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Mortgage Jargon Buster

Mortgages are not simple. Neither is the jargon that comes with it. Don't worry. Read our guide to everything you might come across when applying for a mortgage.

  Mortgage advice is available to people living in England, Wales, Scotland and Northern Ireland.

A

Adverse Credit

Adverse credit is another way of saying someone has a poor credit history, which can impact lending. It is caused by missed payments, County Court Judgments (CCJs) and defaults.

Annual Percentage Rate (APR)

The total cost of your borrowing for a year. This includes the standard fees, and interest you will have to pay.

B

Beneficial Interest

An interest in land that gives a person a financial share in a property, and/or a right to occupy a property.

Buy To Let Property

A property that is bought with the intention of being rented out.

C

Capital Repayment/Cap Rep

A type of mortgage that requires a person to make monthly repayments to the capital balance borrowed for an agreed period of time (known as the term) until you have paid back both the capital and the interest in full.

D

Debt Consolidation

When you consolidate debt, several debts are rolled into one loan or one monthly payment.

Discounted Variable

This sets your interest rate at an amount below the lender's standard variable rate (SVR) for a time. The rate is not fixed. It will rise or fall when the lender changes their SVR. The discounted rate will remain the same during that agreed period.

E

Early Repayment Charge (ERC)

A fee your lender could ask you to pay if you exit a fixed rate deal early, or you wish to change your existing mortgage in any way during the fixed rate period.

Equity

The difference between the value of the property, and the outstanding secured mortgage balance remaining on the property.

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F

Financial Consent Order

A legally binding financial agreement between parties.

Flying Freehold

When part of your property overlaps with your neighbours.

Freehold

When you own the building and the ground the property stands on.

Further Advance

Releasing available equity from your property in the form of a mortgage or secured loan in addition to an existing mortgage or secured borrowing held on your property.

G

Grade Listed

Buildings that are of exceptional or special interest and must be preserved.

There are different levels of grade listed buildings. Grade I, Grade II and Grade II*.

I

Interest Only

Interest only is a type of mortgage that requires a person to make payments to cover the monthly interest on the total mortgage balance over an agreed term. At the end of the term, the full capital will need to be repaid.

J

Japanese Knotweed

A destructive weed that can grow as high as 7ft. It can push its way through concrete, cavity walls and bricks and cause structural damage.

L

Leasehold

When you own your property, but do not own the ground or land or building the property is on, like a flat or apartment.

Loan to Valuation (LTV)

The balance of your mortgage, compared to the value of your property. Expressed as a percent (%).

Let's say you have a £60,000 mortgage. If the property value was £100,000, this would equal a 60% LTV.

Lenders offer rates based on LTV. Generally, the lower the LTV, the lower the rate.

N

Negative Equity

When the amount secured against the property is higher than the value of the property.

P

Part Interest Part Repayment

When you pay off some of your mortgage as you go, but not all of it.

When the mortgage comes to an end, there will still be some money left to pay off.

Peppercorn Rent

A token or nominal rent (often £1).

Paid by way of consideration, in order to form a legally binding contract, and create a legal relationship between landlord and tenant.

Porting

The ability to move your current mortgage balance and deal to a different property with the same lender. There are no charges or restrictions.

Power of Attorney

Allows one or more person, known as an attorney, to make financial decisions on someone else's behalf.

R

Right To Buy (RTB)

A council or local government scheme that allows council tenants to buy their home at a lower price.

S

Shared Equity Scheme (SES)

A government scheme that gives a borrower a loan which will form part of the deposit to purchase a property.

The borrower would then take out a residential mortgage on the remaining part of the property value.

The borrowed part of the loan will need to be paid back on sale of the property, or after a set period of time (commonly five years).

Shared Ownership

A scheme where a person can buy a certain share of a property.

This can be done outright, or by getting a mortgage and paying rent to a landlord for the rest. The landlord is usually a building/management company, or local authority.

The scheme offers the person the opportunity over time to increase their share within the property (known as staircasing) and eventually own the property in full.

This offers an affordable way to get on the property ladder.

Standard Variable Rate (SVR)

The interest rate that is charged by the bank or building society.

This is after the initial fixed or tracker rate period comes to an end.

T

Tenants In Common (TIC)

This is where owners of a property have different shares in it. Shares are shown as a %.

Upon passing of either party, their share will pass to their estate. Instead of going to the remaining owner.

Tracker Rate

A type of variable rate that tracks a base rate. Such as the bank of England base rate, below a certain %. This can be either for a set period, or open period of time.

If the base rate goes up, so will the tracker rate. This could make the rate being paid higher or lower.

True Cost

This is the overall amount you will pay in capital borrowed and interest.

This is over a set period of time. Usually the period of a fixed rate deal. It includes any fees and costs attached to a mortgage deal.


Signposting Hub

Shelter

The UK's largest housing organisation, fighting for housing justice. Shelter can help people who are at risk of repossession and homelessness.

Find out more about Shelter

Civil Legal Advice (CLA)

You could get free, confidential advice from CLA as part of legal aid (England and Wales only).

Those eligible can get help with problems such as:

  • Debt - if your home is at risk
  • Housing - if you are homeless or at risk of being evicted

Find out more about Civil Legal Advice

Citizens Advice Bureau (CAB)

CAB can help people who need extra support for financial services. They offer:

  • Face to face advice
  • Local appointments
  • A range of services, such as financial and legal help

Find out more about Citizens Advice

Charis Grants

An organisation that can help people find trust funds and grants if they are struggling with utilities.

Find out more about Charis Grants

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