This insurance covers you should you fall sick, lose your job, or not have the money to pay your mortgage for any reason. It will cover you for a set period of time, such as a two-year period.
An ‘agreement in principal’ is also known as a ‘decision in principal’, or ‘mortgage in principal’. It’s a document from a lender showing up to how much you can borrow. The lender will check basic information, including your credit rating and credit score, to see how much they can lend ‘in principal’.
This stands for Annual Percentage Rate of Change. It includes the overall cost of a mortgage, such as initial fees to you get the mortgage, the introductory interest rate, and any other costs associated with a particular mortgage. The APRC (previously referred to as APR) helps you compare mortgages.
This is the fee for administrative costs incurred by the broker or lender in order to arrange the mortgage.
This is the interest rate set every month by the Bank of England, most commonly used by tracker mortgages and standard variable rate (SVR) mortgages. It can go up or down, or stay the same.
This is the fee paid, usually upfront, to secure a particular mortgage. It’s non-refundable if you change your mind, or the mortgage falls through for any reason.
Your lender will require you to have insurance for your property to cover its structure in case of fire, flooding, subsidence or any other event that damages the property’s structure.
A broker, such as CARA Mortgage Services, is an advisor who can search through a host of lenders and mortgages to find one right for you. You can use a broker instead of going directly to a lender. The advantage is the work they can do searching through lenders throughout the UK. A broker will charge a commission when a mortgage is completed.
When you buy a property with the sole intention to rent it to other people, you'll get a buy-to-let mortgage. Lenders will calculate how much you can borrow mostly based on the projected rental income, rather than on your work income.
This is a tax charged on the profit you make or the increase in the value of a property since it was purchased. If the property is your own home and you make a profit, you don't pay capital gains tax.
This is another name for a Repayment Mortgage. You will pay what you owe to the lender each month – part of the repayment is for the capital paid for the property, part is the interest owed on the loan. At the end of the loan period, the entire debt on the property is repaid.
Once the property price has been agreed between buyer and seller, all the legal paperwork is signed, all the essential checks have been made, then you legally own the property. This is called completion. It also applies to the process of a remortgage when all legals and agreements are completed.
When the mortgage is finalised, and the lender sends the money for the total price of the property, they charge a completion fee for transferring the funds. You may also get this fee for a remortgage.
This is the legal process required, to be carried out by a solicitor or conveyancer when ownership of the property is transferred, or a remortgage is completed.
This is the amount of money you can pay upfront towards your property. Lenders typically want at least 5%, though some will take less.
If you repay your mortgage in full before the agreed length of the mortgage; or end an agreed mortgage term, such as a two-year fixed rate term, early, then the lender may charge you an ERC for ending the mortgage early.
When the buyer and seller agree terms and the buyer pays the deposit on the property, then both the buyer and seller are legally committed to completing the conditions of the purchase and sale. In Scotland this process has a different name, it is called Conclusion of Missives.
The percentage of the property that you own. If you've paid £20,000 of a £200,000 property, then you own 10% of the equity. Also, if the value of your property has increased since you bought it, you can release equity on the profit through remortgaging.
The owner of a freehold property means you own the property and the land the property sits on. If you only own the property, another party will lease the land to the property owner. The leaseholder sells the use of the land for a certain period of time.
This is optional and is the most comprehensive survey of a property's structure and foundations by a surveyor. It's particularly useful with older properties or those on land which might for some reason be potentially unstable. If anything happens to your property's structure after a full structural survey, you can claim compensation from the surveyor. You'll still need a mortgage evaluation, which will check the structure, as demanded by rote from the lender. The full structure survey is optional.
This is when a prospective buyer puts in an offer on a property and the owner agrees, but then another buyer puts in a higher offer which is accepted, in which case the first buyer is gazumped. This more typically happens in England.
When a buyer, at the last minute, prior to exchanging contracts, demands a reduction in the selling price. This most commonly happens in when house prices are falling. It pressurizes the seller to accept the lower price so they don’t have to go back to square one.
