Accident, Sickness & Unemployment (ASU)
In the event of an accident, sickness or involuntary unemployment befalling a borrower, this insurance will cover their mortgage repayments. Some Lenders attach mandatory insurance cover to their mortgage deals.

Adverse Credit
Term used for applicants with poor credit history. This could include: mortgage arrears, defaults, County Court Judgements (CCJs), Individual Voluntary Agreements (IVAs), bankruptcy and property repossession. Applicants with adverse credit usually have to pay higher interest rates.

Annual Percentage Rate (APR)
The Annual Percentage Rate (APR) is a rate calculated using a generic formula used by all Lenders and includes all the costs associated with a mortgage.

Arrangement Fee
This fee may be charged by the Lender for administration and is payable in advance or added to the loan.

Bank Base Rate
Every month the Monetary Policy Committee sets the Bank of England Base Rate which is used to determine mortgage rates.

Booking Fee
Some Lenders may charge a booking fee. A booking fee is used to book funds for a mortgage.

Buildings Insurance
Buildings insurance covers damage to a property. It is a compulsory insurance for a mortgaged property. Some Lenders will make a charge if their buildings insurance is not taken.

Buy-to-Let Mortgage (BTL)
This is a mortgage for a property that will be let by the borrower to tenants. The loan for this type of mortgage is usually calculated on rental income.

Capital and Interest Mortgage
This method, also known as a repayment mortgage, pays off capital as well as interest and the mortgage debt should be cleared at the end of the mortgage term.

Capital Rest Period
This means the way in which a Lender calculates the interest on the outstanding balance. It can be calculated annually, monthly or daily.

Capped Rate Mortgage
This means that the interest rate charged on a mortgage is designed not to rise above a certain rate known as the capped rate, should the Lender’s Standard Variable Rate (SVR) increase.

Cash-back Mortgage
The Lender will refund a sum of money to the borrower on completion. This can be a percentage of the loan or a flat figure. With this type of scheme there will normally be early repayment charges and should the borrower repay the loan within the set period of the deal, they will have to repay the cash-back.

Contents Insurance
Contents insurance covers damage or theft for removable items in a property.

Conveyancing
This is the legal process of property transfer.

Current Account Mortgage
Keeps all your finances in one place as the same account is used for your mortgage and other financial transactions. Interest is only charged on the outstanding balance therefore, interest payments are reduced.

Discounted Rate Mortgage
This is a variable rate mortgage that is discounted from the Bank of England’s Base Rate by a set percentage within a set period. There are usually early repayment charges if the loan is repaid within this timescale.

Discounted Tracker Mortgage
This is a variable rate mortgage that is discounted from the Bank of England’s Base Rate by a set percentage within a set period. There are usually early repayment charges if the loan is repaid within this timescale.

Early Repayment Charge (ERC) and Early Redemption Penalty (ERP)
These two terms mean the same in that a penalty is usually applied if a special deal has been set-up for a certain period of time. If the loan is repaid before the time is up, a penalty will be charged

Endowment
This is a repayment vehicle usually associated with Interest Only mortgages

Exchange of Contracts
This is the stage in England, Wales and Northern Ireland that the deposit money is paid and both parties are legally bound to fulfil the agreed conditions of the sale and purchase

Fixed Rate Mortgage
This is a mortgage that has a fixed interest rate within a set period of time. There are often early repayment charges should the loan be repaid within the fixed period.

Flexible Mortgage
This differs from the standard mortgages in that you can make overpayments, take payment holidays, and draw down further advances without incurring a redemption penalty.

Freehold
The owner of a freehold property owns both the property and the land it stands on.

Full Status
This term describes a borrower with a good credit history, can prove all their income and is not self-certifying their income.

Gazumping
This is when a prospective purchaser’s offer for a property is accepted, and then another potential buyer puts in a higher offer for the same property. When this happens, all potential buyers are asked to put offers in sealed bids and then they will be opened on a certain day at a certain time. The highest bidder will be able to proceed with the purchase.

Higher Lending Charge
This is a premium charged by Lenders in order to indemnify themselves and not the borrower against any financial shortfall they may incur in the event of repossessing a property. It is applicable if the amount required is higher than a certain percentage of the property value. Sometimes the Lender will pay the cost of this insurance themselves between 75% and 90% Loan to Value (LTV). The charge can be added to the loan or deducted from the advance on completion. Also known as: Additional Security Fee; Indemnity; Mortgage Indemnity Guarantee (MIG).

Homebuyers’ Report
When purchasing or remortgaging a property, the Lender will require a valuation to be carried out in order to ensure it provides sufficient security. There are three levels of valuation: Basic, Homebuyers’ Report and Structural survey. The more involved the valuation, the higher the fee. The Basic would be the cheapest and the Structural would command the highest fee.

Income Multiples
These are the multiples that Lenders apply to borrowers’ income in order to determine the maximum loan they will offer them.

Indemnity
See Higher Lending Charge.

Individual Savings Account (ISA)
A repayment vehicle associated with Interest Only mortgages.

Initial Disclosure Document
During the initial meeting you will be issued with an Initial Disclosure Document (IDD) document also called ‘Key Facts About Our Mortgage Services’, outlining the services offered and the fees that may apply.

