We have done our best to avoid using obscure jargon as much as possible on our website. Just in case, we thought we should provide a jargon buster... otherwise known as a glossary. If you think anything is missing please contact us at info@YourMortgageExpert.com
APR or Annual Percentage Rate, is an indication of how much interest is payable on a particular mortgage over one year. The advertised rate shows an overall cost in percentage terms, including the effect of any fees and any initial discounted or fixed rate period.
A fee which a mortgage lender may charge to arrange a mortgage. Any fee must be clearly stated in the product information. You may be able to add the fees to the mortgage.
The rate of interest which the Bank of England charges banks to borrow money. Lenders may choose to peg their mortgage rates to the Bank of England base rate or to their own Standard Variable Rate.
A fee which a mortgage lender may charge to reserve a mortgage rate. This has to be paid at the outset, before application, and may be non-refundable.
The fee a mortgage adviser may charge for searching the market, finding the best deal for you, completing the paperwork and advising you throughout the process. This is separate from any fee charged by the lender.
‘Completion’ can refer to:
The point when the solicitors for the buyer and the seller have clarified all the terms of the sale and have exchanged a Letter in Conclusion. If either the buyer or seller pull out at this stage, the other party could claim damages.
The legal process of transferring ownership of a property from one person or organisation to another.
Lenders will not normally lend 100% of the cost of a property. Normally, the borrower is expected to contribute a certain percentage up front, called the deposit.
A mortgage with an interest rate that is reduced below the lender’s Standard Variable Rate (SVR), for a certain period of time, after which it reverts to the SVR. A discounted mortgage will follow the movement of the SVR, so the monthly cost can vary.
The difference between the current value of the property and the debt owed on it.
In a shared equity scheme, an equity loan means that the organisation which funds the equity share, treats this as a loan, and charges the homeowner interest.
In a shared equity scheme, the equity share is the portion of the property value which has been funded by an organisation such as the government, a housing association or private developer.
A mortgage with an interest rate which is fixed for a certain period of time, usually 2, 3 or 5 years. During this time the mortgage payments do not change from month to month. After the fixed period ends, the interest rate usually reverts to the lender’s Standard Variable Rate (SVR).
Where a family member provides security on a mortgage in the form of savings or a security on their own property.
Help to Buy is a name given to a number of current schemes run by both the UK and Scottish Governments, which aim to make it easier to purchase homes with smaller deposits. The schemes which apply to purchases of homes in Scotland are the Help to Buy Mortgage Guarantee and Help to Buy (Scotland). There are other schemes in Scotland which precede Help to Buy. These are MI New Home, LIFT and Shared Ownership.
This is a UK Government backed scheme to enable buyers to obtain mortgages on properties in the UK with as little as 5% deposit. The UK government provides a guarantee to the lender, that if the buyer defaults on the mortgage the government will compensate the lender for a percentage of the loss. This scheme is not limited to new-build properties or first-time buyers.
A Scottish Government-backed scheme which allows buyers to obtain mortgages on new-build properties in Scotland with as little as 5% deposit. The Scottish Government funds up to 20% of the purchase, and in return has an equity stake in the property. The buyer has the option of buying back some or all of the government’s equity at a later date. Help to Buy (Scotland) is not limited to first-time buyers.
A report which gives the market value, condition, and environmental rating of a property for sale. In Scotland, anyone selling a property is required to make a copy of a Home Report available to interested buyers.
The rate at which interest is paid by a borrower, for the use of money which is lent to them.
For example, if £100,000 is borrowed at a simple interest rate of 5% APR, £5,000 will be owed in interest over the first year.
A Scottish Government-backed scheme to make it easier for first-time buyers to purchase a home with as little as 5% deposit. The government or a housing association fund a 20% stake in the property, which the homeowner can buy back at a later date. The LIFT scheme is restricted to first time buyers and priority is given to those in social need.
The ratio between the amount the buyer wants to borrow, and the value of the property they want to buy. If a property is worth £100K, and the buyer has a £5,000 deposit, the loan to value is 95%. The lower the LTV, the better the mortgage deals available.
A scheme backed by property developers and the Scottish Government, which makes it easier for buyers to obtain mortgages on new-build properties in Scotland with as little as 5% deposit. The property developers and the Scottish Government provide some security to the lender if the buyer defaults on the mortgage within the first seven years.
Legal documents which set out the details of a house sale to be agreed between the buyer’s and seller’s solicitors.
A loan for the purposes of buying property. Mortgages are designed to be repaid over a long period of time, usually 25 years, and generally have lower interest rates than other types of borrowing.
A mortgage where a third party provides extra security to the lender in the event that the buyer defaults on the mortgage. The MI New Home and the Help to Buy Mortgage Guarantee schemes are both types of mortgage guarantee.
See Mortgage Guarantee
A basic survey for valuation purposes, designed to give the mortgage lender an indication of how much to lend on the property. A Scheme 1 survey does not go into detail about the condition of the property, although it does point out significant issues which might affect the property value.
A Scheme 2 survey is a detailed inspection of a property, including external fixtures, and the roof space if accessible. Any significant issues affecting the value and any urgent repairs needed will be commented on. However the investigations are non-intrusive so furniture will not be moved and carpets will not be lifted. If the surveyor does find any problems they may suggest further specialist surveys are carried out.
A Scheme 3 survey is a thorough structural report which should highlight any major problems with a property such as subsidence, hazardous materials and unauthorised alterations. The surveyor may have to cause some disturbance to the property, for example to inspect woodwork. Although this is the most detailed form of general survey, if any issues are uncovered, more specialist investigations may be required.
A scheme where an organisation such as the government or a private developer, offer to fund a certain percentage of a property’s asking price. This enables the purchaser to buy a property which they would not otherwise be able to afford. The property is in the buyer’s name but when the property is sold, the percentage owned by the government or developer has to be repaid. That way both parties benefit (or not) from any changes in value. The homeowner is generally given the opportunity to increase their stake over time, up to 100%. Like other homeowners, shared equity purchasers are responsible for all repairs, maintenance and insurance for the property.
A scheme which allows buyers to purchase a share of a property from a Housing Association, enabling them to buy a property which they would not otherwise be able to afford. The Housing Association allows the buyer to occupy the whole property although technically it still owns a share, so they may make an Occupancy Charge on the remainder. Like other homeowners, shared ownership purchasers are still responsible for all internal and external repairs, and any ongoing maintenance costs.
The lender’s standard mortgage interest rate, which they can change at their discretion.
See Scheme 3 Survey
A property survey is a report carried out by a qualified surveyor, which provides information on the condition of a property and its value. There are different types of survey depending on how much detail is needed.
A mortgage with an interest rate which follows the movements of the Bank of England base rate, rather than the lender’s own Standard Variable Rate. The cost of a tracker mortgage can change from month to month.
The cost of a mortgage valuation report (Scheme 1 report) which is paid to the valuer. The cost of this is non-refundable. Usually the home buyer pays this fee, but some mortgage lenders may pay this fee as an incentive.
A mortgage with an interest rate which follows the movements of the lender’s Standard Variable Rate. The cost of a variable rate mortgage can change from month to month.
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Peter Dean has helped thousands of people with quality money advice, through his well-known company Your Debt Expert. Peter is now helping even more people by offering quality whole-of-market mortgage advice.