Mortgage Jargon Buster

Blue Moon are the complete online mortgage specialists for people looking to mortgage or remortgage residential property in the UK, whatever their financial circumstances. If you cannot find what you are looking for here please give us a call and we'll be only too pleased to help. Within our site you can find information about mortgages and remortgages and you can apply online using our free quote forms. Below is an A to Z of mortgage jargon and what it means. We aim to keep things as jargon free as possible, because all you really want to know is how much is it going to cost me, how long is it for, and what am I going to get out of it.

Advance
The mortgage loan.

APR
This stands for Annual Percentage Rate. It takes into account all fees and other costs in connection with the mortgage as well as the lender's interest rate. The APR is intended to help you compare the terms offered by different lenders and all lenders must quote an APR in addition to the actual rate of interest applied annually to your mortgage.

Arrangement fee
A fee you pay to the lender in return for a mortgage deal. Different names for arrangement fees are: application fee, booking fee, completion fee, drawdown fee and reservation fee.

ASU Insurance
Accident, Sickness and Unemployment insurance (also known as ASR, Accident, sickness and redundancy). It provides a monthly payment if you cannot work for an extended period due to an accident, sickness or unemployment (or redundancy).

BBA
British Bankers Association. This is the trade organisation of the banks.

BSA
Building Societies' Association. This is the trade organisation of the building societies.

Buildings insurance
This covers the cost of rebuilding or repairing the structure of the property. Lenders insist you have enough buildings insurance before they give you a mortgage. With leasehold properties, such as flats, it is the freeholder's responsibility to arrange buildings insurance, although the freeholder will usually pass on the charges to the leaseholder.

Buildings and contents insurance
This is combined insurance, which may be cheaper than one policy for buildings insurance and another separate policy for contents insurance (see contents insurance).

Burdens
Conditions in Scottish title deeds about the use of the property.

Bridging Loan
A temporary loan which enables you to complete the purchase of a new home if you have to do this before completing the sale of your existing home or other property.

Capital and interest
Your monthly payments are partly to pay the interest on the amount of mortgage you borrowed and partly to repay the captital outstanding on the mortgage. Also known as a repayment mortgage.

Capped rate
An interest rate charged for a set period of months or years which can go up and down with the variable rate, but there is a maximum (capped) interest rate which it cannot go above.

Cashback
A payment you receive when you take out a mortgage. It may be a fixed amount, or a percentage of the amount of the mortgage.

CAT marks/standards
Standing for charges, access and terms, CAT-marked mortgages must comply with benchmarks laid down by the Government. Different CAT marks apply for (discounted) variable rate and fixed or capped rate mortgages. The Government stresses that a CAT mark does not mean a mortgage deal is officially endorsed and for many people non-CAT-marked deals will be a better option.

CCJ
County Court Judgement. A decision reached in the County Court which can be for non payment of debts. If you pay off the debt, the CCJ is satisfied and a note is put on your records (credit file) to say this.

CML
Council of Mortgage Lenders. Building societies and most banks and other lenders are members of this trade organisation.

Completion
When the sale and purchase of the property are finalised, and you become the owner.

Conclusion of missives
Scotland only. The point at which buyer and seller are legally bound to the transaction.

Contents insurance
Insurance cover for your personal possessions. This may include cover against loss or damage away from the home.

Contracts
The legal documents under which you and the person selling the property (vendor) agree to buy and sell the property.

Conveyancing
The legal process involved in buying and selling property.

Credit file
A record of your financial history.

Credit scoring
A lenders way of assessing whether you are a good risk to lend money to.

Credit search
A check the lender makes with a specialist company to find out whether you have any County Court Judgements or a record of not paying loans, credit-card bills and so on.

Critical Illness
Insurance that generally pays out a lump sum if you are diagnosed with a life-threatening illness or disease.

Date of entry
Scotland only, this is the same as exchanging contracts.

Decreasing term assurance
Life assurance that pays out an amount if you die during an agreed period or the term of the policy. The amount of cover reduces each year. So, this makes it ideal to cover repayment mortgages where the amount you owe the lender reduces each year. Decreasing term assurance is usually cheaper than level term assurance initially but more expensive in the long term.

Deposit
The amount of money you put towards buying a property.

Direct lender
A lender that arranges mortgages over the phone, through the post, or the Internet.

Disbursements
A solicitors expenses, i.e., for stamp duty, HM Land Registry fees, searches, faxes etc.

Discount term
The time that a discounted rate applies to a variable rate mortgage. This term may be for a guaranteed number of months or years, or it could be until a set date in the future; for example, 20 April 2010.

Discounted rate
A guaranteed reduction in the standard variable mortgage rate. This often lasts for an agreed period.

Early repayment charges
A fee charged by the lender if you pay off all or part of your mortgage before an agreed date or you move the loan to another lender. These charges usually apply on fixed, discounted, or cashback mortgages.

Equity
The amount of value in a property that is not covered by a mortgage. Take the amount of the mortgage from the value of the property to work out the equity.

Equity release
To remortgage to a larger mortgage, to release equity in your property.

