Glossary

Here at dgs mortgage solutions we understand that mortgage and mortgage related insurance can be a complicated business. We are committed to making any products or service that we offer and provide advice on as easy to understand as possible.

With this in mind we have put together a glossary of Mortgage/Protection and House Buying Jargon for you to use.

Accidental Damage Cover
Cover for your home and personal possessions against accidental damage such as putting your foot through a ceiling/ruining a carpet etc.
Advance
The mortgage loan.
Agreement in Principle
An offer that most lenders provide to you to confirm how much they are prepared to lend to you. Usually they will have carried out a credit check/score to reach this decision. This is also known as a decision in principle with some lenders.
APR
Annual Percentage Rate. This is meant to be the way of comparing the cost of credit. It takes into account most of the up-front costs involved in taking out a mortgage. You cannot always rely on it because lenders work it out in different ways.
Arrangement Fee
A fee you pay to the lender in return for a mortgage deal. This deal could be fixed, discounted, tracker or cashback. The fees are named differently by different lenders but the most common ones are; arrangement fee, application fee, booking fee, completion fee, reservation fee.
ASU Insurance
This covers accident, sickness and unemployment. It provides a monthly payment if you cannot work for an extended period due to the above.
Authorised Firm
A firm that has the required permission from the FSA (Financial Services Authority) to carry out regulated activities.
Base Rate
Known as the Bank of England Base Rate.
Basic Survey/Valuation
A simple check on the property to find out how much it is worth and whether it is suitable to lend a mortgage on. This is carried out by a professional surveyor on behalf of the lender and is the lenders minimum requirement when you apply for a mortgage. You will usually pay the lender for this type of survey and if they provide you with a copy of this, this is usually done when the mortgage offer is issued and the report is usually only one or two pages long with very basic information.
Beneficiaries
The persons named in a will who will benefit from the assets of a decesaed's estate.
Buildings Insurance
This covers the cost of rebuilding or repairing the structure of the property. Lenders insist you have enough buildings insurance before they give you a mortgage. With leasehold properties, it is the freeholder?s responsibility to arrange buildings insurance, although the freeholder will usually pass the charge to the leaseholder.
Buildings Insurance Charge
A charge a lender may make if you decide to take Buildings Insurance cover with another company. This charge differs from company to company but a typical charge would be in the region of £25-£35 and should be indicated within the illustration from the lender.
Buildings and Contents Insurance
This is a combined policy insurance, which may be cheaper than organising the two types of insurance separately.
Capital & Interest
Your monthly mortgage payments are partly to pay the interest due on the amount you borrowed and partly to repay the outstanding capital balance that you borrowed. This is also known as a repayment mortgage.
Capped Rate
An interest rate charged for a set period of time which can go up or down with the variable rate, but there is a maximum (capped) interest rate which it cannot go above.
Cashback
A payment you receive when you take out a mortgage. It may be a fixed amount, or a percentage of the amount of mortgage.
County Court Judgement
(CCJ) A decision reached in the County Court which can be for not paying debts. If you pay off the debt, the CCJ is satisfied and a note is put on your records to say this.
Council of Mortgage Lenders
(CML) Building Societies and most banks and other lenders are members of this trade organisation.
Completion
When the sale and purchase of the property are finalised and you become the owner of the new property.
Completion Deadline
Some mortgage products have a completion deadline. The client must complete the mortgage prior to this date to receive the benefits of the selected product. In some cases it may be possible to extend the deadline for completion (some lenders charge a fee for this). Alternatively another product can be chosen (depending upon the lender).

Contents Insurance
Insurance cover for your possessions. This may include accidental damage to certain items within the home and cover against loss or damage away from the home.
Contracts
The legal documents under which you and the person selling the property agree to buy and sell the property.
Conveyancing
The legal process in buying and selling the property.
Credit Reference Agencies
These are specialist companies that record information about individuals to help lenders and other financial organisations make decisions in relation to credit applications. The agencies provide public information such as voters roll (electoral register) and County Court Judgements, together with information on existing and past crdeit agreements and records of any seaches made by other loan/crdeit providers. The two well known companies are Experian and Equifax.

