WPP Financial Services Mortgage A-Z Glossary can help you to understand mortgages
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Accident, sickness and Unemployment Cover
After a period of deferral this cover provides payment while you are unable to work as a result of an accident, illness or unemployment.
This is another word for the amount of your mortgage loan.
Your affordability considers if you can afford your mortgage payments each month including a change if there is a change in interest rates and house prices.
Agreement in Principle
This is a statement from a lender that states that you borrow the amount requested as a mortgage but if the valuation of the property and the information provided is correct and confirmed.
Annual Percentage Rate of Change (APR or APRC)
This is the percentage charge for lending you the mortgage amount each year. Interest may be charged daily, monthly, or annually but this is summarised as an annual % in the APR.
Bank of England Bank Rate
This is the Bank Rate set by the Bank of England which affects the interest rates set by Banks and Building Societies.
Base Rate Tracker Mortgage
These mortgages change in interest rate by a percentage that tracks the Bank of England’s base rate e.g. base rate + x%.
This survey is an in depth inspection of your building by a chartered surveyor who will inspect all visible and accessible parts of a building, including roofs, walls, floors, windows and doors, chimneys, cellars, garages and outbuildings. Surveyors have a legal responsibility to discover and inform of any major problems with a property, so during the building inspection surveyors will actively search for potential problems and building defects.
This is an insurance you can take out to cover the cost of repair or rebuilding of a property following damage, for example by flood, fire or storm.
Buy to let
If you plan to rent out a property you will need to take out a to buy to let mortgage.
The interest rate on the mortgage is capped i.e. it will not rise above a certain level for a set period.
This is the day when the property is legally transferred to your name and you can pick up the keys and move in.
The contents of your property are items that can easily be removed and these can be insured for fire, theft or accidental damage with contents insurance.
This is the legal expert, or it can be a solicitor, that completes the surveys and legal documents associated with buying and selling a property. Searches include local planning information, any structural defects to the property and confirmation of the legal boundaries.
This is the legal process involved in buying and selling a property carried out by a solicitor or conveyancer.
Your credit score gives an indication of how much risk you are financially to a lender; different lenders use different scales. They will consider public record information such as the electoral roll, credit account information such as any loans, and search information which refers to the number of applications you have made for credit. There are ways of improving your credit score. WPP Financial Services can provide information on this.
Critical Illness Cover
Critical illness cover is insurance that provides financial support when you become critically ill; the exact conditions that are defined by critical illnesses will be defined in the policy such as a heart attack, stroke or cancer. The term over which you will receive this financial support will be defined.
This is a bank account that you use day-to-day to run your finances.
This is your own money that you provide towards the purchase of the house which is a set amount agreed with the mortgage lender of the purchase price.
These are costs that you find on your solicitors or conveyancers final bill that are the costs they had to pay to others for carrying out work when dealing with the buying and selling of a house.
This fee is an administration cost that some lenders charge for releasing their hold on your property after you have paid off the mortgage.
This is the process of ensuring that your true circumstances are communicated accurately e.g. any credit owed or CCJs and your previous addresses. This is a legal requirement and this information should not be hidden but will inform us of the lenders that will be most suitable for your situation.
For a certain period of time you will get a reduction on your usual rate.
This is the release of funds from your mortgage lender to purchase the property during the completion stage.
Early Repayment Charge
This is a fee that is a percentage of the loan amount that may have to be paid if you are in a position to repay your mortgage early.
Energy Efficiency Report
This is a report for buyers on the energy efficiency of the property that sellers must provide in England and Wales.
The difference between the value of your home and your amount you still owe on your mortgage.
Exchange of contracts
Your solicitor dealing with the purchase of your new property and the seller’s solicitor that is selling a property will swap the contracts you have signed; after this is done you are then legally bound to the purchase.
Financial Conduct Authority (FCA)
This is the UK body that regulates the financial services industry to protect consumers and ensure the industry remains stable.
