Jargon Buster

You will hear lots of different jargon and terms being used during the house buying or remortgage process which can be confusing. This is a list of the more common terms you may hear and what they usually mean (although don’t be surprised if you hear someone saying something new or just confusing themselves)! 

A

Agreement in Principle
 An Agreement in Principle (AIP), also known as a Mortgage in Principle MIP) or Decision in Principle (DIP), gives you an understanding of how much you may be able to borrow towards the purchase or remortgage of a property. It's a document that you can use with an estate agent, or those selling a property, to show that you may be in a financial position to purchase it.

APRC
The annual percentage rate of charge (APRC) is the total cost of the loan expressed as an annual percentage. It is a reflection of the cost of the mortgage over it's full term.

Arrangement fee
This is a charge levied by the lender to cover the costs of administering and reserving the funds for certain types of mortgage. May be paid separately or added to the loan amount.

Arrears
If you fall behind on your mortgage payments you are "in arrears".

B

Balance Outstanding
The amount of loan owed at a particular time.

Bank of England Base Rate
It's the rate the Bank of England charges other banks and other lenders when they borrow money. It doesn't have a direct impact on fixed rate mortgages but some tracker mortgage rates and lenders' standard variable rates can follow it.

Broker/Intermediary
An adviser who can help you with a range of mortgages and other financial matters.

Buildings Insurance
Insurance against the cost of rebuilding a property following structural damage, for example by flood, fire or storm.

Building Regulations
The health and safety requirements that any new construction must meet.

C

Capital and Interest Payment
Your monthly payment covers the interest and also reduces the total balance outstanding.

Cashback Mortgage
You receive a lump sum or a percentage of your mortgage in cash when you complete your mortgage.

CHAPS Fee
A fee to cover the cost of electronically transferring the mortgage funds to the borrower/solicitor.

Charge
An interest in the ownership of a property; usually a mortgage or some other debt secured against the property.

Completion (Date of Entry in Scotland)
End of the purchase process. The seller moves out, the buyer moves in and ownership is transferred.

Conclusion of Missives
Final part of the contract process in Scotland.

Contents Insurance
Insurance against accidental damage or theft of all moveable contents in a home, including furniture, appliances and soft furnishings.

Contract (or Draft Contract)
A document that describes the agreement under which the property will change hands.

Covenant
A condition, contained within the Title Deeds or lease, that the buyer must comply with, which is usually applied to all future owners of the property. A restrictive covenant is one that prohibits the owner from doing something.

Conveyancer
 A person whose job is to manage the legal process of moving land or property from one owner to another

Conveyancing
The process of transferring property from one party to another, usually managed by a solicitor or a licensed conveyancer.

Credit Scoring
A way of converting the information in your credit file, your application and any information the lender already holds into a score to help automate a lending decision. Contrary to popular belief, the score provided by a credit reference agency is not the score a lender will use. No two lenders will ever give you the same score. See our ‘check your credit file’ page for more information.

D

Debt Consolidation
The process of combining outstanding debts e.g. loans, credit cards etc, into one loan.

Decision in Principle (DIP)
 A Decision in Principle (DIP) is another term used for what we refer to as an 'Agreement in Principle' (AIP).

Deeds
Title deeds are the legal documents which record the ownership of a property and any accompanying land.

Deposit
The amount you need to pay towards the total purchase price of the property. This varies depending on the product and lender. 

Direct Debit
A Direct Debit is an instruction from a customer to an originator authorising their bank or building society to make regular collections direct from their account.

Disbursements
All the various costs for carrying out the legal work in relation to buying or remortgaging your home.

Discharge
Paying off a mortgage.

Discount Mortgage
A discount offered by mortgage lenders to borrowers, reducing monthly mortgage repayments often for the first two or three years of the loan period.

E

Early Repayment Charge (ERC)
Some mortgage products, such as a fixed rate mortgage, charge a fee if you pay back the loan before an initial period has ended. This can vary, so check your original offer letter.

Easement
A legal right over land, for example the right to access a specified area of land, such as a right of way.

Equity
  Is the difference between the current value of your home and the amount outstanding on your mortgage.

Exchange of contracts
The point at which both buying and selling parties sign their copies of the contract which are exchanged by their respective legal representatives and are legally binding. The buyer usually pays a deposit at this point and the date of completion is agreed.

Exit Fee
This is an administration fee payable to service providers when you fully repay your mortgage.

