APR (Annual Percentage Rate)

An interest calculation which all lenders have to show in advertising literature in addition to their own published rate The APR shows the true cost of the mortgage over its term including all applicable fees and interest. NB different lenders calculate this in different ways.

Arrangement Fee

A fee you may be required to pay when arranging a mortgage for a particular type of mortgage or product. These fees are also known as application and/or booking fees.

Assigned

Usually refers to a life assurance policy taken out in conjunction with a mortgage. When a policy is ‘assigned’, it will be held by the mortgage lender and the mortgage customer gives the lender the right to have first claim on the policy value when it pays out. The mortgage customer cannot then surrender or deal with the policy without the mortgage lender’s consent which will require the policy to be ‘re-assigned.’

B

Buildings Insurance

Insurance cover which protects you in the event that your property is damaged by any of the insured risks. The level of cover should be for an amount sufficient to cover the cost of rebuilding or repairing the structure of the property.

BACS

Banks Automated Clearance System, a method by which money can be transferred electronically between financial institutions. Transfers by this method usually take up to 3 days to reach the intended account.

Buy To Let Mortgage

A loan taken out to buy a property as an investment, for the sole purpose of renting the property out. The rental income received from the tenant is used to repay the mortgage.

C

Capital & Interest

Your monthly repayments are used partly to pay the interest on the amount you borrowed and partly to reduce the mortgage debt. This is also known as a repayment mortgage. Provided payments are maintained the repayments will ensure that the mortgage debt has been repaid at the end of the term.

Capped interest rate

The interest rate is variable, except that it cannot be increased above a stated level for a stated period. At the end of the capped rate period, the interest rate will usually revert to the Society's standard variable rate.

Conveyancing

The legal process of buying and selling a property.

Credit Search

The check a lender makes with a Credit Reference Agency to assist with the decision as to whether or not to provide a mortgage.

Capital

The amount outstanding on your mortgage at any given time.

Certificate of title

A certificate given to the Society by your legal representative which confirms the title to your property is good and marketable.

Contract

A written legal agreement between a seller and buyer relating to the purchase of a property.

D

Deposit

The amount of money payable by a buyer of a property on exchange of contracts which forms part of the purchase price on completion. The maximum that can be required is 10% but it is usual for a lesser sum to be accepted.

Discounted interest rate

The interest rate is variable, but is discounted against the Society’s standard variable rate for a stated period. At the end of the discounted period, the interest rate will usually revert to the Society's lifetime tracker rate.

Disbursements

Fees that will be incurred by your legal representative during the course of a property transaction eg search and land registry fees.

Deeds Administration Fee

An administration charge made by lenders for dealing with queries involving the deeds of a property to cover the costs incurred in retrieving the deeds from storage and dealing with an enquiry.

E

Early Repayment Charge

Usually incurred where a product has been taken out over a specified period and the mortgage or part of the mortgage is repaid before the end of the period Any early repayment charges applicable will be stated in the product information leaflet and also in the offer of advance. This is not a penalty charge but is a charge raised to offset the costs involved when a specific product is taken and then repaid early.

Endowment

This is a life assurance designed to repay your mortgage at the end of the term or in the event of death. Interest only is paid to the lender on the amount borrowed and in addition you pay life assurance premiums to the life assurance company for the endowment policy.

Equity

The difference between the value of your property and the amount of any outstanding loans secured on it.

Exchange of Contracts

The point at which the buyer and seller become legally bound by the terms of the contract for the sale and/or purchase of the property.

F

Freehold

One of two types of title that can be acquired in respect of land. Freehold indicates that the property will be owned outright.

Fixed interest rate

Where the rate of interest payable on a loan is ‘fixed’ at a certain rate for a given period of time. During this period the interest rate will not rise or fall. With regards to a mortgage the interest rate at the end of the given period will usually revert to the Society's lifetime tracker rate.

Further advance

An additional amount of money borrowed by you under your existing mortgage possibly for an extension or home improvements.

