land Registry Fee

This is a fee paid by a solicitor on the behalf of the buyer to register ownership of the property with the Land Registry.

Loan to Value (LTV)

This is the size of the loan as a percentage of the purchase price of the property or the value of the property.

M

Mortgage Payment Protection (MPP)

This is insurance that pays your monthly mortgage for a specific period, in cases where you are unable to work due to redundancy, sickness or accidents.

N

Negative Equity

This occurs when the value of a property falls below the outstanding mortgage.

NHBC Certificate (National House Building Council Certificate)

This is a building guarantee available on some new builds designed to cover defects within a specific time period, typically 10 years.

O

OIEO

Offers in Excess of the listed price

OIRO

Offers in the region of

P

Peppercorn Ground Rent

A nominal periodic rent usually paid annually

R

Redemption

When a mortgage is fully repaid.

Retention

A lender’s ability to hold back (retain) part of a mortgage until conditions are met.

S

Sale by Tender

This is the process by which a property is placed on the market. Sealed bids are submitted to the estate agent by a certain date for the seller’s consideration. Sale by tender sales are subject to the buyer paying an ‘introduction fee’ rather than a commission fee paid by the seller to the agent.

Stamp Duty

This is tax paid by the buyer for a property that exceeds £125k. The rates currently range from 1% to 4% of the purchase price, depending on the total value of the property.

Standard Variable Rate (SVR)

This is the normal interest rate lenders charge. This rate can change periodically.

T

Tracker Mortgage

A mortgage that moves in line with the Bank of England base rate for a set period of time.

Tenure

The conditions on which the property is held. For example, freehold or leasehold.

U

Under Offer

This is the status of a property for sale when an offer has been accepted but no exchange of contracts has taken place.

V

Variable Base Rate

This is the basic rate of interest charged on a mortgage which will vary based on market conditions.