Getting your first contractor mortgage can be complicated, so we have put together this Mortgage Jargon Buster to help you understand what is meant by certain words and phrases used in the mortgage process.
Advance: The mortgage loan.
Adverse Credit: Borrowers with bad credit history such as missed payments or CCJs.
APR (Annual Percentage Rate): The total cost of the mortgage including all charges and fees.
Arrangement Fee: The fee charged by the lender at the start of the loan for arranging the mortgage.
Bank of England Base Rate: The interest rate set by the government.
Buildings & Content Insurance: Insurance policy to cover the property and the contents of your home against damage, fire, theft etc.
Charge: An interest in the ownership of the property, which is normally the mortgage lender and any other creditors from whom you have borrowed money by using your property as security.
Completion: The date at which the process is complete and the property changes ownership.
Contract: The document that confirms the agreement for buying and selling the property.
Conveyancing: The legal process of transferring the ownership of the property, managed by a solicitor.
Covenant: A condition within the deeds or lease of the property that the buyer must comply with, such as allowing right of way if required.
Debt Consolidation: Combining your outstanding debts and securing them against your home.
Deeds: The legal document proving that you own the property and land.
Deposit: The money that you pay to the lender to secure the loan after exchange of contracts.
Disbursements: The costs for legal work for buying or remortgaging.
Discharge: Repaying the mortgage in full.
Early Repayment Charge: The fee paid to the lender for repaying the mortgage during the early repayment period.
Equity: The amount of the property that you own. i.e. the property value minus the outstanding mortgage amount.
Exchange of Contracts: When both parties sign the contract and exchange them through their solicitor. This is the ‘point of no return’ and the contracts are legally binding.
Fixtures & Fittings: The items including in the property purchase (i.e. carpets etc).
Freehold: Legal title meaning that you have absolute ownership of the land and property.
Full Structural Survey: A thorough check of the property by a surveyor to highlight any potential issues with the property, usually done for insurance purpose.
Further Advance: Additional funds taken on your existing mortgage.
Gazumping: When the sale falls through due to the seller accepting a higher offer price from another buyer.
Gazundering: When the buyer offers a lower price just before exchange of contracts.
Guarantor: Someone who guarantees to pay your mortgage if you miss payments.
Home Buyer Report: A survey and report offering comments on the structural condition of the property.
Home Envirosearch: A report detailing information on local flooding, subsidence and land contamination history for every UK area.
IFA: Independent Financial Adviser – offering whole of market financial advice.
Key Facts Illustration (KFI): Quotation from the mortgage lender detailing costs and mortgage information.
Land Certificate: Land Registry certificate proving that you own the property.
Land Registry: The government body that records the ownership of all property and land in the UK.
Leasehold: When you own the property but not the land that it is on. You normally have to pay ground rent to whoever owns the land.
Loan to Value: The amount of mortgage shown as a percentage of the property value.
Mortgage Offer: The formal document from the lender offering you a mortgage sum.
Negative Equity: When the property value is lower than the mortgage amount.
Private Sale: Sale without an estate agent’s involvement.
Product Fee: Same as arrangement fee.
Retention: When some of the mortgage funds are held back until repairs are completed.
Solicitor: Legal representative dealing with the legal side of the sale/purchase.
Stamp Duty: A tax that must be paid when you buy a new property.
Survey: A report on the property that you intend to purchase, including details of the structural state of the property. Conducted by a surveyor.
Transfer of Equity: Adding or removing someone from the mortgage.
Valuation: When the property is valued to ensure that it is worth the amount that you wish to borrow.
Vendor: The seller of the property or land that you are buying.
Struggling to get to grips with mortgage related terms? Use our quick-reference guide to help you.