Interest Only Mortgages
If paying Interest Only the original loan (capital) amount borrowed remains the same throughout the term. The mortgage payments pay the interest being charged on the loan, not the amount borrowed. An Interest Only mortgage requires an investment vehicle to pay off the amount borrowed at the end of the term. These repayment vehicles include endowment policies, personal pensions, ISAs, etc. With a Capital and Interest mortgage, also known as a Repayment mortgage, pays off capital as well as interest and the mortgage debt should be cleared at the end of the mortgage term.

Key Facts Illustration
Once a recommendation has been made to you, you will receive a ‘Key Facts About This Mortgage Illustration’ (KFI) This will provide you with information about a chosen mortgage product. Details of the loan will also be confirmed in your Lender's formal mortgage offer.

Leasehold
The buyer of a leasehold property owns the property for a set number of years, but does not own the land on which it stands.

Let to Buy Mortgage (LTB)
This is when your main residence is let to purchase a different main residence.

Libor-Linked Mortgage
This is a variable mortgage that is either above or below the London Inter-Bank Offered Rate by a set percentage within a set period. The Libor rate is set independently every three months. It is often associated with Lenders that offer loans to borrowers with elements of adverse credit.

Life Policy
See Term Assurance.

Loan to Value (LTV)
This is a percentage figure of the loan amount in relation to the property value. For instance a £100,000 property bought with a mortgage of £70,000 has an LTV of 70%. With higher LTVs, some Lender may charge a higher interest rate or they may apply a Higher Lending Charge. (See Higher Lending Charge)

Mortgage Indemnity Guarantee (MIG)
See Higher Lending Charge.

Mortgage Payment Protection Insurance (MPPI)
See Accident, Sickness and Unemployment (ASU).

Non-Conforming
See Adverse Credit.

Offset Mortgage
This is a Flexible mortgage, which allows a borrower to keep balances (such as mortgage debt, savings account and current account) in separate accounts, but, for the purposes of interest calculation, all balances are aggregated. Money in savings or current accounts is set against the mortgage balance and interest is only charged on the outstanding amount, meaning interest payments are reduced.

Overpayment
This is when an unscheduled capital repayment is made or when monthly payments are increased in order that the mortgage is repaid before the end of the mortgage term, saving considerable sums in interest. Many traditional (i.e. non-Flexible) mortgages include early repayment charges if overpayments are made within a set period. In contrast, Flexible mortgages allow unlimited overpayments without penalty. Some Lenders have schemes which are semi-flexible that allow borrowers to overpay a certain percentage of their loan each year without incurring early repayment charges.

Pension Mortgage
A repayment vehicle associated with Interest Only mortgages.

Personal Equity Plan (PEP) Mortgage
A repayment vehicle associated with Interest Only mortgages.

Portability
A portable mortgage is one that can be transferred to another property without penalty if the borrower moves house within an early repayment charge period.

Procuration Fee
This is commission paid by some Lenders to intermediaries for introducing business. These amounts have to be disclosed on Key Facts Illustrations (KFI) and also on the mortgage offer.

Redemption Penalty
See Early Repayment Charge (ERC).

Repayment Mortgage
See Capital and Interest mortgages.

Right to Buy (RTB)
This is when a tenant living in a council-owned property purchases it at a discount, the size of which depends on the length of their tenancy.

Self Build
This is a mortgage for property under construction. The loan is paid out in stages as the property is completed, in order to ensure the Loan to Value (LTV) does not rise too high at any point.

Self-Certification Mortgage (S/C)
This is a mortgage where a borrower states their income and signs a confirmation of their ability to repay a loan, without having to provide full evidence such as accounts, payslips or bank statements. Consequently, S/C rates are often higher than standard Full Status mortgages.

Shared Ownership
This is a scheme operated by Housing Associations where the borrower owns part of a property and pays a mortgage on this, while the Housing Association owns the rest of the property and the borrower pays rent on this part.

Split Loan
This is a mortgage that is taken partly on a Capital and Interest (Repayment) and partly on an Interest Only basis.

Stamp Duty
This is a government tax charged on properties with a purchase price in excess of £125,000. Properties are charged 1% from £125,000 to £250,000, 3% from £250,000 to £500,000 and 4% above £500,000. Stamp Duty is not stepped, it is charged on the whole purchase price e.g. for a mortgage of £300,000, £9,000 would be payable. Stamp Duty is not payable on remortgages.

Standard Variable Rate (SVR)
This is a variable rate determined entirely at each Lender’s discretion. Unless linked to Libor or the Bank of England Base Rate, the SVR is the reverting rate at the end of any special offer period, such as a Capped, Discounted or Fixed rate.

Term Assurance
This insurance, if assigned to the mortgage, can repay the mortgage (depending on the amount assured) in the event of the insured person’s death. Also known as a Life Policy.

Tracker mortgage
This is a variable mortgage that is either above or below the Bank of England’s Base Rate by a set percentage within a set period.

Valuation Fee
When purchasing or remortgaging a property, the Lender will require a valuation to be carried out in order to ensure it provides sufficient security. There are three levels of valuation: Basic, Homebuyers and Structural. The more involved the valuation, the higher the fee. The Basic would be the cheapest and the Structural would command the highest fee.