Advance

The mortgage loan.

Annual Percentage Rate (APR)

The total charge for the loan including fees and interest expressed as a percentage.

Applied or Nominal Interest Rate

The rate used to calculate the interest due.

Arrears

Mortgage payments which have not been paid as requested and have become overdue.

Bank of England base rate

The Bank of England 'repurchase' or 'repo' rate which is the main factor influencing interest rates charged by lenders.

Buildings insurance

Needed from exchange of contract to cover your house.

Capital

The amount you owe excluding costs and interest outstanding.

CAT standard

Stands for Charges, Access and Terms - which have to be low, easy and fair respectively. These standards were introduced by the Government for mortgages to help borrowers, especially first-time buyers.

Closing administration charge

A charge made by the lender to cover administration costs when a mortgage is repaid.

Collateral/security

The property which the lender can sell to repay the loan if the borrower does not keep up the mortgage payments.

Completion

1. The final legal transfer of ownership of the property - when the property becomes yours.
2. The start of the mortgage (also known as 'drawdown').

Contents insurance

Cover for all your personal belongings

Contract

The written agreement between the seller and the buyer of a property to transfer ownership.

Contract race

The seller has received two or more offers on the property and will sell to whoever is ready to exchange contracts first.

Conveyancer

Solicitor or licensed conveyancer who deals with the legal aspects of buying or selling land.

Conveyancing

The legal work involved in the sale and purchase of land.

Daily interest

Interest is calculated on the balance outstanding each day. So, when you make a payment, interest is calculated on the new balance straightaway.

Deposit

Two deposits may be payable:

1. A reservation charge payable by the buyer as a sign of good faith to the seller when they initially agree to buy/sell to each other.
2. The deposit paid towards the total price of the property, payable at exchange of contracts.

Drawdown date

The date when the mortgage starts.

Drawdown deadline

Some mortgage funds are available for a limited period only and usually these mortgages must start by a certain date - the drawdown deadline.

Early repayment charge (ERC)

A charge payable on certain types of loan if it is repaid or partly repaid within a certain period eg during a fixed-rate period or while a discount applies.

Equity

The difference between the value of the property and the amount of any loan secured against it.

Essential repairs

Work required to be carried out on the property before we'll issue the mortgage loan can be issued.

Exchange of contracts

In England and Wales (not Scotland), the point when both buyer and seller are legally bound to the transaction and at which point the buyer should take out buildings insurance on the property.

Endowment mortgage

Sometimes used to describe an interest only mortgage supported by an endowment policy.

Endowment policy

A combined life assurance and investment policy often taken out at the start of a mortgage to run for the same term. Premiums are paid by the borrower to a life assurance company, usually monthly. The company invests the premiums and the investment should provide a lump sum at the end of the policy term (which can be used to repay all or part of the mortgage) or earlier if the borrower should die.

Final reminder

A letter requesting payment and sent to a customer who is in arrears before legal proceedings start.

Freehold

Outright ownership of the property and the land on which it stands.

Further advance

An additional loan by the lender to the borrower, which may be for any purpose and secured by the existing mortgage deed.

Gazumping

When the seller, having already accepted an offer but before contracts are exchanged, accepts another, higher offer from someone else.

Ground rent

An annual charge payable by leaseholders to the freeholder.

Guarantor

A person who promises they will pay the borrower's debt, usually if the borrower fails to.

Higher Lending Charge

A payment to a lender for an insurance policy for the lender's benefit when they lend above a certain percentage of the property value. The policy covers the risk of selling a repossessed property at a loss. (Previously referred to as Mortgage Indemnity Premium or lender's risk fee.)

Home-buyer's survey

A surveyor's report on a property which is less extensive than a building survey and is paid for by the purchaser.

Initial interest

Any payment due for the period from the day the mortgage began up to the first payment date.

Interest only mortgage

A mortgage where only interest is paid during the mortgage term. The capital is repaid at the end of the term, usually from the proceeds of an investment plan such as an endowment policy.

Individual Savings Account (ISA)

The Government's tax-free saving scheme. You can make financial provisions for the future by putting money into any of three types of investment - cash savings, stocks and shares and life assurance.

Land Registry Certificate

Provides details of the property including a plan and, if the property is leasehold, a copy of the lease.

Land Registry fee

A fee paid to the Land Registry to register ownership of a property.

Leasehold

The right to possession, but not ownership, of a property for an agreed period of time. Ultimate ownership remains with the freeholder.

Lender

The bank/building society where you have your mortgage.

Lessee

The person to whom a lease is granted - the tenant.

Lessor

The person who grants a lease - the landlord.

Life assurance

An insurance policy that pays a lump sum on death. Often taken out with a mortgage to provide money for the loan to be repaid if the borrower dies during the term.

Loan to Value (LTV)

The size of a mortgage as a percentage of the value of the property or its purchase price.

Local authority search

Questions to the local authority regarding plans for new road building, planning permission for any building work previously carried out, connection to the mains sewer, etc.

Mortgage

Has a specific meaning in law but has come to mean a loan with property as security.

Mortgagee

The lender.

Mortgagor

The borrower.

Mortgage term

The period over which the mortgage loan is to be repaid.

Negative equity

When the value of the property has fallen and is less than the loan secured on it.

NHBC guarantee

A 10-year guarantee, provided by the National House Building Council, that the builder will put right serious defects on a newly-built property. Zurich Municipal and Premier Guarantee all offer similar guarantees.

Payment Protection

Insurance which pays your monthly mortgage payments, usually for a specified period, if you lose your income through sickness, injury or unemployment.

Pension Plan

An investment plan which can provide a lump sum on and an income after retirement. A pension plan is sometimes used as a way of providing a lump sum to repay the capital of an interest only mortgage.

Principal

The amount of the loan on which interest is calculated.

Repayment

When a mortgage is repaid. (Also called redemption.)

Remortgage

Repaying one mortgage by taking out another secured on the same property, possibly to take advantage of a particular mortgage product or better interest rate from a different lender.

Repayment mortgage

A mortgage where the capital borrowed is gradually repaid over the agreed term.

Specialist report

A report required by the lender into particular defects discovered at the property to be purchased, such as dry or wet rot, damp, etc, before they will agree the mortgage.

Stamp duty

A government tax payable on exchange of contracts on properties of a certain value.

Building survey

A full inspection of the property by a surveyor on behalf of and paid for by the buyer.

Subject to contract

The phrase used before exchange of contracts which allows either party to withdraw without incurring a penalty.

Surveyor/valuer

The person qualified by the Royal Institution of Chartered Surveyors or the Incorporated Society of the Valuers and Auctioneers to carry out valuations and surveys of properties.

Tie in Term

The period of time you would need to remain on certain mortgage terms to avoid an early repayment charge.

Title deeds/title documents

The legal documents which provide proof of ownership of a property.

Transfer deed

A form which provides details of the transfer of ownership to be entered on the Land Registry register.

Valuation

An inspection of the property to ascertain its acceptability to the lender as security against the mortgage loan, for which the borrower may have to pay.

Vendor

The person(s) you are buying your new home from.