All the key terms explained

Added to Loan
Many costs arise when arranging a mortgage, such as indemnity and administration fees. In some cases, these can be added to the amount that a person borrows, in which case they are known as ‘Added to Loan’.

Adverse Credit
If a borrower has adverse credit, he or she has had problems with credit in the past, usually relating to late payment, county court judgments (CCJs) or bankruptcy.

It might sound quite complex, but amortisation is simply the reduction in the amount you owe on your mortgage over time as you make regular payments.

Annual Percentage Rate of Charge (APRC)
APRCs are a calculation that allow people to compare the cost of borrowing as they take into account not only the amount of interest you pay but also any other fees charged by the provider, e.g. arrangement fees for setting up a loan. Put simply, the lower the APRC the better.

The person applying for a mortgage.

The process of applying for a mortgage and supplying personal and financial details to the mortgage broker and/or lender.

Arrangement Fee
These are usually charged by the lender when arranging a loan on certain products.

This is the amount, usually expressed in pounds or months, which your mortgage payments are behind schedule.

Balance Sheet
A statement showing the assets and liabilities of a company at a particular time.

Base Rate
The Bank of England Base Rate determines how much other banks and building societies pay for the loans that they take out from the Bank of England. These base rates will in turn affect the interest rate paid for loans including the loan on your mortgage.

Booking Fee
These are usually charged by the lender when arranging a loan on certain products

Bridging Loan
This is a temporary loan which enables you to complete the purchase of your property before completing the sale of your existing house. A typical example of when you may need one would be if you wanted to buy a second property before you’d sold your first.

A broker is a middleman who brings two or more parties together, in the case of mortgages, the borrower and the mortgage lender.

Broker’s Fee
The fee a broker charges for finding the borrower the most appropriate mortgage.

Buildings Insurance
Buildings insurance covers loss or damage to the physical structure of your home, for example, the roof, walls and floors. Contents insurance, which is often sold alongside buildings insurance, covers loss of, or damage to the ‘material possessions’ within your home.

Buy To Let
This is a type of mortgage used to buy property that will be used solely for the purposes of renting to a third party i.e. you as the owner never intend to live there.

Calculating Interest Daily
The interest on most flexible mortgages is calculated daily. The advantage of this is that, when you make payments or overpayments, you will be paying less interest almost immediately, as the size of the mortgage will have reduced. This may not sound much initially, but over a number of years it can add up to a substantial sum.

A cap is a ceiling on interest rates, usually for a specified period. For example, if your mortgage is capped at 5%, you will not pay more than that even if interest rates rise to 6%.

Cap and Collar
A collar is a floor on interest rates, usually for a specified period. For example, if your mortgage has a 5% collar, you will not pay less than that, even if rates fall to 4.5%. A cap and collar mortgage is a combination of the two.

The often protracted situation whereby a buyer is waiting on the completion of the sale of an existing property in order to complete on the purchase of a new property.

Clear Title
Legal jargon referring to the clear, unequivocal ownership of a property.

Commercial Mortgages
These are for individuals or companies buying commercial property – offices, bars and retail outlets – with a view to gaining from capital appreciation and rents.

This is the point at which the money to buy your new property is released to the seller, ownership is then transferred to you and you become a proud home owner!

Compound Interest
Compound interest is the interest paid on capital and any previously accrued interest. For example, £1,000 borrowed for 5 years at 5% p.a. would become £1050 after 1 year, £1,102.50 after 2 years and so on.

Contents Insurance
Insurance that covers the material possessions within your home, for example, electrical goods such as TVs and computers, furniture, curtains and carpets. Certain items, such as expensive computers, may need additional insurance.

A legal agreement between the buyer and seller of a property.

This is the legal process involved when buying or selling property. Most people use a solicitor or a licensed conveyancer when buying or selling a property because there’s quite a lot of detailed work to do when transferring ownership of a property. If you are obtaining a mortgage your lender will insist that you use a solicitor.

Conveyancing is not arranged via Sesame Ltd or regulated by the FCA.