F

Financial Conduct Authority (FCA)
The regulatory authority for the UK financial services industry. The FCA oversees the regulation of mortgages, and all lenders and mortgage intermediaries must be authorised and regulated by the FCA.

Fixed Rate Mortgage
  A mortgage where the interest rate stays the same for a specific period.

Fixtures and Fittings
All non-structural items included in the purchase of a property.

Flexible Mortgage
An arrangement enabling the mortgage borrower to overpay, and with the overpayments that have been built up, borrow money back, take payment holidays or pay less in some months.

Freehold
You own both the property and the land it stands on.

Full Structural Survey
A full structural survey looks at all the main features of the property, including walls, roof, foundations, plumbing, joinery, electrical wiring, drains, and garden. You should always seek advice from a qualified surveyor before deciding what type of survey you need. 

Further Advance
Additional borrowing arranged with your current mortgage provider.

G

Gazumping
When a seller accepts an offer (a promise to purchase) on the property from one potential buyer, but then backs out or changes the terms agreed. This is often due to them accepting another offer from another party.

Gazundering
A tactic whereby the buyer offers less than the agreed price just before exchange of contracts.

Gifted deposit
  A gifted deposit is when someone else, usually a family member, provides the funds for some of, or all, your mortgage deposit.

Ground Rent
The annual fee which a leaseholder pays to a freeholder.

Guarantor
A third party who agrees to meet the monthly mortgage repayment if you are unable to. They will be legally liable for the payments but have no benefit from the property.

H

Help to Buy
Help to Buy is the name given to several UK Government schemes generally designed to help first time buyers attain home ownership. 

Higher lending charge (HLC)
This is sometimes charged by a mortgage lender if a borrower wishes to borrow more than 75% of the property’s value. The lender can use this money to buy an insurance policy to protect against them in case of default.

Home Buyers Report (level 2 survey)
This is an intermediate-level survey. The homebuyer’s report comments on the condition of parts of the property that are readily accessible, but it does not involve in-depth investigation. You should always seek advice from a qualified surveyor before deciding what type of survey you need.

Home Contents Insurance
A general insurance policy which can cover household contents against theft and damage.

I

IDD / Initial Disclosure Document
This is a document designed to assist you in comparing the services provided and the fees and charges made by lenders and intermediaries.

Interest Only Mortgage
This is where you only repay the interest on your mortgage debt each month. At the end of the mortgage term, you will need to have the money to fully repay the mortgage, or you will have to sell the property which could make you homeless. Because the interest you pay is based on the capital amount, you will pay substantially more interest over the life of the mortgage vs a capital repayment mortgage. 

Illustration
 This document contains key mortgage information which is designed to help you understand the costs and features of different mortgages. Its official name is European Standardized Information Sheet (ESIS) and used to be called a Key Facts Illustration (KFI). You should always be given an ESIS before you make a mortgage application.

J

Joint Applicants / Joint Mortgages
This is where you have a mortgage with another person or persons. All parties are equally liable for the mortgage and in the event of non-payment can each be held individually liable. 

K

Key Facts Illustration (KFI) 
This document contains key mortgage information which is designed to help you understand the costs and features of different mortgages. Its official name is European Standardized Information Sheet (ESIS). You should always be given an ESIS before you make a mortgage application.

L

Land Registry
The official body that holds the details of property ownership.

Land Registry Fee
A fee paid to the Land Registry to register your details if you have bought a property or changed mortgage lenders.

Leasehold
This is where you own the property, but a 3^rd party owns the land and possibly the structure. It’s usually for flats but sometimes houses. Leases typically start at 999 years, 125 years or 99 years and reduce over time. The lower the length of the lease the harder it is to get a mortgage or sell the property. You should always seek legal advice if the property you are interested in is leasehold. 

Life Insurance
Insurance which pays out on the death of the policy holder.

Local Authority Search
A search of the local area to highlight anything that may impact on the property or surrounding area, e.g. planned road building, planning permissions etc.

LTV (Loan to Value)
LTV means Loan to Value. The size of your mortgage as a percentage of the value of your property. for instance, if you have £50,000 mortgage and your home is worth £100,000, your LTV is 50%.

M

Maturity Date
The date the mortgage must be repaid in full, or by which a new agreement needs to be taken out.

Monthly Interest
A method of calculating mortgage interest on a monthly basis.

Monthly Repayment
The amount you pay to your lender for your mortgage each month.

Mortgage Deed
A legal document relating to the mortgage lender’s interest in the property.