This is a fee, usually nominal, paid to the leaseholder (owner) of the land your property sits on.
A person, or other third party, who guarantees to pay the mortgage if you can’t. This is often the parents and is most common with first-time buyers.
The UK government has launched a range of schemes in which they will pay part of a deposit to enable first-time-buyers to get on the property ladder.
This is the amount the lender calculates to determine the maximum it will lend you. The calculation includes the multiples of your income.
With this loan, you only pay the interest due on the loan, rather than paying off any of the loan itself. At the end of the mortgage term, you will still owe all of the money paid for the property since you’ve only covered the interest. These mortgages are cheaper than repayment loans. The borrower usually saves the money owed on the property through investments and/or other means.
This is a mortgage taken out by two people or more. This is most often used by couples, but sometimes by friends or parents and their children. In a joint mortgage, if one person dies, the mortgage reverts to the other person or people named on the mortgage.
The Land Registry is the official body responsible for keeping a record of who owns the land. They also keep details of property owners on land.
Land & Building Transaction Tax (LBTT)
If you have a leasehold property you don’t own the land your property sits on. You lease the land from the owner. A lease usually is given for a century or more. Once the lease starts to get low, such at 60 years, the cost of the property can lower since it will cost money to renegotiate the lease.
This represents the percentage you're borrowing (your loan/mortgage) of the value of the property. If you borrow £80,000 on a £100,000 property, your LTV will be 80%.
The Scottish name for the Exchange of Contracts process.
This is the amount you are required to pay each month, depending on your current mortgage deal.
A legal contract between you and the lender. It outlines your obligations to the lender and their legal obligations to you.
When your mortgage is more than your property's value, ie. your property's value has fallen since you bought it.
You can pay more than your monthly repayment, or pay a lump sum at once, to shorten your mortgage. This is called overpayment. You may also make overpayments so your monthly repayments are cheaper later in the original mortgage term. If you end your mortgage earlier than the initial term agreed, you could be charged a fee (see Early repayment charge).
With certain mortgages, especially in a Flexible Mortgage, you can take time off from your monthly repayments. Interest will continue to be accrued during the payment holiday.
This is when your mortgage can be transferred to another property if you sell up and buy a new home. You could incur a fee or change of interest rate. It will depend on the terms and conditions of your mortgage.
When you switch your current mortgage to a new mortgage with different terms, such as a lower interest rate or longer fixed rate period. You can transfer to a new lender when you remortgage or negotiate with your current lender. At CARA Mortgage Services, we will do this for you if you wish.
If you take out an interest-only mortgage, your lender may want to know how you are going to pay off the equity owed on the property at the end of the mortgage. You may need to show you have a property portfolio or own stock and shares.
When a borrower can no longer meet the monthly repayments of the mortgage, and there is no sign of that changing, their property will be repossessed by the lender. It may then be sold at auction or by another method.
You can buy a home, usually belonging to a housing association or other local authority, in partnership with them. You may purchase 25% or more of the property and pay the rest in rent to the local authority.
A government tax payable when you buy a property. The amount will be a percentage of the property’s price. You do not pay stamp duty on a remortgage. In Scotland this tax is called Land & Building Transaction Tax (LBTT). The rates are different in Scotland than in England. Our advisers will assist you with this information.
At the end of your introductory, fixed rate mortgage term or other timed special offer, your lender will most likely move you to their default interest rate, which is the SVR. This could be higher or lower than you had been paying, and is not necessarily linked to the Bank of England interest rate.
A legal document that states who owns the property, and gives details about the property and the land, such as the size of the land the property is on.
The lender will require a valuation of the property to ensure their investment is sound, e.g. the property has no structural problems and is worth the money you are paying for it. You can get more detailed surveys done to ensure the property is completely structurally sound. The more detailed the survey, the more it costs, and the buyer always pays for the valuation survey.