Glossary

Annual Percentage Rate – the total cost of the loan (including fees and interest) expressed as a percentage of the principal, over the term of the mortgage

Arrears – mortgage repayments that have been requested but not paid

Balance – the amount outstanding on your mortgage loan

Bank of England base rate – the Bank of England “repurchase” rate which affects the mortgage rates that banks charge

Buildings insurance – insurance cover for the structure of the property you are buying. You may wish to have this on risk from the day you exchange contracts

Contents insurance – insurance cover for your personal possessions

Endowment policy – an investment vehicle that may also be a life assurance policy. The investor pays a monthly payment for a set number of years. The policy pays out at the end of the term or the policyholder’s death, whichever is the sooner

Equity – the value of the property minus the outstanding balance of any borrowing you may have secured on it

Exchange of contracts – (in England and Wales) the moment when Seller and Purchaser are committed to the sale and purchase of a property when their parts of a contract are “exchanged”

Freehold – the fullest type of property ownership you can get, where you own the building and the land that it stands on outright

Gazumping – what happens when another purchaser offers a higher price than you have agreed with the seller before contracts are ‘exchanged’.

Guarantor – someone who agrees to pay a borrower’s debt, and may be pursued by the lender if the borrower fails to pay

Interest-only mortgage – a mortgage where the borrower pays only interest. The capital will still be outstanding at the end of the term.

Land Registry – the body responsible for registering transfers of land and maintaining the records of land ownership in England and Wales

Leasehold – the right to exclusive possession of a piece of land that lasts for a defined period of time.

Lender – the bank or other financial institution that has given you a mortgage

Loan to Value (“LTV”) – typically expressed as a percentage, the LTV expresses the size of the loan in relation to the value of the property. This may affect what mortgage products are available

Local Authority search – questionnaires to be filled in by local Highways and Planning Authority about the property you intend to buy

Mortgage – a loan that is secured on a property

Mortgagee – the bank or building society who is entitled to the mortgage

Negative equity – a situation where the outstanding balance on a mortgage is higher than the property’s value

Principal – the loan amount on which the interest is calculated

Remortgage – replacing one mortgage with another, possibly to withdraw more funds or to get a better deal

Repayment mortgage – a mortgage where both interest and capital may be repaid each month, so that by the end of the term nothing will be outstanding

Valuation – an assessment of the property’s value to ascertain whether it is sufficient security for the loan

Vendor – the person selling the property