Credit Search
A check that a lender carries out with a specialist company to find out whether you have any County Court Judgements, defaults or any records of not paying loans, credit card bills etc. This search will also include a search as to whether you are on the voters roll at your addresses.
Credit Scoring
A lenders way of assessing whether you are a good risk to provide a mortgage to.
Critical Illness
Insurance that pays out if you are diagnosed with a specified critical illness regardless of survival or recovery.
Decreasing Term Assurance
Life assurance that pays out an amount if you die during a period or the term of the policy. The amount of cover reduces each year. So, this makes it ideal to cover repayment mortgages where the amount you owe the lender reduces each year. Decreasing term assurance is usually cheaper than level term assurance.
Deposit
The amount of money you put towards buying a property. When you are due to exchange contracts your solicitor will agree with you the amount of deposit that is required at that stage (usually 10% of the purchase price of the property).
Disbursements
A solicitors expense, for example stamp duty, HM Land Registry fees, search fees, bankruptcy searches, etc.
Discounted Rate Mortgage
A guaranteed reduction in the lenders standard variable rate usually set for a period of time.
Early Repayment Charge (ERC)
A fee charged by your lender if you pay off all or part of your mortgage before an agreed date or you move your loan to another lender. These charges usually apply on fixed, discounted, tracker, capped or cashback mortgages.
Endowment
A policy that is designed to produce a lump sum to pay off an interest only mortgage. There are different types of endowments and they also provide life cover.
Equity
The amount of value in a property that isn?t covered by a mortgage ? simply take the amount of the mortgage from the valuation of a property to calculate the equity in that property.
Equity Release
This is where you can take a new, larger mortgage or increase the mortgage you currently have to use the extra money you raise for items such as home improvements, debt consolidation, holidays etc. (Equity release mortgages for the elderly)
Estate
Total value of your assets
Estate Agency Fees
The amount that an Estate Agent charges you to sell your property for you. This is usually worked out as a percentage of the sale price and may be negotiable or a set fee, always remember that you must add vat to this fee.
Excess
The amount you agree to pay first as part of any claim made by you on some types of insurance, the larger the excess amount the cheaper the premium normally is.
Exchange of Contracts
The point in where you and the person selling the property sign and swap identical contracts that show the price and what fixtures and fittings are being sold, as well as a date when everything will be finalised (completion). When you exchange contracts the deal becomes legally binding, and if you or the seller pull out before completion, you or they will have to pay compensation to the other person.
Fixed Rate Mortgage
A mortgage where the rate is fixed at a set amount for a set period of time.
Fixtures
Any item that is attached to the property and so is legally part of the property.
Flexible Mortgage
A type of mortgage where you can make extra payments and even underpayments without paying an early repayment charge.. Different lenders have different levels of flexibility.
Freehold
This is when you own the property and the land that the property is on.
Freeholder
Someone who owns the freehold of the property.
The Financial Services Authority
(FSA) the UK?s financial watchdog and regulator.
Ground Rent
A fee that the leaseholder has to pay to the freeholder every year.
High Loan to Value Charge
This is a charge that some lenders apply when you are usually borrowing in excess of 90% of the property?s value. It is a type of insurance cover in case the lender has to repossess your property and the lender cannot get their money back.