County Court Judgement (CCJ)
CCJs are rulings issued by a County Court or higher court and relate to bad debt. The judgement against the individual is recorded and will show up during credit checks. They almost certainly count against people when they apply for a mortgage.

Credit Check
The process whereby checks are made on a person’s credit history, often as part of the mortgage application process. These checks are carried out by dedicated credit reference agencies on behalf prospective lenders, and usually examine outstanding debts, arrears, credit card repayments and County Court Judgements.

Credit History
The full history of a person’s paid and unpaid debts. These help lenders assess the likelihood that prospective borrowers will be able to meet their mortgage repayments.

Credit Rating
Normally based on a person’s credit history, this is an assessment of whether or not they will be able to keep up repayments on a loan.

Credit Reference Agency
A company (for example, Equifax and Experian) that accumulates financial records relating to the payment history of a prospective borrower. Almost all lenders will use such an agency during a mortgage application.

Credit Report
The report issued by a Credit Reference Agency that details a person’s credit history. Used by lenders to assess the quality of a mortgage application.

Credit Scoring
The process whereby a lender assesses the likelihood of mortgage applicants being able to maintain their mortgage repayments.

The legal documents that prove ownership of a property. Deeds are usually held by the lender.

A deposit is the term used for the monies that you use as a down-payment on a property that you intend to buy.

These are the fees your solicitor has to pay on your behalf (e.g. Stamp Duty, Land Registry fees and search fees) which will be added to your conveyancing bill from the solicitor on completion of the buying or selling of a property.

Discount Rate
A discounted rate mortgage offers you reduced repayments for a given term. This interest rate is discounted from the published lender standard variable rate, for an agreed period from the start of the mortgage.

What this means for you the borrower is that you are guaranteed to pay a set amount below the standard variable rate for the period of the discount. The standard rate can go up and down, but the discount amount remains fixed during the agreed period.

Early Repayment Charge

If you pay off your mortgage in full or make overpayments in excess of the amount agreed by your lender at the outset you may be asked to pay an early repayment charge by your lender.

This charge is raised in order to recover any losses or costs incurred by your lender as a result of your early payment.

Endowment Mortgage
An endowment mortgage is a type of interest only mortgage designed to repay the mortgage, subject to investment returns. They usually have two parts, the first is a monthly interest payment to the mortgage lender and the second, a monthly payment into an endowment policy that is mainly invested in stocks and shares.

What this means is that you are only paying off the interest on the loan during the term on the mortgage so the balance of your mortgage never changes. The mortgage is designed to be repaid at the end of the term with the proceeds of the endowment policy, subject to investment returns.

This is the positive difference between the value of your property and the amount of any outstanding loans secured against it.

For example if your home was worth £300,000 and the mortgage on your property was £100,000 your equity would be £200,000.

Exchange of Contracts
This is the stage in England, Wales and N.Ireland when both the buyer and seller have legally committed themselves to the sale and purchase of a property and are legally bound to complete the transfer.

First Time Buyer Mortgage
There are mortgages available exclusively for first time buyers and can have some special features such as; assistance towards legal fees, cash backs and free valuations.

First Time Buyer
This is the term for a person taking out their very first mortgage.

Fixed Rate
This is a mortgage rate where the interest rate is agreed at the start of the mortgage and will not change during the term of the fixed rate.

So you know exactly how much your monthly payment will be each month during the fixed rate period.

When you have the freehold on a property this means that you solely own the property and the land it is situated on.

This rather unfortunate state of affairs occurs when another potential buyer puts in a higher offer for a property after your offer on the same property has been accepted.

This means that your offer is then rejected. This can happen because under English law, the seller is not legally committed to go ahead with the sale until the point at which contracts are exchanged.

Ground rent
The fee payable by a leaseholder to the freeholder. Tends to be paid annually or six monthly.

A Guarantor is the person liable for the repayment of a mortgage if, for whatever reason, the borrower fails to keep up their mortgage repayments. Guarantors are usually parents or close family members.

Home Buyer’s Report
A property survey, or report half way between a mortgage valuation and a full survey, and which is intended to satisfy the buyer that the property they are purchasing is in a good condition.

