Glossary of Terms

A

Actuary

Actuaries compile and analyse data to calculate insurance premiums, annuity
rates, dividends and risks.

Added to Loan

Administration fees incurred during the mortgage process can be added to the amount being borrowed, in which case they are known as ‘Added to Loan’.

Adjustment Date

The adjustment date is the date from which interest accrues on your mortgage. It also refers to variable rate mortgages, where it is the date on which the interest rate changes.

Adverse Credit

Anyone who has a poor record when it comes to meeting their credit commitments, including late payments, CCJs or bankruptcy, has adverse credit.

Amortisation

Amortisation is simply the reduction in the amount you owe on your mortgage over time as your repayments are processed.

Annual Percentage Rate (APR)

This is a calculation which allows the applicant to compare the cost of borrowing across different lenders. APRs take into account the amount of interest and any other fees charged by the provider. The lower the APR, the better.

Applicant

The person applying for a mortgage.

Application

The process of applying for a mortgage, and supplying personal and financial details to the mortgage broker.

Appraised Value

A surveyor’s estimate of a property’s value.

Appreciation

The increase in a property’s value over time.

Arrears

When you have fallen behind your repayment schedule you are said to be in arrears, usually expressed in pounds or months.

Asset

An economically valuable resource controlled by a person, including any form of property owned, shares, cash and land.

Assignment

The situation whereby an asset, or mortgage, is transferred from one owner to another.

B

Balance Sheet

A document showing the assets and liabilities of a company.

Base Rate

The interest rate set by the Bank of England.

Basic Earned Income

This is your base salary, without taking tax or additional sources of income, like a bonus, into account.

Beneficiary

This is a person entitled to gain, usually financially, from a trust or will.

Borrowing Back

Available to flexible mortgage holders only, this allows you to borrow back any overpayments you have made if, for whatever reason, you need additional cash flow.

Bridging Loan

This is a stop-gap loan to finance a project until permanent financing can be obtained. Rates tend to be high and they are only recommended in the short term.

Broker

A broker facilitates the transaction between borrower and lender.

Broker’s Fee

The fee a broker charges for securing the most appropriate mortgage for the borrower.

Buildings Insurance

Buildings insurance covers loss or damage to the physical structure of your home (for example, the roof, walls and floors). Contents insurance, often sold alongside buildings insurance, covers loss of or damage to the possessions inside (furniture and so on).

Buy to Let Mortgage

This is designed for people who buy a property with the sole intention of renting it out for profit.

C

Calculating Interest Daily

The interest on most flexible mortgages is calculated daily to take into account the reduction in the overall size of the mortgage as payments or overpayments go through. Over time this can save a substantial amount.

Cap

A cap is an upper limit on interest rates, usually for a specified period. For example, if your mortgage is capped at 4% for 2 years, you will not pay more for that time period even if interest rates rise to 5%.

Cap and Collar

A collar is a lower limit on interest rates, usually for a specified period. For example, if your mortgage has a 4% collar, you will not pay less than that, even if rates fall to 3.5%. A cap and collar mortgage is a combination of the two.

Capital

In mortgage terms, this is the money, or deposit people put into buying a property (also known as equity).

Chain

The interdependent events whereby a buyer is waiting on the completion of the sale of their existing property in order to complete on the purchase of a new property.

Clear Title

Legal term for the unequivocal ownership of a property.

Collateral

An asset, such as a car or an expensive television, which a lender may seize if the borrower fails to repay the loan under the terms of the original contract.