APRC

The Annual Percentage Rate of Charge, often referred to as APRC is the total cost of the credit to a consumer, expressed as an annual percentage of the total amount of credit.

ASU (Accident sickness and unemployment) insurance

The Annual Percentage Rate of Charge, often referred to as APRC is the total cost of the credit to a consumer, expressed as an annual percentage of the total amount of credit.

AVM

AVM stands for Automated Valuation Model. It is a search used by some lenders to establish the value of your property based on recent local sales and value trends. This is instant and means therefore does not require a surveyor to visit the property.

Base Rate

The UK's core interest rate, set by the Bank of England. The lender's Standard Variable Rate (SVR) is higher than the Base Rate but is often adjusted as a result of this rate.

Buildings Insurance

Insurance cover which protects the policy holder against damage to the property itself, it can be linked to include the contents as well. The amount insured may vary from the purchase price/valuation of the property depending on the type of location of the property. The valuer will usually provide a rebuild cost for insurance purposes.

Capital and interest

A capital and interest mortgage is also known as a repayment mortgage. It involves paying all of the interest plus repayment of a little of the capital each month; an interest only mortgage involves only paying off the interest.

Chain

A sequence of linked sales and purchases.

Completion

The final stage of the house-buying process, which comes after exchange of contracts. The sale must proceed after Exchange, but Completion occurs when the property's agreed sale price, less any deposit already paid is safely received by the seller’s bank account.

Consumer Buy to let:

Buy-to-let mortgages that are driven by certain circumstances where the potential borrower (a) did not set out to borrow for business or investment purposes, (b) does not have any other buy-to-let properties and (c) is only looking for a remortgage. For this reason these mortgages are regulated giving greater protection than with a business buy to let mortgage.

Contents Insurance

Insurance cover which protects the personal belongings your home contains. In the case of rented accommodation, the landlord is responsible for insuring those contents which he owns, but not those owned by his tenants.

Conveyancing

This is normally carried out by a solicitor or licensed conveyancer on the buyer's behalf, conveyancing includes proving the property is really owned by its seller, making sure that all the loans secured on it are discharged, establishing its legal boundaries and searching local planning information for upcoming developments which could affect the property's value.

Council Tax

This is a local authority charge. Generally speaking, the more valuable your property is, the higher the Council Tax bill will be, although the amount for an identical property can vary considerably between different local authorities. In rented or buy to let accommodation, the tenants are usually responsible for the Council tax.

County Court Judgement (CCJ)

If a County Court rules against an individual for defaulting on a debt, that ruling is listed on their credit record. Having such a judgement listed against them may mean they are turned down for future loans, or be expected to pay a higher rate than other customers. The Scottish equivalent of an English CCJ is a Decree.

Covenant

An obligation affecting a homeowner which is found within the title to a property. A Covenant can restrict the owner of a property from doing something (e.g. using the property for business/trade purposes) or oblige the owner of a property to do something (e.g. maintain a particular boundary).

Credit Reference Agency

When assessing a mortgage application, a mortgage lender will study the customer’s credit records. These records are held centrally by credit reference agencies and contain information from many different aspects of their life. Reports produced by Experian or Equifax for example will contain records of credit accounts held and payments made.

CRM (Customer Relationship Management) system

A system to manage customers and the broker firm's relationship with them. It enables streamlined processes, managing the mortgage and insurance transactions as well as reporting on case status and payments.

Current Account

A bank account linked to a cheque book and/or debit card.

DA

A Directly Authorised firm which is registered with the FCA for the purposes of their regulatory permissions to conduct a variety of regulatory activity.

Deeds

A collective term generally used to describe all the legal documents associated with the ownership of a property. The deeds will demonstrate the seller’s ownership of the property, and also contain the details of any rights and covenants affecting the property. The old system of paper Title Deeds have now largely been superseded by the system of land registration at HM Land Registry.

Deposit

The sum of money payable by the buyer to the seller on Exchange of Contracts. The deposit is usually 10% of the purchase price but can be less if the seller agrees to this. A solicitor will ask their client to transfer the deposit to them shortly before Contracts are exchanged.

Direct Debit Mandate (DDM)

A form which the client(s) sign which contains their bank details and permission for their bank to release a regular monthly payment to the lender providing the mortgage. This must be provided to the lender before they will release the mortgage funds.

Disbursements

Expenses that a solicitor must pay out on the clients behalf, for example, Land Registry fees, or search fees.

Discounted Rate

A mortgage which has an interest rate below the lender's standard variable rate (SVR), Bank Base Rate or Libor rate, typically for the first few months or years of the loan. The rate payable may move up and down, but the discount on SVR remains constant.

