Glossary
Glossary | Fixed Rate Mortgages
Buyers market - This is when the buyer is more in demand than the seller. The buyer is more able to dictate terms.
Capital / Capital Repayments - Capital means a sum of money. Capital repayments are what you make to repay the capital debt (i.e. the actual money you borrowed) on your mortgage /loan. These would usually be monthly.
Chain - Usually when you're buying a new home you are depending on the sale of your old home to finance the new one. If the people buying from you are also depending on others buying/selling their homes then this is a "chain". The problem is that no one can move 'till everyone's ready and one failure along the line will beak the whole "chain."
Conveyancing - Conveyancing is the legal work involved in buying and selling a home. It would normally be done either by a solicitor or a licenced conveyancer. As a buyer you need to have one or the other for the sellers/vendors Estate Agent to contact immediately your offer is accepted so try to have one lined up before you get to this stage.
Credit reference agencies - These are used to check your credit rating.
Endowment payments - With an endowment mortgage, these are payments made into an endowment policy which is a type of life assurance. (The mortgage /loan is eventually paid off with one lump sum at the end of the mortgage term).
Excess - In insurance "excess" means the first bit of your claim which you have to cover yourself. So if your excess were 250 that means you would have to pay the first 250 of any damage you wish to claim for. The insurer would pay the rest. If it relates to a time period e.g. 30 days this means the insurance would start being paid after 30 days).
Gazumping - Gazumping is where the seller has accepted your offer but then takes a higher one. The Estate Agent is legally bound to pass on all offers to their client, the seller and of course the higher the offer the bigger their commission... They may even pretend there's been a higher offer at a crucial moment just to see if you'll raise your offer...
Headline interest rate - This is the interest rate for a mortgage which is used to gain the public's attention and sales. The mortgage lenders aim to attract new business with great sounding cut-price interest rates. However you have to make sure you're not paying more in other ways e.g. tie ins to the lenders more expensive insurance cover or penalties to make you stay with them after the very low interest rate no longer applies and you're paying over the odds.
IFA - This stands for an Independent Financial Adviser. They have to be qualified and are supervised stringently by the Financial Services Authority
Interest - When you borrow money the lender makes money by charging interest. If you've borrowed 100 and the interest rate is 5% that means you would be paying 5 in interest - so you'd have to pay a total of 105 back.
Interest rate - This is the most significant thing about a mortgage. The Interest Rate is the amount of interest you're charged and will affect what you have to pay back. For example, if you've borrowed 100 and the interest rate is 5% that means you would be paying 5 in interest - so you'd have to pay a total of 105 back. The interest rate should always be referred to as an APR (Annual Percentage Rate). Even if it's termed as a monthly interest rate it should show the APR it reflects BY LAW.
ISA - Individual Savings Account
Loan to value - This is usually a percentage which shows the size of mortgage vs the property's value. E.g. if the mortgage is 80,000 and the property's value is 100,000 the loan to value is 80%.
Mortgage lender - Any financial institution that offers and/or arranges mortgages. These could be insurance companies, friendly societies, building societies, banks, unit trust managers and, nowadays, even supermarkets.
Mortgage in Principle - This is a conditional offer made by a mortgage lender that - provided the information you give them is correct - they will "in principle" give you the loan you have discussed with them. It's very useful to have one before you even start looking for a house to give you the edge over any competition. Having one means you should be able get the actual mortgage quicker when the race to buy your chosen home begins.
Mortgage term - The length of the mortgage agreement. This is normally 25 years but can be any period agreed.
National Land Information Service - The National Land Information Service will bring all the relevant information on land and property, local government, the private sector and local geography online onto one system/website. In fact you should be able to find out much more about your house than from an old style local search. Proposed roads, supermarkets, residents' parking schemes, planning issues, rights of way etc. will be revealed online within minutes whereas this often took local authorities weeks to produce.
Negative equity - When the value of a property falls below what is owed on the mortgage. This would happen during a property slump. Say you bought a house for 100,000 during a property boom. Two years later there's a slump and it halves in value. If you sell it the new price won't cover the repayment of the, say, 98,000 you still owe on the mortgage. This happened to millions during the 80's and meant people had to stay with unwanted partners and friends' they'd bought the property with during happier times.
Overhanging lock in - This is where the mortgage lender imposes penalties to make you stay with them after an initial low interest rate (which attracted you to that particular mortgage) no longer applies and you're paying a normal rate or perhaps more than average.
Redemption penalty / Early Pay Off Charges - This is where the mortgage lender imposes penalties to make you stay with them after an initial low interest rate (which attracted you to that particular mortgage) no longer applies and you're paying a normal rate or perhaps more than average.
Penalties - These are used by mortgage lenders to make sure you stay with them or - if you leave - that they squeeze a bit more money out of you. Typical penalties are charging a percentage of what's still owed on your mortgage if you go to another lender with a better interest rate.
Premiums - Insurance premiums are the regular payments you make for the policy.
Surveyor - A surveyor checks property is in an acceptable condition.
Tie you in / tie ins - Mortgage lenders will lure you in with great sounding cut-price interest rates (aka the "headline interest rate"). To make up for their "loss leader" they'll try to "tie you in" eg by making you pay a financial penalty if you change to another mortgage lender. Sometimes they'll make it compulsory that you buy their insurance policies ie it'll be a condition of your taking the cut-price interest rate. This would be known as an insurance "tie in".
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