WPP Financial Services Mortgage A-Z Glossary can help you to understand mortgages

Capped mortgage

The interest rate on the mortgage is capped i.e. it will not rise above a certain level for a set period.

Completion date

This is the day when the property is legally transferred to your name and you can pick up the keys and move in.

Contents Insurance

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. 

Conveyancer

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.

Conveyancing

This is the legal process involved in buying and selling a property carried out by a solicitor or conveyancer.

Credit Score

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.

Current Account

This is a bank account that you use day-to-day to run your finances. 

Deposit

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.

Disbursements

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. 

Discharge Fee

This fee is an administration  cost that some lenders charge for releasing their hold on your property after you have paid off the mortgage.

Disclosure

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.

Discounted Rate

For a certain period of time you will get a reduction on your usual rate.

Drawdown

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. 

Equity

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.                                                                    

Freehold

This means that both the property and the land it’s built on are owned.

Guarantor

This is someone who agrees to make your monthly payments if you cannot make them yourself e.g. a parent.

Income Protection

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. 

Leasehold

The property and the land is only temporarily yours but this period can be for centuries. 

Legal Fees

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. 

Letting Agreement

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.                                     

Life Assurance

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.

Life Cover

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.

Mortgage

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.

Mortgage deed

This is the legal document for establishing the mortgage on a property. 

Mortgage Illustration

This summarises details of the mortgage such as the length of term and the total cost of the loan. 

Mortgage term

The length of time  to pay the mortgage back which can be up to 40 years.                                                                                                                                      

Negative equity

This occurs when the amount you owe on your mortgage becomes greater than the value of your property.

Offer

A mortgage offer is the given when the lender finishes their assessment of you and the property.

Offset mortgage

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.

One-off costs

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.

Product fee

This is charged on some mortgages (the product and you can choose to pay it outright or add it to the total mortgage amount.

Product transfer

This occurs when you have a mortgage with a lendet and want to change It to a different mortgage they offer.

Remortgage

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.

Repayment mortgage

Each monthly mortgage payment includes funds that pay off the loan amount as well as the intrerest.

Retention

This occurs when some of the mortgage loan is held back until repairs or improvements to the property have been completed.  

Self-employed

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

Sub-accounts

Your mortgage may be broken up into separate accounts which each have different interest rates over different terms.

Tracker rate

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.

Valuation

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. 

Variable Rate

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.