Interest Only
There are two types of mortgage, interest only or capital repayment. With an interest only mortgage the balance of your mortgage stays the same throughout the mortgage term.

Interest and sometimes a premium in a suitable investment vehicle are paid monthly. At the end of the term, the proceeds from the investment vehicle are intended to repay the mortgage. This amount will depend on the performance of the investment vehicle.

If you do choose an interest only mortgage you are responsible for ensuring that you have sufficient funds available to repay your mortgage at the end of the term.

Income Multiples
When calculating how much they will offer as a mortgage, lenders multiply an applicant’s income by a set figure, which depends on the person’s salary, current commitments and ability to keep up payments.

Interest is what lenders charge people for borrowing money. Exactly how much interest is charged depends upon many factors, including the time period of as loan and the deemed credit risk. However, in a deposit account, for instance, interest can also be the return upon a capital sum invested.

Joint Tenancy
A form of property ownership between two people, whereby if one of the owners dies, their share of the property will be automatically transferred to the other party.

Land Registry Fee
The fee paid to the Land Registry to register the ownership of a specific area of land.

This is a system used mainly in England where you own the property for a set period before handing back ownership to the freeholder. When you hold a leasehold on a property, it remains the property of the freeholder.

A leasehold will set out the details of obligations of the leaseholder for repairs and maintenance of the property.

Local Authority Search
Carried out by the buyer’s solicitor, and carrying a fee, a local authority search checks, for example, that there are no proposed developments close to a property that could make it less attractive. The last thing a new homeowner wants is a motorway being built at the end of their garden just after they have bought their dream property. The search also highlights the various planning permissions for the property and whether any enforcement notices have been served upon it.

LTV (loan to value)
A mortgage term describing the amount of money a bank or building society will lend you as a percentage of your property’s value. For instance, if you are buying a property for £200,000 and have a 10% (£20,000) deposit, the Loan to Value would be 90%

A loan where the ‘mortgaged’ property acts as a security for the lender until the loan is repaid in full.

This is the creditor or lender i.e. your bank or building society, that lends you the money for your mortgage.

This is the person who borrows money, usually to buy a property.

Negative Equity
This situation occurs when a mortgage is greater than the actual value of the property. This can occur due to a decline in the value of the property after it is purchased.

For example, if the mortgage on the property is £300,000 but the value of the property is only £270,000 then a negative equity situation has occurred.

The sum of money that a buyer offers to a seller for a property.

Generally applies to flexible mortgages, which allow for small overpayments to be made by the borrower without incurring a penalty. Over the term of a mortgage, this can result in significant interest savings.

A mortgage that can be transferred between properties when a borrower moves house is said to be ‘portable’.

The amount of the loan on which lenders calculate interest.

The person who is buying a property.

The ‘paying off’ of a mortgage when remortgaging, moving house or simply at the end of the mortgage term.

This is the term used when moving your mortgage from one lender to another without actually moving house. You may do this to save money.

This might be possible by switching to another mortgage product with the same lender or by switching your mortgage to a competitor. But remember, if you move lenders, the saving you make on the interest rate you pay may be partially or wholly eaten up by the transaction charges associated with moving your loan.

So, if you are thinking about remortgaging it is advisable to do your sums carefully and take good advice from a mortgage adviser. If you don’t do your homework properly you could face the equivalent of several months’ mortgage payments which would effectively wipe out any of the benefits of remortgaging.

Repayment Mortgage
Repayment mortgages, often referred to as capital repayment mortgages, require borrowers to repay on a monthly basis not just the interest on the loan but also a slice of the capital borrowed. This kind of mortgage ensures that if all payments are met at the end of the mortgage term, the property will belong to them.

The unfortunate situation whereby a borrower can no longer keep up with his/her mortgage repayments and the property is legally repossessed by the lender. In order for the lender to then retrieve any outstanding debt, the property is usually sold at a public auction.

Right to Buy Mortgages
These are mortgages specifically tailored for public sector tenants who qualify to buy their home under the Government’s Right-to-Buy scheme. You may be eligible to qualify to buy your council home if you are a secure tenant of either; a London Borough council, a district council, a non-charitable housing association, or a housing action trust.

