Mortgage Jargon Buster

Advance

A mortgage loan.

Adverse Credit

The term used to apply to a borrower or application that has past problems with credit, for instance late payment, bankruptcy or County Court Judgements.

Agreement in Principle (AIP)

The agreement in principle gives an indication to you of the likely outcome of a loan application. It is not a formal offer, but includes a credit check with a credit reference agency and an assessment of your ability to repay the loan amount requested. This is sometimes referred to as a 'Decision in Principle'.

Annual Percentage Rate (APR) or Overall Cost for Comparison

The true cost of borrowing shown as a percentage rate, allowing comparison between offers from different lenders. The APR takes into consideration all payments, such as interest payments, repayments of capital, all costs and any fees based on projections for the payments applicable during the term of a mortgage.

Appreciation

The increase in the value of a property as a result of changes in market conditions.

Arrangement fee

The fee payable to the lender for arranging the mortgage.

Arrears

Term used on the account when the monthly mortgage payments have fallen behind schedule.

Asset

Any form of property owned by a person, including currency, stocks, and enforceable claims against others.

Assignment

The transfer of a right, interest or title to property.

Balance Outstanding

The amount of loan owed at a particular time.

Bank of England Base Rate

The Bank of England set a rate each month known as the 'Base Rate'. Banks and Building Societies use the Base Rate to set their interest rates.

Basic Valuation

A basic property survey for mortgage purposes. This is less comprehensive than both a Homebuyers Report and a Full Structural Survey.

Bridging Loan / Bridging Finance

A temporary loan advanced to help somebody buy a new property before they have sold their existing one.

Buildings Insurance

Insurance to cover the cost of rebuilding a property from scratch following structural damage, for example by flood, fire or storm.

Building Society

A mutual institution owned by its investors and borrowers that provides a range of savings and mortgages.

Buy To Let Managed Rate

Our Buy to Let Managed Rate is set at the sole discretion of the Society and is set independently from Bank Base Rate. The setting of these rates reflects the costs of funds that we raise from our savings customer base and rates of interest in the wholesale money markets.

Buy To Let Mortgage

A mortgage used to buy property which is to be used solely for the purposes of renting out to a third party.

Capital Repayment

A lump sum payment to reduce the loan outstanding.

Cashback Mortgage

A lump sum or a percentage of your mortgage paid in cash when the mortgage completes.

Capital & Interest Mortgage

Also known as a Repayment Mortgage. The monthly payments pay off both the interest and capital borrowed. If all payments are made on time the mortgage will be fully repaid at the end of the term.

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)

The date that you become the legal owner of your new property.

Contents Insurance

Insurance to cover accidental damage or theft of household contents.

Contract

A document that describes the agreement under which the property will change hands.

Conveyancer

A person other than a solicitor who may conduct the conveyancing.

Conveyancing

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

County Court Judgement (CCJ)

An order given by the County Court registering the details of an outstanding debt.

Covenant

A condition, attached to the property and contained within the Title Deeds or lease, that the buyer must comply with. This can either be positive or restrictive. A positive covenant is a clause in a loan agreement which requires a specified action by the borrower. A restrictive covenant is one that prohibits the owner from doing something.

Credit Check

A report containing detailed information on a persons' credit history, including identifying information, credit accounts and loans, bankruptcies and late payments and recent inquiries. It can be obtained by prospective lenders, with the borrowers pemission, to determine his or her credit worthiness.

Credit Scoring

A system used by Lenders to help them decide whether to lend to you. They ask a series of questions about you and your finances and score your answers. Depending on your score you will be accepted or declined.

Debt Consolidation

The process of combining outstanding debts e.g. loans, credit card borrowing etc, into one loan.

The Decision in Principle (DIP)

The decision in principle gives an indication to you of the likely outcome of a loan application. It is not a formal offer, but includes a credit check with a credit reference agency and an assessment of your ability to repay the loan amount requested. This is sometimes referred to as an 'Agreement in Principle'.

Decreasing Term Assurance

Assurance cover designed to protect a repayment (capital and interest) mortgage. In the event of death during the term of the policy, a cash lump sum is payable to help pay off the outstanding balance of your mortgage. As the mortgage amount decreases, so does the value of any cash sum that would be payable on death.

Deeds

Legal documents that show who owns a property or piece of land.

Deposit

Sum of money which the buyer forwards to the seller’s solicitors at exchange of contracts, usually 5 to 10 per cent of the purchase price.

Disbursements

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

Discharge

Release of the charge held by the mortgage lender.

Discounted Rate Mortgage

A mortgage where the interest rate is discounted from the lender's published Standard Variable Rate for an agreed period, often the first two or three years.

Early Repayment Charge

A charge payable on some mortgages if they are repaid early (during an Early Repayment Charge period). The amount depends on the mortgage outstanding and the terms of the mortgage product.

