Definitions of terms commonly associated with mortgages and property ownership in the UK.
Added to Loan
The costs borrowers incur when arranging a mortgage. Usually refers to expenses such as arrangement and administrative fees.
Administration Fee
A fee charged by some mortgage lenders to cover the costs of setting up the mortgage.
Annual Percentage Rate (APR)
The yearly rate charged on a loan required by law to be shown to borrowers. The APR includes the interest rate and other fees charged on the mortgage.
Arrears
Borrowers are said to be in arrears when they have either not made their mortgage repayments in time or if they have not paid the correct amount.
Base Rate
Set by the Bank of England the base rate is the lowest percentage amount of interest lenders can charge. Interest rates on loans are set at an amount over the base rate decided according to the level of risk involved.
Capital and Interest Mortgage
A common type of mortgage where the monthly repayment made by the borrower includes a repayment of both the capital borrowed and the interest charged.
Capped Rate Mortgages
A combination of a fixed rate and a variable rate mortgage. In a capped rate mortgage although the interest rate can change it will never rise above a certain level.
Cash Back Mortgage
In a cash back mortgage the lender will pay 'back' to the borrower a percentage of the amount borrowed. This lump sum payment is made on completion of the mortgage.
Conveyancing
Conveyancing is the legal process that must be completed for the transfer of ownership of the property to take place. Conveyancing work is usually performed by solicitors.
Credit Reference Agency
An organisation that collates information on the borrowing records of people in the UK. This information is used by lenders when setting up credit agreements.
Deferred Interest Mortgage
A type of mortgage in which the full rate of interest is not paid in the first few years of the agreement. The deferred interest is added to the amount borrowed and is repaid over the rest of the mortgage term.
Endowment Mortgage
An endowment mortgage is a type of mortgage where the property buyer makes two monthly payments; one into a life assurance (endowment) policy and the other to the mortgage lender to cover interest payments. At the end of the loan period the mortgage is paid off in one lump sum.
Equity
The difference between the value of a property and the amount remaining to be paid on the loan (mortgage) secured against it.
Exchange of Contracts
One of the final stages in the transfer of ownership of a property. In the exchange of contracts the buyer and seller both sign a contract committing to completing the sale.
Fixed Rate Mortgages
In a fixed rate mortgage the interest charged is set for a certain period of time and does not vary with changes to the base rate.
Land Registry
The Land Registry is the government department responsible for maintaining and updating the ownership records of all properties in England and Wales.
Local Search
Part of the conveyancing process, local search refers to an application to the local authority for information relating to a property.
Negative Equity
Negative Equity is a situation where mortgage repayments on a property are for a higher amount than the actual value of the home. This means that the home owner has paid or will pay back more than what the property is worth.
Re-mortgage
A term for when a home owner replaces their existing mortgage with a new mortgage agreement. Remortgaging is common for people looking for better rates of interest, lower repayments or a different type of mortgage.
Stamp Duty
A tax on property transactions paid by the buyer of the home.
Variable Rate Mortgage
The most common type of mortgage agreement where the lender sets an interest rate that will change according to variations in the base rate.
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