Homebuyers Survey Report
This is a more detailed survey than the basic survey that can be arranged. The report will contain more specific advice in relation to the condition of the property.
Income Multiples
The size of mortgage that lenders will offer will often be worked out by multiplying your income each year by a set figure. Usually there are different multipliers for a single applicant and joint applicants. Lenders have individual criteria in respect of income that is earned by the way of overtime, bonuses or commission ie non guaranteed income. Lenders will also take into account existing financial commitments such as credit card balances and loans before applying the income multiples.
Income Protection insurance
This covers accident, sickness and unemployment. It provides a monthly payment if you cannot work for an extended period due to the above.
Interest Only
Your monthly payments to your lender are simply made up of interest. You are therefore not paying any of the capital balance outstanding off of the mortgage. Lenders will usually require you to have a repayment vehicle in place to pay off the capital balance although sometimes lenders will allow you to take an interest only mortgage without this.
Intestate
Dying without having made a wil.l
Insurance Premium Tax
(IPT) A tax levied on all general insurance products.
Leasehold
This is when you own the property for a set number of years, after which the ownership reverts back to the freeholder although there is legislation in relation to extension of leases in place to protect a leaseholders rights. Most flats are Leasehold and lenders will usually lend on this type of property providing that the length of the lease meets their criteria, normally a lease of 55 years plus is acceptable although you should seek legal advice if you are considering purchasing a property with a short lease.
Leaseholder
Someone who owns a leasehold property.
Level Term Assurance
Life insurance which pays out a lump sum amount if you die during the term of the policy. The amount of cover stays the same throughout the term, which makes the cover suitable for interest only loans because the amount of mortgage stays the same.
Licensed Conveyancer
An alternative to solicitors, these people specialise in the legal side of buying and selling a property.
Loan to Value
(LTV) This is the size of the mortgage as a percentage of the value of the property or purchase price.
Mortgage
A loan to by a home where you put the property up as security against paying back the loan.
Mortgage Offer
This is the formal offer of mortgage which gives the details and conditions of the mortgage loan. It is normally received about 2 weeks after your mortgage application is submitted. A copy of this is sent to you, your solicitor and us. The mortgage offer will contain the information that was set out in the Key facts Illustration originally given to you when the application was submitted.
Mortgagee
The person taking out the mortgage.
Morgage Term
This is the period selected over which the mortgage will be repaid.
No Claims Bonus
This is similar to motor insurance. You will usually be given a discount on buildings and contents insurance if you haven?t made a claim for a number of years.
On Risk
This is when any insurance cover begins. This may be before you have paid a premium.
Percentage Advance
Very similar to the loan to value, basically if you were borrowing say £100000 on a property price of £200000, your percentage advance would be 50%.
Permanent Health Insurance
(PHI) The same type of policy as Income protection, this type of cover provides an income to you until you retire or return to work if you cannot work due to illness or injury.
Personal Possessions Away From The Home
Items such as jewellery, cameras and bicycles that can be covered under a Contents Insurance policy when you take them away from your home or abroad for instance.