Energy Performance Certificate (EPC)

A document which confirms how energy-efficient (or inefficient) a property is, and gives information on areas for potential improvement.

Early Repayment Charges (ERC's)

A charge levied by the mortgage lender on the customer in the event that the loan is repaid in full or in part before a date specified in the contract. Fixed-rate, capped-rate, cashback and discount rate mortgages commonly carry early repayment charges that can in some cases persist long after the initial special rate itself has expired.

Employment Status

A term used by lenders to describe potential borrowers' working arrangements. This covers employed, self- employed and contractors.

Endowment Mortgage

A mortgage funded by an insurance-based savings plan. The borrower only pays interest during the mortgage term and the savings plan is designed to repay the mortgage at the end of the mortgage term. As the returns payable under the savings plan depend on stock market performance, shortfalls and in some instances overpayments can occur.

ESIS

See Illustration

Exchange of Contracts

The terms of a property's purchase become legally binding for both parties when contracts are exchanged. The buyer is then committed to buying, and the seller to selling.

Execution-only/Non-advice

A service which offers no advice, but merely carries out the customer's orders.

Experian / Equifax report

See Credit Reference Agency.

FCA

The Financial Conduct Authority, the regulator established by Government to oversee the standards and conduct within the sector.

Fixed Rate

A mortgage which fixes the interest rate at a specified level, typically for the first few years of the loan.

Fixed rate mortgage

A fixed rate mortgage charges a set interest rate over an agreed period of time, which could be anything from 1 year, 3 years, 5 years, or occasionally even longer. At the end of the fixed rate, the mortgage will normally revert to the lender's standard variable rate. The good thing about a fixed rate mortgage is that you know how much you'll be repaying each month for the length of the fixed period, which can make budgeting much easier.

Flexible Mortgage

A mortgage which allows borrowers to make overpayments when they have spare cash. Other features could include the option to reduce or miss payments altogether when times are tight, and to reborrow any overpayments. Not all flexible mortgages offer all of these features.

Freehold

Outright ownership of the title to a property (as opposed to Leasehold).

General insurance

It is typically defined as any insurance that is not life insurance. Most brokers offer building and contents insurance and ASU as types of general insurance.

Gross

Before tax or deductions.

H M Revenue & Customs

The department of government responsible for the collective of taxes. In the vast majority of property purchases a Stamp Duty Land Tax return will need to be submitted to H M Revenue & Customs.

Home and Contents Insurance

A joint term, referring to both buildings cover and contents cover. The two policies may or may not be bought from the same insurer but buying them together can sometimes save money or make life simpler.

Illustration

In the context of mortgages, a lender's estimate of the monthly payments you would have to make under a particular loan arrangement, together with the costs to set it up.

Impaired Credit

Impaired credit mortgages are specialist loans for customers whose credit problems disqualify them from using mainstream lenders' standard products. Some lenders specialise in loans like these.

Income

An income strategy for investments is one which seeks to achieve a minimum level of income from the investment to fund day-to-day spending (often used by retired people).

Independent Mortgage Advice

Independence in regard to mortgage advisers is defined by the FSA as advice given in respect of the whole of the market, and offers the client a fee-only option, in other words is able to accept no other payments apart from those levied on the client, thereby eliminating any conflict of interest that could arise.

Indemnity Policy

An insurance policy usually taken out to offer protection to a buyer or their mortgage lender. Indemnity policies cover a wide range of issues/problems, for example, a property not having necessary rights of way contained within the deeds, or where works have been carried out on the property without the necessary planning permission or building regulations approval. The insurance premium only needs to be paid on a one off basis, usually on completion of the transaction.

Interest

The premium which a borrower must pay a lender in return for use of the lender's money.

Interest-Only Mortgage

An interest-only mortgage or interest only remortgage is where you pay the lender the minimum amount to cover the interest on the loan and invest enough each month in an investment vehicle to build up a large enough fund to pay off the capital part of the mortgage, when it becomes due at the end of the agreed term.

KFI

See Illustration

Land Registry

A government agency that records details of all property sales and values paid, and the current ownership of each property. We can access these records for a small cost if required.

Letting Agent

A property agent who can help landlords locate suitable properties for purchase, and who finds tenants to occupy those properties and can manages the rental process which follows. Our guide for landlords has more information about letting your property.

Loan To Value

This is the amount you want to borrow divided by the purchase price. In other words, it reflects the size of your deposit. Generally, the lower the loan to value, the safer the lender will view the loan.

Local Search

See Search.