Estate agency fees
The amount the estate agent charges the person selling the property. This is usually worked out as a percentage of the sale price. On a 2% fee, the estate agent selling the property for £100,000 would receive £2,000. There are some state agents that will sell on a fixed fee basis.

Exchange of contracts
The point where you and the person selling the property sign and swap identical contracts that show the price and what fixtures and fittings are being included in the sale, as well as a date when everything will be finalised. When you exchange contracts the deal becomes legally binding, and if you or the seller pull out before completion, you or they will have to pay compensation to the other side.

Execution-only
The company selling or arranging a mortgage or life insurance policy cannot and does not give any advice on the benefits of the scheme.

Extra cover or accidental cover
This is insurance against accidental damage to the structure of your property and its contents.

Feuhold
Scotland only. Similar to freehold.

Fixed rate
The interest charged on the mortgage is for a set amount for an agreed period of months or years.

Fixtures
Any item that is attached to a property, and so is legally part of the property.

Flexible mortgage
A type of mortgage where you can make extra payments or underpayments without paying a charge or penalty.

FPC
Financial planning certificate. These are professional qualifications for financial advisers. There are FPC Levels I, II and III.

Freehold
This is when you own the property and the land it is on.

Freeholder
Someone who owns the freehold of the property.

Gazumping
This is when the person selling the property accepts an offer from a potential buyer, and then accepts a new, higher offer from another buyer before exchange of contracts.

Gazundering
This is when the person selling the property accepts an offer, and then the buyer puts in a new, lower offer just before exchange of contracts.

Ground rent
An annual fee that a leaseholder has to pay the freeholder.

Guaranteed death benefit
On certain life policies, there is a guarantee that the company will pay out a certain amount when you die.

HM Land Registry
The official organisation that keeps records of properties in England and Wales. Transfer of ownership has to be registered with the HM Land Registry.

Higher Lending Charge
Higher Lending Charge. This is insurance that covers the lender in case your property is repossessed and the lender cannot get back its money. (The lender may add the higher lending charge, which usually applies on high LTV mortgages, to the mortgage.) This use to be known as a Mortgage Indemnity Guarantee (MIG).

Homebuyer's report
This is when a professional surveyor checks the structural state of a property. This is more detailed than a valuation but less detailed than the structural survey. The report is optional and you pay the bill. This report should pick up possible problems and may give you the chance to negotiate a lower price. You also have more grounds to sue or get compensation from a surveyor for a poor report than you would from a simple valuation.

Income multipliers or multiples
The size of mortgage that lenders will offer will often be worked out by multiplying your income each year by a set figure. If you are the only person taking out the mortgage, the usual maximum income multiple is three times your yearly income (although there are lenders that will do higher multiples). So someone earning £15,000 could borrow three times this amount, or £45,000. If you are taking out a mortgage with a partner, the multipliers might be three times the main income plus one times the second income. Or it could be two-and-a-half times the two incomes added together. Lenders may consider including all or part of any regular bonuses or commission you receive as your income.

Income protection insurance
This is a policy which pays a monthly income to replace your income if you become sick or have an accident and become unable to work. It will usually continue to pay until you return to work the end of the plan - whichever comes first.

Income references
This is confirmation from your employer that you earn the amount you claim in your mortgage application. Accountants may also give confirmation of income if you are self-employed.

Interest-only
Your monthly payments to your lender are simply made up of interest. You do not pay off any of the mortgage during the term of the mortgage. You may pay off the mortgage finally using the proceeds of a separate investment plan or simply by selling the house.

IPT
Insurance premium tax. A tax on all UK general insurance. This is currently charged at 4% of the premium when you buy it from an insurance company or an insurance broker (but the Government can change this rate).

ISA
Individual Savings Account. This is a tax-free way to own shares, with trusts and life assurance, as well as savings. Depending on the lender, you may use an ISA to repay an interest-only mortgage.

Leasehold
This is when you own the property for a set number of years, after which it goes back to the freeholder. Most flats in England are leasehold, and although most lenders will lend on leasehold properties, they will demand that there is a number of years left on the lease before making a loan (the amount varies from lender to lender).

Leaseholder
Someone who owns a leasehold property.

Lessee
A person to whom a lease is granted.

Lessor
Someone who grants a lease.

Level term assurance
Life assurance which pays out a lump amount if you die during the term. The amount of cover stays the same throughout the term, which makes the cover suitable for interest-only loans because the amount you owe on the mortgage stays the same until the end of the mortgage.

Licensed conveyancer
An alternative to solicitors, these people specialise in the legal side of buying and selling property.

Loyalty bonus
These are special schemes if you already have a mortgage, that may provide reduced interest rates or fees, and even services like removals.

LTV
Loan to value. This is the size of the mortgage as a percentage of the value of the property or the price you are paying for the property. A £90,000 mortgage on a house valued at £100,000 would mean an LTV of 90%.

Missives
Scotland. The formal written offer to purchase and the acceptance.

Mortgage
A loan to buy a property where the property is held as security against you paying back the loan.

Mortgagee
The company or organisation which lends you the money for the mortgage.

Mortgagor
The person taking out the mortgage.

Multiple agency
Where a property is listed for sale with more than one estate agent.