G

Guarantee

A legally binding promise given by someone other than the borrower to be responsible for payment of the mortgage if the borrower fails to do so.

Guarantor

The person who provides a guarantee.

H

Higher lending charge

A higher lending charge is normally required by a lender where the loan is over 90% of the purchase price or valuation of the property.

The higher lending charge is the premium payable for insurance which benefits the lender only and is to cover any loss the lender may suffer if it has to enforce the terms of the mortgage and sell the property where the amount received is less than the amount outstanding on the loan. The higher lending charge does not release you from any liability and the insurance company can look to you to repay them any sums paid to the lender to cover any loss or shortfall.

I

Intermediary

An individual, firm or organisation which introduces mortgage applications to lenders (for example, estate agents, mortgage brokers, independent financial advisors).

Income References

When the lender confirms with your employer details of your employment and salary to assist with the decision as to whether or not to make a mortgage offer. Accountants may also be required to give confirmation of income for self-employed applicants.

Interest Only

With an interest only mortgage monthly repayments are calculated to only cover payment of interest. The capital borrowed is paid at the end of the mortgage term using the proceeds of a separate investment vehicle, for example an endowment or personal pension. It is your responsibility to ensure there is a suitable investment in place to repay the mortgage at the end of the term.

ISA

Individual Savings Account, introduced by the Government in April 1999 whereby the interest on the account is not liable to income tax deduction. There are strict limitations on the amounts which can be invested in ISA’s.

J

Joint borrower

Where there is more than one borrower.

L

Land Registry

This is a government agency which is responsible for recording and maintaining records in respect of properties in the UK. The Land Registry maintains details of all registered property and records such details as ownership, mortgages and rights effecting a property.

Leasehold

One of two types of title that can be held in property whereby the property is held for a term of years with rent and/or service charges being payable to another party known as the ‘lessor.’

Loan To Value (LTV)

The amount of loan in proportion to the value of the property. The loan to value is always expressed as a percentage. For example a £40,000 mortgage on an £80,000 property would be a 50% LTV.

M

Mortgage

A loan secured against a property.

Mortgagee

The lender or institution which makes the loan.

Mortgagor

The borrower who has taken out the mortgage.

Mortgage Indemnity Insurance

A type of insurance which protects the lender (not the mortgage customer) against losses. This is usually paid for by a higher lending charge payable by the mortgage borrower at the time of taking out the mortgage.

Should a mortgaged property have to be taken into possession by the lender and the money received from the sale is insufficient to repay the outstanding mortgage debt the indemnity insurance provider pays an amount up to the amount of the indemnity to meet any shortfall or loss suffered by the lender.

Monthly repayment

The monthly sum payable by you to the lender.

Mortgage clauses

The detailed legal provisions which apply to the mortgage.

Mortgage deed

The Legal Document which you will sign agreeing to the terms of the mortgage and to secure the loan against your property. The Mortgage Deed is registered at the Land Registry after completion has taken place and a note of the lender’s interest is then shown on the charges register of the title of the property.

Mortgage offer

The offer of advance sent to you once your mortgage application has been approved which sets out the terms of the offer of advance and includes all the financial and other terms of the offer.

O

Operated account

This is an account opened for a child and can be operated on their behalf until the child's 16th birthday.

P

Possession proceedings

The legal process that has to be taken to obtain possession of your property if you fail to meet your obligations under the terms of the mortgage and usually brought where the mortgage repayments are not met.

Principal sum

The initial amount borrowed by you when your mortgage commences.

Payment break

Where the lender agrees that a specified number of monthly mortgage repayments can be missed. Normally associated with flexible mortgages.

R

Rate of return

This is the benefit to the investor, relative to the cost of initial investment.

Redemption

When a mortgage debt is repaid in full. Redemption usually occurs when a property is sold, when an endowment policy matures or at the end of the term of the mortgage.

Part-redemption is when a mortgage customer pays a lump sum off their mortgage, but not sufficient to repay the total amount outstanding.