Easement

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

Equity

The difference between the value of a property and the amount of mortgage and/or secured loans owed.

Exchange of contracts

The point at which signed copies of the contract for the sale of the property are exchanged by the legal representatives of both parties and become legally binding. The buyer usually pays a deposit at this point and the date of completion is agreed.

Financial Ombudsman Service

An independent professional body set up by law to help settle individual disputes between consumers and firms.

Financial Services Authority (FSA)

Until the 1 April 2013 the FSA was the principal regulator of Financial Services. This authority has now been split between the Prudential Regulation Authority and the Financial Conduct Authority.

Financial Conduct Authority (FCA)

It regulates financial firms providing services to consumers and maintains the integrity of the UK's financial markets.

Fixed rate mortgage

A mortgage where the interest rate is fixed for a specific time.

Fixtures and Fittings

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

Flexible Mortgage

A mortgage product enabling the borrower to tailor repayments to suit their particular financial circumstances. This can be used when earnings are subject to seasonal fluctuations or contractural bonuses.

Freehold

Legal title that gives you absolute ownership of the land your property is on.

Full Structural Survey

A type of property survey looking at the main features of the property. More comprehensive than both a Basic Valuation and a Homebuyers Report.

Further Advance

An additional loan to your existing mortgage which is also secured against the property.

Gazumping

When a seller pulls out of a sale after accepting a higher offer.

Gazundering

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

Ground Rent

The annual fee which a leaseholder pays to a freeholder.

Guarantor

A guarantor is someone who guarantees to pay an outstanding amount on default of the mortgage up to the limit of the guarantee.

Higher Lending Charge

A charge (that may be added to the loan) when borrowing more than a certain percentage of the valuation or purchase price of the property (e.g. 80%).

Home Buyers Report

A type of property survey that is more comprehensive than a mortgage valuation but less extensive than a full structural survey.

Home Envirosearch

A report on detailed flood, subsidence and land contamination history for each UK neighbourhood.

Home Information Pack (HIP)

A set of documents providing information about a property (eg. an Energy Performance Certificate) for the buyer. The pack is prepared and paid for by the seller.

House of Multiple Occupancy (HMOs)

A house which is occupied by persons who do not form a single household.

Household Insurance

An insurance policy that protects against loss or damage to the property caused by fire, some natural causes and acts of vandalism.

IFA

Independent Financial Advisor.

IDD / Initial Disclosure Document

Issued by lenders and intermediaries to inform of the scope and nature of the services offered. The standardisation of the document allows the comparison of the services of other lenders and intermediaries.

Income Multiplier

The formula used by lenders to calculate how much a prospective borrower can borrow, in relation to household income.

Interest Only Mortgage

Only the interest on the mortgage debt is paid each month. The outstanding balance remains the same throughout the term. A separate Investment Vehicle is required, which is designed to grow sufficiently to pay off the loan when the mortgage period expires.

Investment Vehicle

An investment designed to grow sufficiently to pay off an interest only loan when the mortgage period expires.

Joint Income

The total gross income of the two borrowers in a joint mortgage.

Joint Mortgage

A mortgage where there is more than one named individual responsible for the contract.

Joint Tenants

A form of ownership frequently used by couples which ensures that when one dies, the property passes automatically to the other. The alternative is Tenancy in Common.

Key Facts Illustration (KFI)

A document which contains key mortgage information and is designed to help you to easily compare the costs and features of different mortgages from different lenders.

Land Certificate

A Land Registry certificate proving ownership of a property.

Land Registry

A government organisation that holds records of all registered properties in England and Wales.

Land Registry Fee

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

Landlord's Reference

A reference given by a previous landlord, which confirms an applicant's history of payment of rent and previous conduct as a tenant.

Leasehold

Legal title giving ownership of a property but not the land it is built on. This normally requires payment of ground rent to the landlord.

Level Term Assurance

Assurance cover usually used to protect an interest only mortgage. In the event of death during the term of the mortgage, a guaranteed lump sum is payable to pay off the balance of the mortgage.

Life Assurance

An insurance which pays out on the death of the policy holder.

Local Authority Search

A Local Government document detailing anything that may impact on the property or surrounding area, e.g. planned road building, planning permissions etc

Loan to Value (LTV)

The amount of mortgage expressed as a percentage of the property value. For example, if the mortgage amount was £80,000 and the property is valued at £100,000, the loan to value (or LTV) is 80%.

MIRAS (Mortgage Interest Relief At Source)

This was a government scheme discontinued in April 2001 that allowed you to claim tax relief on the interest you paid on your mortgage.

Mortgage

A loan using the property as security.

Mortgage Deed

A legal document signed and sealed and delivered to effect a transfer of property and to show the legal right to possess it.

Mortgage Offer

A formal offer from the mortgage lender advising that they will provide the finance to enable you to purchase a property.