First time buyer
Someone who is buying a property for the first time.
Fixed Rate Mortgage
The interest rate that you pay on your mortgage is fixed for a certain period of time which means your monthly repayments stay the same.
This means that both the property and the land it’s built on are owned.
This is someone who agrees to make your monthly payments if you cannot make them yourself e.g. a parent.
This covers your income if it is stopped because you are ill or injured, and usually replaces most of your net income and lasts for a set term in whole years, or until a given milestone.
Indexation of Benefit
This allows the amount of cover to increase with your insurance plans but premiums also increase to reflect the higher level of cover.
Interest Only Mortgage
With an interest only mortgage, your payments cover only the interest on the loan so you will need some means of repaying the loan at the end of the term.
Land Registry Fees
There are two fees to pay the Land Registry; one for the searches that will be done to check who the property belongs to and one for registering you as the new owner.
The property and the land is only temporarily yours but this period can be for centuries.
These are the fees you pay for the legal work your solicitor or conveyancer completes for the purchase of the property e.g. searches and Land Registry fees.
You’ll need one of these if you choose to become a landlord with a buy-to-let mortgage and quite often you’ll need to let the mortgage lender know what type of tenancy agreement you have opted for. Most mortgage lenders will be satisfied with a six month assured shorthold tenancy agreement.
A form of insurance where a person’s life is insured which means the mortgage can be repaid if they die before the end of the term.
This cover pays out on death as a lump sum, or as income for a set period.
Loan to value (LTV)
Loan to value is the proportion of the price of the property that you borrow on a mortgage.
Local authority search fees
This is a charge from the local authority for answering your solicitor’s questions about the property you are buying.
This is a loan you take out to buy a property.
Mortgage account fee
The fee charged for covering the administration of the mortgage account.
This is the legal document for establishing the mortgage on a property.
This summarises details of the mortgage such as the length of term and the total cost of the loan.
The length of time to pay the mortgage back which can be up to 40 years.
This occurs when the amount you owe on your mortgage becomes greater than the value of your property.
A mortgage offer is the given when the lender finishes their assessment of you and the property.
Offset mortgages make use of savings that you have to reduce or ‘offset’ the amount of interest that you pay on your mortgage. The savings account must be with the same company that you have the mortgage arrangement with.
As it states in the name these are costs that you will only have to pay once which includes legal fees, valuation fees, and mortgage arrangement fees.
This is charged on some mortgages (the product and you can choose to pay it outright or add it to the total mortgage amount.
This occurs when you have a mortgage with a lendet and want to change It to a different mortgage they offer.
This occurs when you change your mortgage on a property you own.
Rent Guarantee Insurance
Rent guarantee insurance covers you if your tenants failt to pay their rent and therefore protects your property from being at risk.
Each monthly mortgage payment includes funds that pay off the loan amount as well as the intrerest.
This occurs when some of the mortgage loan is held back until repairs or improvements to the property have been completed.
For self-employed applicants, mortgage lenders will require proof of your income over at least three years. Proof can take the form of accounts and tax returns, and the SA302 from the HMRC. The income is profit and not turnover.
Standard Variable Rate (SVR)
This type of mortgage has a rate of interest that varies and is not always linked to the Bank of England base rate.
Structural engineer’s report
This is a specialist report from a structural engineer on the condition of a property
Your mortgage may be broken up into separate accounts which each have different interest rates over different terms.
This is a variable rate loan with an interest rate that tracks another rate e.g. the Bank of England Base rate but is not necessarily the same as it.
A valuation involves an inspection and giving a value to a property to work out if it is suitable security for your lender to offer you a mortgage.
The rate varies over the term of the mortgage and this will be detailed in the mortgage illustration.
Waiver of Premium
If you become seriously ill and are unable to pay the premiums of a protection plan a waiver of premiums will cover can pay your premiums for you until the deferred period ends.