Redemption administration fee

This is a fee incurred on redemption of a mortgage whenever redemption occurs and for whatever reason. It is made to cover the cost of the work the Society is involved in at the time of redemption.

Retention

In certain circumstances the lender may hold an amount of money back from the advance monies until agreed work or repairs have been carried out to the property to the satisfaction of the Society.

Re-mortgage

When a mortgage is transferred by the customer from an existing lender to a new lender secured on the same property without moving home.

Re-inspection

When we ask our valuer to re-visit a property already valued usually to check that repairs or other work has been carried out.

Repayment mortgage

A mortgage where your monthly mortgage repayments are used to repay both the capital outstanding and interest. Payments are calculated so that the mortgage will be repaid in full by the end of the term provided your payments are maintained and adjusted when interest rates change. No life assurance cover is included in a repayment mortgage. Separate arrangements should be made to provide life assurance cover.

Rules

The Society’s rules which regulate to the relationship between the Society and its members. Every borrower receives a copy of the Society’s rules with their mortgage offer.

S

Shared ownership/shared equity

A government backed scheme to assist persons on low income or key workers to own their own home. A percentage or share of a property is purchased with rent being paid, usually to a Housing Association, on the remaining percentage/share. Additional shares in the property can usually be purchased at a later date until such time as the whole property can be owned by the borrower. Some shared ownership/shared equity schemes have restrictions on the whole of the property being owned, in these circumstances some lenders will be unable to accept the property for mortgage purposes.

Stamp Duty

A tax payable on property where the purchase price exceeds £125,000. Stamp Duty is calculated in ‘bands’ on a percentage basis calculated against the purchase price. NB in some disadvantaged areas there are special provisions relating to the payment of stamp duty.

Standard variable interest rate

The Society's standard mortgage rate. This goes up and down with interest rate changes generally.

Solicitor/licensed conveyancer

The legal representative who will deal with the legal formalities relating to the transaction.

Standard mortgage interest rate

Our standard variable interest rate.

Sealing Fee

A charge made by lenders to cover the cost involved when required to seal certain documentation e.g. forms to discharge part of land forming part of the Society’s security, the discharge document on redemption of a mortgage (this is usually included in the redemption administration fee).
Stage Release/re-inspection fee

A charge that may be incurred where a property is in the course of construction and re-inspection is necessary.

T

Title

Denotes the legal right a person has to ownership of property.

Title Deeds

Important documents which relate to individual properties. Following de-materialisation in 2002/3 under the new Land Registry rules title deeds are now only of relevance to property where the title is unregistered and will eventually become obsolete. Where title deeds are still relevant the Society will hold these during the life of a mortgage as security for the debt.

The Register is now fully electronic and online via the Land Registry's Website and property owners can now verify ownership of their home personally and obtain copies of their registered entries for a small fee. A copy of the registered entries may be provided by the legal representative acting for the borrower on completion of the purchase transaction.

Tenancy

When you rent out your property the person who rents the property is known as the tenant and the rental agreement is the tenancy. – You would be in breach of your mortgage covenants if you rented out your property without the Society’s prior written consent.

Tenure

The type of ownership of property either freehold or leasehold.

Term

The length of time over which the mortgage is calculated to be repaid, sometimes called the “repayment period”.

V

Variable interest rate

An interest rate is which can be varied by the Society either by way of increase or decrease usually in response to changes made by the Bank of England in its base rate.

Vendor

The person who is selling a property.

Vacant possession

The right to insist that anyone living in a property you are buying leaves the property on or before completion of your purchase and mortgage.

Valuation

An assessment of the value of a property by a valuer or surveyor to establish the properties worth and suitability for security for the mortgage required. This can sometimes been done by way of a desktop or drive by valuation. It is carried out for the lender but you will usually be responsible for the fee and receive a copy of the report.

Valuation report

The written report provided following a valuation being carried out by a valuer. It is a brief report for mortgage purposes only and is not a detailed survey report.