Policy Excess
The amount that you will have to pay when you make a claim. For example this may be the first £50 of a claim.
Policy Schedule
This gives policy details of how much cover you have (the sum insured), and the premiums you will have to pay.
Possession
The lenders term for repossessing your property.
Premiums
The amount you pay for the cost of the cover provided by a range of insurance policies, the premiums are normally paid monthly.
Private Building Survey
This is the most wide ranging check of the outside and inside of a property. This is carried out by a professional surveyor, and it should pick up all but the most hidden faults. This survey is optional and you will usually pay the surveyor directly for the cost but it does provide the greatest protection for the potential buyer in terms of the information it provides. It also gives you cover against negligence buy the surveyor.
Purchaser
The buyer of the property.
Rebuilding Cost
This is the recommended amount (usually gained from your property valuation) that you should take out buildings insurance cover for. This may be higher or lower than the market value of the property.
References
Some lenders may request certain references to confirm the information given to them at application stage. Such references include employer's (to confirm your salary details) landlord's (to confirm that rental payments are paid), previous mortgage (to confirm mortgage payments are up to date). In most cases references may be avoided by supplying certain documentation to the lender at application stage such as payslips to confirm income.

Remortgage
A new mortgage obtained even though you are not moving home. This process is usually carried out when your mortgage is due to be reviewed once you are coming to the end of a particular product.
Removal Expenses
The cost of actually moving home. This will be any cost for a removal company to move your possessions to your new home.
Repayment Mortgage
See capital and interest.
Retention
A lender may hold back part of the mortgage until certain conditions are met. These conditions normally involve improvement works which are required to the property to enable the property to be adequate security for the mortgage. The amount held back is known as a retention and this will be confirmed within the mortgage offer.

Searches
Checks carried out during the conveyancing. These checks are made with local authorities and other official organisations to check planning proposals and other matters that may affect the property value and if it can be sold in the future.
Self Certified
You confirm how much you earn by way of a declaration and the lender will not normally ask for confirmation of this.
Solicitor
The person who deals with the conveyancing.
Stamp Duty
A tax you pay when you buy property or shares. You pay stamp duty land tax when you buy a property. If the property is more than £125,000 you will normally pay between one and four percent of the whole purchase price. If the property is in an area designated by the government as 'disadvantaged' a higher threshold of £150,000 applies for residential properties.

The Chancellor announced in his Budget on 24th March 2010 that legislation will introduce relief from stamp duty land tax (SDLT) for purchasers of residential property at up to £250,000 where the purchaser or all of the purchasers are first time buyers and intend to occupy the property as their only or main home. This relief is limited for a 2 year period and will be effective for purchases made between 25/3/2010 and 25/3/2012.

In addition a new rate of 5% was also introduced under this legislation for properties that are purchased in excess of £1 million.

The current charges are therefore:-
Purchase price up to £125,000 0%
£125,001 - £250,000 (first time buyers) 0%
£125,001 - £250,000 1%
£250,001 - £500,000 3%
£500,001 - £1 million 4%
£1,000,001 and over 5%

Note that between 3 September 2008 and 31 December 2009 the starting threshold for SDLT was £175,000 - higher than shown above. The threshold was reduced back to £125,000 from 1 January 2010.

Standard Variable Rate
(SVR) This is the usual interest rate a lender will charge and can go up or down. Usually if you have taken out a mortgage product for a certain term ie a fixed rate for 2 years, after this period of time your interest rate will revert to the lenders SVR.
Structural Survey
See Private Building Survey
Sum Assured
How much an insurance cover will pay you based on your cover.
Survey
A report on the condition of the property you are planning to buy/ mortgage.
Tie In Period
As a condition of a mortgage product (fixed or tracker rate for example), you may have to agree to stay with a lender for a period of time whilst that product is applicable. There are also some deals that have an extended tie in period which means that you are sometimes tied in to the lender after a specific deal has ended. If you paid off your mortgage during this period you are usually faced with an early repayment charge.
Term
The period of years over which you take your mortgage and when you have to repay it. Most new mortgages are taken on a 25 year term, but lenders will consider longer terms.
Title Deeds
Documents to show proof of who owns the freehold and leasehold of the property.
Tracker Mortgage
A mortgage with an interest rate that is usually linked to the Bank of England Base Rate or a rate that is set, so the rate you pay ma go up or down.
Transfer Deed
A document that, once you sign it, actually transfers the ownership of the property.
Valuation
See basic survey valuation.
Vendor
The person selling the property.
Waiver Of Premium
An additional option with some insurance contracts for the insurance provider to pay your premium in the event of you being off sick after a specific period.
Will
A legal document detailing who your assets will be left to in the event of your death. 'The Financial Services Authority does not regulate will writing'.

Bank of England Base Rate is 0.5% (last updated 10/02/11)- next update due 10/03/11

Just a little note to say thank you for all your help with the purchase ? it was a lot of hard work but we got there in the end!! (At some points I thought it would never happen!) We wouldn?t have done it without you so thank you. Look forward to dealing with you again in the future.

Miss W & Mr B - London

Read more testimonials of what our clients have to say

12th December 2018

d g s mortgage solutions ltd
84 Balham High Road
Balham
London
SW12 9AG

Tel: 0845 3626206
Fax: 0845 3626208

enquiry@dgsmortgages.co.uk