F
Flexible Mortgage
A mortgage that allows you to vary your monthly repayments and, for a certain number of months, even take a payment break. Because of the ability to make overpayments, borrowers can pay off their mortgage early and therefore reduce the interest payable. However, in return for this flexibility, this type of mortgage usually comes at a higher interest rate.
Freehold
If you own your property’s freehold, you not only own the property itself but also the land it is built on.
G
Gazumping
This is when the person selling a property initially accepts an offer, but then accepts a higher offer from a second party just before the exchange of contracts. Particularly common in strong housing markets.
Gazundering
The nightmarish situation for the seller where a buyer makes a reduced offer just before the exchange of contracts.
Ground rent
The fee payable by a leaseholder to the freeholder. Tends to be paid annually or biannually.
Guarantor
The guarantor is the person liable for the repayment of a mortgage if, for whatever reason, the borrower fails to keep up their mortgage repayments. Guarantors are usually parents or close family members.
H
Home Buyer’s Report
A surveyor’s report, more detailed than a mortgage valuation but less comprehensive than a full survey, intended to satisfy the buyer that the property they are purchasing is in good condition.
I
Income Multiples
When calculating how much they will offer as a mortgage, lenders multiply an applicant’s income by a set figure, depending on the person’s salary, outgoings, circumstances and ability to keep up payments.
Income Reference
Lenders often ask employers to confirm the amount the applicant earns in writing. For self-employed applicants, lenders may ask for confirmation from an accountant.
Individual Savings Account (ISA) Mortgage
This is an interest-only mortgage that relies on the performance of a tax-efficient ISA to pay off the loan at the end of the mortgage term. An ISA can invest in numerous asset classes, including shares, bonds and cash.
Interest
Interest is what lenders charge people for borrowing money. Exactly how much interest is charged depends upon various factors, including the time period of the loan and the deemed credit risk.
Interest-Only Mortgage
With interest-only mortgages, borrowers only have to pay off the interest on the mortgage and not the capital. However, the onus is upon the borrower to ensure, via an appropriate savings vehicle, that sufficient funds will be in place at the end of the term to pay off the mortgage in full.
J
Joint Tenancy
A form of ownership whereby the property is held jointly by two parties. Each party’s share passes to the other (or others) upon their death.
L
Land Registry Fee
The fee paid to register the ownership of a specific area of land.
Leasehold
A common type of home ownership whereby you purchase a house or flat for an agreed number of years but the actual land remains the property of the freeholder. When the leasehold period ends, the freeholder reclaims ownership of the property.
Licensed Conveyancer
A person specialising in the transfer of the legal ownership of a property, often used in place of a solicitor.
Life Assurance
Life assurance policies pay out the ‘sum assured’ if a person dies during the term of the policy, usually to his or her dependents. This can be a lump sum or a series of payments, and is tax-free in most cases.
Listed Building
A building of particular historic or architectural importance which cannot be altered in any way by its owner without official permission.
Loan to Value (LTV)
The amount of money a bank or building society will lend you as a percentage of your property’s value. In some cases they will lend the full value of the property, or 100% LTV.
Local Authority Search
Carried out by the buyer’s solicitor for a fee, a local authority search checks that there are no developments in the pipeline close to the property that could render it less attractive or less valuable (a busy motorway, for example). The search also highlights the various planning permissions for the property and whether any enforcement notices have been served upon it.
M
Mortgage
An agreement whereby a bank or building society lends money at interest, with the ‘mortgaged’ property acting as security until the loan is repaid in full after a certain term.
Mortgage Indemnity Guarantee (MIG)
An insurance policy that covers lenders in the event of a property being repossessed and the mortgagor not being able to repay any outstanding payments. Although these insurance policies protect the lender, it is the borrower who has to pay for them. MIGs are generally requested when the LTV is over 75%.
Mortgage Payment Protection Insurance (MPPI)
MPPI pays a percentage of a person’s mortgage payments if they are unable to work because of illness, accident or enforced redundancy.
Mortgagee
The organisation that lends you the money to buy a property, usually a building society or bank.
Mortgagor
The person who borrows money from a lender under a mortgage agreement.
N
Negative Equity
A property is in negative equity if it is worth less than the amount owed on a mortgage secured against it, usually caused by falling property prices. It becomes a problem if a person wants to sell their home.
O
Offer
The sum of money a buyer proposes to pay a seller for a property.
Offshore Mortgage
These are usually for people with complex mortgage needs, such as high net worth foreign nationals and international sports stars looking to purchase a UK home. Finance is arranged through any number of trusts and companies from the Cayman Islands to the Isle of Man.
Open Market Value (OMV)
The price of a property when both buyer and seller are willing.
Overpayment
A larger repayment instalment than required under the terms of the mortgage is deemed an overpayment. Flexible mortgages allow overpayments without incurring a penalty. Over time, this can result in significant savings.