Mortgage Illustration
This document contains key mortgage information which is designed to help you understand the costs and features of different mortgages. Its official name is European Standardized Information Sheet (ESIS). You should always be given an ESIS before you make a mortgage application.

Mortgage in Principle (MIP)
 A Mortgage in Principle (MIP) is another term used for what we refer to as an 'Agreement in Principle' AIP.

Mortgage Offer
This is your guaranteed offer. Once your mortgage is approved you'll get a formal offer setting out the terms and conditions.

Mortgage Term
The amount of time you are repaying your mortgage over (e.g. 25 years).

N

Negative Equity
  When the value of your home falls below the amount of your mortgage.

NHBC
National House Building Council. A warranty scheme for new properties providing cover against major structural defects..

O

Overpayment
 This is when you pay extra, over and above your monthly mortgage payment. You could choose to make a one-off lump sum overpayment or overpay a regular amount with your normal mortgage payment. Overpayments save you interest and will shorten your mortgage term.

P

Payment Holiday
This is a period during which you make no payments on your mortgage. While you make no payments interest will continue to be charged. They are often classed as defaults even when agreed with the lender so it is important to get advice before proceeding.

Planning Permission
The permission granted by the local planning authority (usually the local council) for any new building or engineering operations or change of use of a building if it meets the public’s interest.

Portability
Where an existing mortgage product can be transferred between properties when you move home usually to avoid paying an earley repayment charge. You still have to be approved for the new mortgage so it is a backup rather than a plan.

Premium
The amount you pay regularly, monthly or annually, to an insurer for an insurance policy.

Product Fee
A fee you pay to secure an interest rate. Typically lenders will offer a range of products all with different rates and fees so you should always get professional mortgage advice. 

Product Transfer

This is the process for changing interest rates or mortgage products with the same lender, when your current mortgage product finishes. 

R

Rebuild costs
The amount it would cost to rebuild your home if it is destroyed (by fire for instance). This is needed for insurance purposes.

Remortgage
The process of moving your mortgage to a new lender, often to benefit from a new promotional rate or to change the terms of your mortgage.

Repayment Mortgage
Also known as a Capital and Interest mortgage. Your monthly payments pay off the interest and some of the capital borrowed. By the end of the term of your mortgage you will have paid off all your mortgage debt.

Retention
Holding back part of a mortgage loan until any repairs to the property are satisfactorily completed.

S

Solicitor
Legal expert handling all documentation for the sale and purchase of a property.  

Stamp Duty
  This is a tax you pay when you buy a property. This amount differs based on the purchase price of a property and what type of purchaser you are eg. A First Time Buyer or someone purchasing an additional property. 

Standard Variable Rate (SVR)
  The default mortgage interest rate your lender will charge you after your initial mortgage deal ends.

Subject to Contract
Words to indicate that an agreement is not yet legally binding.

Survey
A thorough report on the property you are planning to buy

Surveyor
Person who conducts the survey.

T

Tenancy in Common
A form of ownership by two or more people in which, if one dies, their share of the property forms part of their estate and does not automatically pass to the other(s).

Tenants
People living in a property on a non-ownership basis.

Title
The record of ownership of a property, the evidence of which is found in the title deeds.

Total Amount Payable
The total cost of repaying a mortgage.

Tracker Rate Mortgage
The mortgage interest rate is set at a fixed percentage above a variable rate often the Bank of England (BoE) base rate. The interest rate payable will rise and fall in line with changes to the variable rate.

Transfer of Equity
Adding or removing a party to/from the property ownership and mortgage.

Transfer Deeds
The Land Registry document that transfers legal ownership from seller to buyer.

V

Valuation (Mortgage Valuation)
  Mortgage lenders require a valuation to prove that the property is worth the amount you want to borrow. Its the most basic form of survey and its likely you wont get a copy of the report. It should never be relied upon when making your purchasing decision

Valuation Fee
The charge for the valuation of the property.

Variable Rate
This means the interest rate (and therefore your payments) can go up or down at any time without warning. Some types of variable rates include a lenders Standard Variable Rate (SVR) a tracker or discount tracker.  

Vendor
The seller of a property or piece of land.

This is a glossary of terms provided to help you understand the different jargon used during the house buying process. It is not mortgage, legal or any other kind of advice or a definition of any product or service and you should always seek professional advice before making a decision to buy or commit yourself to any product. No warranty is provided, or liability undertaken by KG Mortgages for any loss due to these terms being incorrect. These terms could be used to in different way to describe different thing by different people, always check if you are unsure. 

Your home may be repossessed if you do not keep up repayments on your mortgage