Mortgage Payment Protection Insurance (MPPI)

An insurance designed to pay your monthly mortgage payment for a limited period (usually a year) if you are unable to work through illness, accident or redundancy.

Mortgage Term

The length of time over which the mortgage is to be repaid.

Negative Equity

When the amount of the mortgage loan outstanding on the property is more than the market value of the property.

NHBC

National House Building Council. An organisation controlling a warranty scheme for new properties providing cover against major structural defects for 10 years from the initial build of the property.

Offer of Advance

Once a mortgage application has been assessed, the lender will give you an offer of advance which will show how much they are prepared to lend and on what terms.

Offset Mortgage

With an offset mortgage, you can use the money in a Manchester Building Society offset savings account(s) to help reduce the interest charged on your mortgage. A maximum of 50% of your outstanding mortgage balance can be offset.

Ombudsman

An independent professional body set up by law to help settle individual disputes between consumers and firms.

OMR

Our Offset Managed Rate (OMR) is set at the sole discretion of the Society and is set independently from Bank Base Rate. The setting of these rates reflects the costs of funds that we raise from our savings customer base and rates of interest in the wholesale money markets.

Originator

An originator is any party who 'originates' a Direct Debit, i.e. the Direct Debit comes from that party. For example, if you pay your Council Tax by Direct Debit, your Council would be the originator of the Direct Debit.

Overpayment

When repayments to the mortgage are greater than required. Some mortgages (flexible mortgages) allow for overpayment, but others may impose charges for overpayment.

Payment Holiday

A period of time (agreed by the mortgage lender) when you can take a break from making repayments to your mortgage.

Planning Permission

The permission granted by the local planning authority (usually the local council) for any new building, operations, change of use etc.

Portability

Where the mortgage lender allows the mortgage terms to be transferred betweeen properties when the borrower moves home.

Premium

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

Private Sale

Sale of a property without the use of an estate agent.

Prudential Regulation Authority (PRA)

Carries out the prudential regulation of financial firms, including banks, investment banks, building societies and insurance companies.

Re-inspection Fees

A fee levied if the lender needs to re-inspect the property, usually to check if agreed repairs have been made.

Remortgage

Replacing a mortgage with a different product, for example to obtain a better interest rate or release further funds.

Repayment Mortgage

Also known as a Capital and Interest mortgage. The monthly payments pay off both the interest and capital borrowed. If all payments are made on time the mortgage will be fully repaid at the end of the term.

Repayment Type

The manner in which you pay back your mortgage (see Repayment Mortgage/Capital & Interest Mortgage or Interest Only Mortgage).

Right-to-Buy

A Government scheme for qualifying public sector tenants to buy their home at a discounted price.

Self Certification

Where the borrower states their income with little or no supporting evidence provided.

Sole Agency

Where a single estate agent acts on the seller's behalf.

Solicitor

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

SVR

Our Standard Variable Rate (SVR) is set at the sole discretion of the Society and is set independently from Bank Base Rate. The setting of these rates reflects the costs of funds that we raise from our savings customer base and rates of interest in the wholesale money markets.

Stamp Duty Land Tax

A tax payable when the property being purchased exceeds a specified amount. Once the threshold is reached the tax is payable on the whole purchase price, with the rate payable increasing with the house value.

Standard Construction

A building that has been constructed using conventional techniques and materials, for instance bricks and stone with a tiled or slate roof.

Standard Variable Rate (SVR)

The standard interest rate offered by financial institutions. The SVR will differ between lenders.

Subject to Contract

An agreement that is not yet legally binding as it is subject to terms and conditions.

Survey

A report on the property you are planning to buy – see Basic Valuation, Homebuyers Report and Full Structural Survey.

Surveyor

A person who conducts a survey of property.

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). The alternative is Joint Tenants.

Tenancy

Occupancy of land or a house, or the like, under a lease or on payment of rent.

Term

The period of time between the start and finish of the mortgage loan.

Title

The record of ownership of a property, the evidence of which is found in the Title Deeds, or Land Registration Certificate.

Total Amount Payable

The total cost of repaying a mortgage, including interest and charges etc.

Tracker Mortgage

A mortgage where the interest rate is set at a constant level above or below the Bank of England base rate, rising and falling in line with any changes during the tracking period. If the base rate falls, the repayments fall but if the base rate goes up, so will the repayments.

Transfer Deeds

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

Transfer of Equity

Adding or removing a party to/from a mortgage.

Unencumbered

A property that has no loans or borrowings secured on it.

Under Offer

A term applied to a property for which the seller has provisionally accepted the buyer's offer.

Valuation

A valuation of the property for mortgage purposes to ensure that the property is worth the amount requested for a mortgage.

Valuation Fee

The charge levied for the valuation to be carried out.

Variable Interest Rate

Rate of interest that fluctuates over time with general interest rates.

Vendor

The seller of a property or piece of land.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE