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Jargon Guide A Adverse CreditAlso known as Bad, Poor, impaired credit - in the mortgage industry it is called sub prime lending. If a person misses a credit agreement payment it will show up on their credit file, thus showing the lender that lending to this persons is a higher risk. The interest rate on these type of mortgages/secured loan tend to be higher.
Agreement In Principle (AIP)Is an agreement to offer you credit on agreed terms, this is usually carried out by a lender conducting a preliminary credit check with the basic details you have provided the lender. An AIP is not legally binding, a lender has the final decision once the full case has been fully underwritten (accessed) with the full loan application and satisfactory references. Annual Percentage Rate (APR) The Annual Percentage Rate (APR) is the overall cost of the loan/mortgage amount. This is calculated by adding all of the associated costs e.g. lenders arrangement fee, valuation and all other fee and charges associated to the credit agreement. The APR is also affected by the length of the credit agreement, the longer the repayment term the higher the APR. All secured loan quotation will be supplied with an APR figure. Arrears are payments that are measured in months or pounds (£), that have been missed from a credit agreement. If you have missed payments, this can affect the interest rate that you borrow on in the future as it will show up on a credit reference agency check records. Always contact a lender if you think you will miss the agreed payment date as you may be able to come to some arrangement with out the missed payment appearing on the credit reference agencies records. B
Bank Base Rate is the rate that the Bank of England lends money. The rate is set by the Bank's Monetary Policy Committee that consists of 9 people who vote to decide if any changes to the interest rate should take place. The main purpose of the committee is to keep a stable financial market place, keeping inflation low and keep prices stable, thus creating confidence in the pound. Bankrupt / Bankruptcyis where a person or partnership has been relieved from payments of their debts by a court order after surrender of all their assets. Bankruptcy lasts for 12 months in the UK. Basic Income is the wage gross payment that is guaranteed before tax and national insurance has been taken off, that you would get paid without any e.g. overtime, allowances or bonus etc added. A number of lenders take these added extras in to full consideration, thus increasing the amount you can borrow. These lenders tend to lend at a higher rate of interest as it does carry a greater risk. Building Insurance covers the property for repair or rebuild costs in the event of damage. A lender will always ensure that the building has this insurance to cover their security (the building). It is up to the borrower (you) to ensure that adequate cover is in place at all times to protect you and the lenders interests. Buy to Let are property's that have been bought to let/rent out to tenants. These have become very popular over recent years as the property prices have risen. People have bought them as an investment, but with current high prices at present it is wise to get advice if you are thinking of buying a property to let out. Buy to Let mortgages are commercial loans and are not regulated by the FSA.
C Capital is the amount of equity that is in a property. This capital can be used for security for almost any purpose (dependent on lender). Home improvements, debt consolidation or business purposes are just some of the reasons why people raise capital from their property. Secured loans tend to have a lower rates of interest as there is the security of the building to repay the loan. A Charge is a Legal charge on the property that a lender has to acquire the property in the event of repossession. Mortgage lenders tend to have the 1st charge on the property, and secured loan lenders have the 2nd charge on the property. It is order of who gets paid first in the event of the property being repossessed. Completion is where the buyer of the property solicitor completes all of the legal paperwork and the ownership of the property is passed over to the buyer. Conveyancing is the Legal work carried out by a solicitor or licensed conveyancer for the legal transaction of buying or selling of a property. Conveyancing also applies if you re mortgage a property to deal with the legal documents of charges on the property concerned County Court Judgments or CCJ's are an adverse ruling against a person by a creditor for non payment, this is carried out at a county court or a higher court in the land. You can still get a mortgage or secured loan if you have a CCJ or a number of CCJ's, but you will pay a higher rate of interest that will be set against the risk of lending. D Disbursements are the fees the conveyancer or solicitor has on the behalf of the client for e.g. searches, land registry and stamp duty etc. These fees and charges are normally added onto the final bill, but in some cases may have to be paid up front by the client, normally the searches.
E Endowments are investment policy's that are used to repay a mortgage on maturity at the end of the agreed term. These do involve risk as the investments are usually linked with the stock market and they may fall short of their maturity target at the end of their term. Endowments are normally used along side an interest only mortgage. Equity is the amount of capital (£) between the value of the property and the mortgage/loan secured on it e.g. Property Value £200,000 - £150,000 mortgage = £50,000 equity. F Freehold is where the land a property is built on belongs to the property. No lease or ground rent is payable. Further advance in simple terms is asking your current mortgage lender for more funds secured against your property. If this is not possible due to various reasons e.g. income multiples this is one of the reasons why people opt for a secured loan. G Gifted deposit is a term used to describe a sum of money usually offered by the seller against the purchase price of a property towards the purchaser's deposit. H Home Buyer Report is the next step up from a standard mortgage valuation, this is really type of valuation identify's more points to be taken into consideration of the true state of the property. A structural survey is the highest level of valuation, which takes into account of all areas in detail of the property providing a full breakdown of the true state of the property condition (identify's any hidden problems). List below are the 3 types of property valuations: I Interest Only Secured Loans/Mortgages is where you only pay the interest on the loan amount without repaying any capital back to the lender. So when the loan agreement comes to the end of the term e.g. Secured Loan for £25,000 over 20 years = You will still owe £25,000 after the 25 years is up. People take this option to keep the monthly payments low, they look to repay the amount owed by cashing in an investment, remortgaging or changing to repayment when their personnel finances allow. Repayment option is best. L The Land Registry hold all of the ownership records for land and property's in the UK. They also record mortgages and other charges against the property including restrictions and cautions. A Registry fee is normally incurred if there is a change to ownership. A Lease Hold is where the land that a property is built on belongs to another owner, thus the property owner will have to rent the land for a set period of time called a lease to the Free Holder of the land. Loan to Value (LTV) is the the total loan amount in ratio (%) to the value of the property: Loan amount £150,000 Value of property £200,000 = 75% LTV Calculation to work out the LTV: Property Value (£200k) Divided by the (£150k) loan amount = 75% M Mortgage this is a loan that is secured against the value of a property. Mortgagee is the lender i.e. Bank or building society. Mortgagor - the persons who borrow from the bank or building society. Multiple Occupancy - is if there is more than 1 person who is staying in a property, say a bed sit where people have their own rooms. Q Quotation - Shows the monthly payments and cost of the secured loan/mortgage. R
Redemption - Is when you pay off the outstanding loan/mortgage amount completely. Redemption Charge - This is a charge that may be incurred if you pay off a loan early, within a certain time scale.
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