Mutuals
Organisations owned by and for the benefit of their members (savers and borrowers), with no outside shareholders. Building societies are mutuals, and so are some insurance and investment companies.

Negative equity
This is where the money you owe on the mortgage is greater than the value of the property. For example, if you had a £100,000 mortgage on a property valued at £90,000, you would have £10,000 negative equity.

New for old
This is insurance cover which will pay the full cost of replacing damaged or lost property with a similar, new item.

No-claims bonus
This is similar to motor insurance. You will be given a discount on buildings and contents insurance if you have not made a claim for a number of years.

Non-status
This means the lender does not need employment or income references from you. This type of loan is often offered to self-employed people.

On risk
This is when your insurance cover begins. This may be before you have paid a premium.

Percentage advance
The size of the mortgage worked out as a percentage of the price you are paying for the property or valuation. (If your property was valued at £100,000, a £75,000 mortgage would be a 75% advance.)

Personal pension
This is a structured personal savings and investment plan to provide for your financial needs after you retire. You can use some or all of the proceeds from a personal pension to pay off an interest-only mortgage. You will need to arrange life assurance separately.

PHI
Permanent health insurance. This pays a regular monthly amount until you retire or return to work if you cannot work because of illness or an accident, also known as income protection insurance.

Policy excess
The amount you will have to pay when you make a claim. For example, this may be the first £100 of a £500 claim for damage caused by a storm.

Policy schedule
This gives policy details of how much cover you have (the sum insured), the discount you qualify for (if any), and the premiums you have to pay. With some policies you may get a new schedule when you renew the policy or whenever you want to change your policy.

Possession
The lenders term for repossessing your property.

Private medical insurance
This simply pays the costs for private medical or hospital treatment.

Purchaser
The buyer of the property.

Rebuilding cost
This is the recommended amount from your property valuation that you should take out buildings insurance cover for. This may be higher or lower than the market value of your property.

Remittance fee
A charge made by the lender for sending the mortgage funds to your solicitor when the purchase is just about to be completed.

Remortgage
A new mortgage although you are not moving home and not necessarily borrowing any more money.

Removal expenses
The cost of hiring a removal firm. This may depend on the total amount and size of your possessions, the distance travelled, the number of stairs and so on.

Repayment
Your monthly payments are partly to pay the interest on the amount you borrowed and partly to repay the outstanding mortgage. Also known as a capital and interest mortgage.

Replacement value
This is the cost of buying the same or similar items as new if you have to replace them.

Sassines Register Fee
Fees paid to the Register of Scotland to register ownership of a property.

Sealing fee
A charge made by lenders when you repay the mortgage.

Searches
Checks carried out during the conveyancing. These checks are made with local authorities and other official organisations to check planning proposals and other matters that may affect the value of the property, and if it can be sold in the future.

Self-certified
You confirm how much you earn, and the lender does not need any references.

Settlement
In Scotland, this is the same as completion.

Sole agent
A single estate agent agrees to sell the property.

Solicitor
The person who deals with the conveyancing.

Stamp duty
A tax you pay on properties which cost over £125,000.
This is charged as follows:
Property value 0k - 125k stamp duty = 0%
Property value 125k - 250k stamp duty = 1%
Property value 250k - 500k stamp duty = 3%
Property value 500k+ stamp duty = 4%
So a property costing £200,000 would have stamp duty of £2,000.

Structural survey
This is the most wide-ranging check of the outside and inside of a property. This is carried out by a professional surveyor, and it should pick up all but the most hidden faults. The structural survey is optional and you must pay the bill, but it provides the greatest protection for the potential buyer in terms of the information it provides. It also gives you cover against negligence by the surveyor.

Sum assured
How much the life assurance guarantees to pay out when you die. This figure may be less than the mortgage amount unless the policy is specifically designed to match the mortgage amount.

SVR
Standard variable rate. The interest rate the lender charges goes up and down, with your interest payments changing accordingly.

Tax relief
Mortgage Interest Relief at Source (MIRAS). This is tax relief on your mortgage interest payments. MIRAS was abolished in April 2000.

Tie-in period
As a condition of a special mortgage deal (discount or fixed rate, for example), you may have to agree to stay with the lender for a period of months or years after the deal has ended. If you move your mortgage elsewhere during this period, you may have to pay an early repayment charge.

Term
The period of years over which you take the mortgage and when you have to repay it. Most new mortgages are taken on a 25-year term.

Third party buildings insurance
A charge a lender may make if you decide to take buildings insurance from someone other than the lender.

Title deeds
Documents to show proof of who owns the freehold and leasehold property.

Total Amout Payable (TAP)
The total cost of repaying a mortgage over the loan period, including the initial amount borrowed and interest.

Transfer deed
A document that, once you sign it, actually transfers the ownership of the property to you.

Valuation
A simple check of the property in order to find out how much it is worth and whether it is suitable to lend a mortgage on. This is carried out by a professional surveyor for the lender. You usually pay the bill and will usually get a copy of the report.

Variable rate
The interest rate the lender charges goes up and down, with your interest payments changing accordingly.

Vendor
The person selling the property.