Jargon Buster
APR This stands for Annual Percentage Rate and can be
used to compare the cost of borrowing money from different lenders.
Basic valuation A check carried out by a surveyor, on
the property, which determines how much the property is worth and to confirm that
the property is suitable for a mortgage.
BBR This stands for Bank base rate, which is set every
month by the Bank of England.
Buy-to-let mortgage A mortgage designed for property investors
who buy a property and then rent it out.
Capital and interest mortgage This is sometimes called
a repayment mortgage. With this type of mortgage you pay off some of the capital
(the amount of money borrowed) and some of the interest every month.
Capped rate With this type of mortgage, the rate that
you pay is variable to a maximum limit set at the outset for a fixed period (it
can go up and down).
Cashback* Some mortgages offer cashback as an incentive.
It is a cash sum that you receive when your mortgage completes.
Conveyancing The legal process for buying and selling
property.
Discounted rate* With this type of mortgage, the rate
that you pay is discounted from the lender's standard variable rate. This discount
is guaranteed for a set period of time and the rate can go up and down.
ERC This stands for Early Repayment Charge and is an amount
of money that you may be charged if you fully repay your mortgage before a set time,
usually before the end of the incentive period.
FSA This stands for the Financial Services Authority.
The FSA is an independent organisation that regulates specific areas of the financial
services industry including mortgage advice.
Fixed rate* With this type of mortgage, the rate you pay
is fixed for a set period of time.
Freehold This means you own the property and the land
the property is on.
Full Structural Survey This survey is a more in-depth
review of the condition of the property than a homebuyer survey. It does not incorporate
a basic valuation.
HLC This stands for higher lending charge and it is an
insurance policy that you pay for but which protects the lender in the event that
the lender may have to repossess the property, sell it and then does not retrieve
enough money in the sale of property to repay the mortgage in full. This policy
would then pay the outstanding balance remaining. The borrower, however, is still
responsible for the outstanding balance.
Homebuyers report This is a survey, which reviews the
condition of the property, and incorporates a basic valuation.
Interest-only With this type of mortgage you only pay
off the interest every month, not the capital (the amount of money borrowed). The
capital is paid back at the end of the mortgage term. A repayment vehicle, such
as an endowment policy or Individual Saving Account, could be used however you should
seek independent financial advice. Pink Home Loans do not advise on investments.
Leasehold This means you own the property for a set period
of time but not the land the property is on. After the set period of time, ownership
of the property reverts to the freeholder. Many flats are leasehold properties.
LTV This stands for loan to value and denotes the relationship
between the amount of money you want to borrow (the loan) and the cost of the property
(the value) and is expressed as a percentage. For example, if you borrow £85,000
and your property costs £100,000, then the loan to value is 85%.
Mortgage This is a loan that is used to buy a property,
where the loan is secured against the property as a charge. This acts as security
for the lender in case you fail to repay the loan.
Repayment mortgage This is sometimes called a capital
and interest mortgage. With this type of mortgage you pay off some of the capital
(the amount of money borrowed) and some of the interest every month.
Stamp Duty Land Tax (SDLT) This is a tax that may be payable
on purchases of flats, houses and other UK land and buildings.
Sub-prime mortgage This is a mortgage that is designed
for someone with adverse credit.
Tracker mortgage With this type of mortgage, the mortgage
rate tracks the Bank of England base rate by a set amount for a specified period
of time.
Variable rate This is the rate set by a lender, which
can go up and down.
*Additional Terms and Conditions, and Early Repayment Charges may apply to these
types of contracts.