Glossary of Terms

O

Overseas Mortgage

These can be secured against the equity in a UK property, and are taken out by investors looking to build a portfolio of properties abroad or simply buy a holiday home. Can be either sterling or foreign currency loans.

P

Portability

A mortgage that can be transferred between properties when a borrower moves house is said to be ‘portable’.

Principal

The amount of the loan on which lenders calculate interest.

Purchaser

The person who is buying a property.

R

Redemption

The paying off of a mortgage when remortgaging, moving house or coming to the end of the mortgage term.

Redemption Penalties

Lenders levy redemption penalties when borrowers pay off their mortgage before the end of the agreed redemption period. They are very common with fixed rate and discounted mortgages.

Remittance Fee

An admin cost charged by lenders when sending mortgage funds to a solicitor immediately before the purchase of a property.

Remortgage

The act of paying off your old mortgage with the money you receive from a new mortgage, using the very same property as a security. People often remortgage to switch lenders and/or secure a more competitive interest rate.

Repayment Mortgage

Repayment mortgages require borrowers to repay not just the interest accrued on the loan but also a portion of the capital borrowed, on a monthly basis. This kind of mortgage is favoured by more conservative homeowners who want to be sure that, at the end of the mortgage term, the property will belong to them.

Repossession

The situation where the lender legally takes control of the property used as security when the borrower can no longer keep up repayments. The lender usually then sells the property at public auction in order to retrieve any outstanding debts.

Retention

The holding back of financing by a lender until certain repairs have been completed to their satisfaction.

S

Sealing Fee

Charged by lenders when a mortgage is repaid.

Stamp Duty

Stamp duty is a tax levied on property purchases, and applies on a sliding scale according to the price of a property.

Standard Variable Rate (SVR)

The standard variable rate is a type of interest rate on a mortgage that often moves in line with the Bank of England base rate. However, unlike a tracker mortgage, changes are ultimately at the lender’s discretion.

Structural Survey

An in-depth structural analysis of the inside and outside of a property that should reveal any hidden problems, also known as a Building Survey. Carried out by a chartered surveyor who then produces an extensive report outlining any defects, structural surveys tend to be carried out on older properties or those that have been poorly maintained.

T

Term

The time period – usually in years – over which a mortgage is to be repaid.

Term Assurance

The most common form of insurance, this pays out a lump sum if the policyholder dies during the term of a policy. The money is usually used to pay off a mortgage or to provide for the policyholder’s dependants.

Tie-in Period

If you move mortgage during a tie-in period, you will usually be charged an early redemption fee

Title Deeds

The documents that prove ownership of the freehold and leasehold of a property.

Transfer Deed

Once you have signed the transfer deed, ownership of the property is transferred to you.

U

Under Offer

When a seller has accepted an offer from a buyer but the exchange of contracts has not yet been reached, the property is ‘under offer’.

Unencumbered

When a property is owned outright and no mortgage is secured against it, it is said to be unencumbered.

V

Valuation

A check carried out by the lender to find out how much a property is worth and whether it is suitable for a mortgage. The valuation fee is usually paid by the borrower.

Variable Rate

On a variable rate mortgage, the interest rate charged by the lender goes up and down according to base rate movements and mortgage repayments change accordingly.

Vendor

A person selling a property.

W

Waiver of Premium

A caveat within an insurance policy that allows a policyholder who has become incapacitated to stop paying the premiums while continuing to be covered.

Y

Yield

For buy to let investors, this is the income generated from a property, calculated as a percentage of its value.