Discounted rates are usually offered to council tenants for their homes. So if you are a council tenant wanting to buy your home, the rate you will pay will depend upon how long you have lived there. The amount of discount you will receive is roughly in proportion to the number of years you have been paying rent.

These are the enquiries made, usually by your solicitor, at the Land Registry, the Land Charges Register and Local Authorities to ensure there is nothing to cause concern about title to the land and the property you intend to buy.

Stamp Duty
This is a charge levied by the government on house purchases. There is a sliding scale of stamp duty depending upon the value of the property you are buying. Your mortgage broker can provide more information on the amount you will have to pay when purchasing your property.

First Time Buyers are currently exempt from stamp duty on property purchases up to £300,000 (as at Nov 2018)

If you are buying an additional property, a higher rate of stamp duty will apply (as at Nov 2018)

Standard Variable Rate (SVR)
The standard variable rate is a type of interest rate on a mortgage that often moves in line with the Bank of England base rate. However, unlike a tracker mortgage, changes are ultimately at the lender’s discretion.

Subject to Contract
This is the provisional agreement made between the buyer and the seller, before contracts on a property are actually exchanged. This allows either side to back out of the agreed sale without any financial penalty

This is the length of time over which your mortgage loan is repaid.

This is the legal right to the ownership of your property.

Title Deeds
These are the legal documents showing the ownership of your property.

Tracker Mortgages
This is a variable rate mortgage where the interest rate is linked directly to the Bank of England Base Rate. Therefore when the Base Rate changes, the rate on your tracker mortgage changes by the same amount. For example, if the Base Rate increases by 0.25% then your mortgage payments will increase by the same amount.

Transfer Deeds
This is the legal document which transfers ownership of registered land from the seller to the buyer

Where the property is owned outright and no mortgage is secured against it.

This is an independent assessment of the value of a property carried out by an approved surveyor and paid for by you the customer. All lenders insist that a valuation is carried out on a property. The valuation is used by the bank or building society to decide how much they are willing to lend you.

Variable Rate
This rate can go down as well as up during the course of your mortgage and is usually based on The Bank of England Base Rate, but can also be based on the lender’s own standard variable rate that they can determine.

A person selling a property to a buyer.

For buy to let investors, this is the income generated from a property and calculated as a percentage of its value.

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Chris's help was invaluable, he was honest and open throughout the process. He gave me and my partner (first time buyers and clueless) a really easy to understand and comprehensive breakdown of not only how mortgages work but the buying process too, and also helped us with home insurance and life insurance too. He understood exactly how to help us and was never too pushy and always approachable. Without Chris's help I don't think we would have bought a house yet!

Tom & Vicki - Leeds

Chris came to our home to meet us, understand our circumstances and take lots of information from us. Chris then looked at all the options available to us, discussed each option to ensure we were fully aware of the pros and cons of each, and then worked with us to ensure we had the right option when we had found a house. Chris was always available should we have any queries outside our formal meetings, was extremely knowledgeable, helpful and supportive throughout the process.

Liz & Ben - Leeds

Chris helped us from beginning to end. From the first meeting having discussed our options it was "Go go go!" which is exactly what we wanted. Chris is down to earth and honest and realistic with what we had to do and what we needed. We could tell from the first meeting with Chris that he genuinely wanted to see us succeed in being a first time buyer, and that this wasn't just a job. He is passionate in wanting to help.

Donna & Lee - Leeds

Thanks for sorting out my mortgage and protection, I can't believe I'm finally in after all the obstacles we (you!) had to overcome. Thanks again.

Lauren - Cheshire

We finally got the keys on Friday!! Just wanted to say thank you for all your help, we appreciate it all. Couldn't have done it without you!

Donna & Lee -

We have used BR Needham Financial Services for our last 3 mortgages - this latest one was the most complicated due to our changing circumstances and particular requirements. Chris took time to understand our needs and objectives, before recommending a solution that we would have never thought of. We managed to secure a fantastic rate which saves us a substantial amount each month. Will continue to recommend and use next time!

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