London Inter-Bank Offered Rate (LIBOR)

The interest rate at which leading banks lend to one another. Sometimes used as an alternative to base rate in setting the benchmark for a tracker mortgage. There are separate LIBOR rates for different periods up to a year but either "1" or "3" months LIBOR is what is normally used in setting mortgage rates.

Money Markets

The wholesale markets in which banks and other financial institutions lend money to one another. Mortgage lenders often borrow money in these markets, particularly for funding fixed rate mortgages.

Mortgage Adviser

A firm or individual with permission for advising on regulated mortgage contracts.

Mortgage Club

A firm which brokers, usually DA firms will register to use as a payment route and or wider marketing and compliance support.

Mortgage Refinancing

Mortgage refinancing typically refers to using a lower rate mortgage to consolidate other loans and reduce monthly outgoings.

Mortgage Term

A mortgage term is the whole lifespan of a mortgage. This can be 5 to 30 years depending on the mortgage product you have selected. Some mortgage terms are restricted by a maximum age rather than a maximum term.

Net

After tax or deductions have been deducted.

Network

A network is a firm which has 1 or more firms which have its regulatory permissions through their network/brand, will provide broad support to their business and handle the compliance management and in most cases the processing of fee income for their firms.

Non-Status Loan

This is where your income is not disclosed.

Offset Mortgages

Most mortgage borrowers also have savings, even if they are small, and using this money to cancel out mortgage debt makes sense. This is the basic principal behind offset mortgages. With interest only paid on the balance between savings and mortgage debt you achieve the same effect as overpaying a home loan: but you retain the ability to get the money back if you need it.

Overpayment

A mortgage repayment bigger than the one needed to meet the loan's minimum requirements. Mortgages that allow these without penalty are often useful for people whose type of employment means that from time to time they receive significant bonuses or other influxes of money.

Payment Holiday

A short break from regular mortgage repayments, sometimes offered with flexible mortgages.

Premium

In the context of insurance, a premium is the regular sum you pay to keep your cover in force.

Procuration Fee

The total amount paid by the mortgage lender to a mortgage adviser/ intermediary, whether directly or indirectly, in connection with providing applications from customers to enter into regulated mortgage contracts with the mortgage lender.

Remortgaging

The process of switching your mortgage loan from one lender to another without moving house.

Repayment Mortgage

A mortgage loan funded by simple monthly repayments, calculated to repay capital and interest usually over a term of 25 years (less if preferred).

Repayment vehicle

The means by which a mortgage loan's capital is repaid. Examples include endowment policies, ISAs, and personal pensions.

Search

A local authority search is an examination of local planning records to uncover details of any upcoming developments near the property which could affect its future value or existing restrictions on the site.

Second charge

A second mortgage on a property, which ranks behind the first charge (i.e. if the property is re-possessed and needs to be sold, the first charge lender will always get their money back first). Generally, this is with a different lender but can sometimes be the same as the First charge lender.

Secured (loan)

If you should default on your mortgage, the lender can ultimately repossess your property to recover their money. The loan is hence said to be "secured" on the property. A second charge mortgage is a type of secured loan.

Self build mortgage

A self build mortgage is designed to help you finance the building and ownership of a house that you are about to build. The UK self build mortgage market is a specialist area, because you are asking lenders to put forward money against an asset which does not exist at the beginning of the project.

Specialist Distributor

An authorised firm which will have a variety of potential permissions from the regulator to support DA firms or AR firms with the placement of business with lenders which potentially have limited panels or exclusives products for specialist brokers.

Stamp Duty

Stamp duty, or stamp duty land tax to give it its full title, is the tax levied by the government on house purchases. The amount of stamp duty you'll pay depends on if you are a first time buyer and whether you're buying a main, secondary residential property or a buy to let investment.

Status

A shorthand term for the borrower's credit record and employment situation. See "Non-Status Loan".

Standard Variable Rate (SVR)

A mortgage lender's main interest rate. Fixed-rate and discount loans usually switch to SVR when the special offer period expires. Conversely, tracker mortgages switch to a fixed percentage above Bank Of England Base rate (or LIBOR)

Tracker

Tracker mortgages link your interest rate to a benchmark, such as Bank of England base rate. The rate you pay moves up and down in line with the benchmark selected.

Underpayment

A mortgage repayment smaller than the regular agreed sum. Some flexible mortgages have this feature, which can be useful for people with irregular income.

Valuation

A report carried out by a professional property surveyor, carried out for the purposes of confirming the value of a property and that it is acceptable security for a lender’s loan. This report may also identify any repairs that may be needed prior to a loan being agreed or completion.