Glossary - Mortgage Adviser and Insurance Broker offering Life Assurance, Protection and Mortgage Advice in - Kent - Maplestone Financial Services

We have produced the following list of commonly used terms so that you can make sense of some of them when looking at information on mortgages, loans and insurance policies. If you need further guidance or can’t find what you are looking for on this page, please contact us.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Accident, Sickness & Unemployment Insurance (ASU) - A type of insurance policy that pays the policyholder a percentage of their salary if they are unable to work due to an accident, sickness or unemployment.

Accidental Damage Cover - This optional element of buildings and/or contents insurance policy and will cover you if you accidentally cause damage to your building or the contents in it. However, a certain level of excess may be applicable.

Administration Fee - The money payable to the lender to cover the cost of processing your application.

Advance - Another word for mortgage loan.

Adverse Credit - A situation where someone has a bad credit history due to, for example, late or missed mortgage / rent / credit payments, or County Court Judgements

Annual Percentage Rate Charge (APRC) - The total cost (inclusive of interest rate; product fees & charges) that is payable by you for a particular product. This enables you to compare different financial products more easily.

Applicant(s) - An individual or a group of individuals applying for a mortgage/loan/insurance product.

Arrangement Fee - The money you pay to the lender to cover their administration costs for arranging a particular mortgage product for you.

Arrears - If you fall behind on payments on a mortgage or loan, you are considered to be in ‘arrears’ (on your payments). As this situation may result in adverse credit history, this should be avoided.

Assignment - A term applied to the process of legally transferring ownership of a policy or product, from one party to another.

Base Rate - The interest rate set by the Bank of England, which is normally used by other banks/lenders as their benchmark for when they lend money to their customers.

Basic Income - Your gross salary without addition of any overtime, bonuses and before any tax has been deducted.

Booking Fee - Also known as a Reservation Fee, this is the money payable to the lender to reserve a particular product until the full application is received by the lender.

Broker - An advisor who can help you to arrange the purchase of various products such as mortgages, loans and insurance policies.

Broker Fee - The fee payable to the broker for advising and/or arranging the set-up or purchase of a product such as a mortgage or loan.

Buildings and Contents Insurance - An insurance policy that will cover the fabric and structure of the property (e.g. roof, walls) and the contents contained in the same property, against loss or damage as a result of various risks such as storm, fire, flood, theft and vandalism.

Buildings Insurance - An insurance policy that will cover the fabric of the property (e.g. roof, walls) against loss or damage as a result of various risks such as storm, fire, flood and vandalism.

Buy-to-Let (BTL) Mortgage - A mortgage product that enables an individual/company to purchase a property that will be let out to third parties.

CAP - The interest rate which a Capped-Rate Mortgage cannot rise above.

Cap and Collar Mortgage - A mortgage product in which, for a defined period, the interest rate can only fluctuate between pre-defined maximum and minimum levels.

Capped Rate - The interest rate that a particular product cannot exceed during a defined period.

Capped Rate Mortgage - A mortgage product in which the interest rate, for a set period, cannot rise above the stated maximum but which can fall below the stated rate.

Cashback - The money paid by the lender to the borrower as an incentive for taking out a particular mortgage product. The amount of money may be specified as a fixed value or percentage of the loan amount and is normally payable upon completion of the deal.

CHAPS Fee - Money payable to a third party (e.g. solicitors, bank) to cover their costs for making a same day payment via the Clearing House Payment System (CHAPS).

Commission - Money payable by one party to another for introducing business. For example, a lender may pay commission to a mortgage broker for introducing a client to the lender.

Completion Fee - A fee payable to a lender to cover their administration costs for finalising the mortgage.

Compulsory Insurance - A type of insurance policy that a lender may require the borrower to take out in order to be approved for a particular product (such as buildings insurance or ASU).

Conditional Insurance - A type of insurance policy that a lender may require the borrower to take out in order to be approved for a particular product (such as buildings insurance or ASU).

Contents Insurance - An insurance policy that will cover the contents of the insured property in the event they are subject to loss or damage due to risks such as theft and vandalism.

Conveyancer - An individual or firm (e.g. licensed conveyancer or solicitor) authorised to carry out the legal work for the sale and purchase of property or land.

Conveyancing - The legal process of transferring property/land from the seller to the purchaser. This work is normally undertaken by conveyancer.

County Court Judgement (CCJ) - This is an order issued by an English County (or higher) Court against someone if they default on a debt. The court’s ruling is recorded on the debtor’s credit record and will therefore, adversely affect the debtor’s ability to borrow money in the future (e.g. they may have to pay a higher interest rate or may be refused further credit altogether).

Credit Check - This is the process whereby a lender will check your credit history (i.e. credit worthiness). The lender will evaluate where you have lived, the amount of debt that is outstanding, your repayment history, whether you have missed any payments or have any CCJs against your name. This information is normally provided by a Credit Reference Agency.

Credit Reference Agency - An organisation (e.g. Experian, Equifax, TransUnion and Crediva) that maintains a record of you and your credit history. These organisations’ records are normally checked by lenders as part of their process when they are deciding whether to lend you money.

Critical Illness Cover (CIC) - This type of insurance policy will pay out a lump sum to the policy holder if they are diagnosed with a specific critical illness such as cancer, heart attack or stroke.

Current Account Mortgage - This type of mortgage allows you to combine your current account and mortgage. Therefore, if you maintain a balance of £10,000 in your current account and your mortgage is £80,000, your total outstanding mortgage balance will be £70,000 and your repayments will be adjusted accordingly.

Debt - This is the amount of money that you owe to a third party.

Decreasing Term Assurance (DTA) - A type of life insurance policy where the amount of money assured (i.e. that will be paid out) reduces over the term of the life insurance policy to reflect the reducing debt amount by the policyholder. This is normally taken out to protect you against mortgage/loan repayments.

Defaulting or Defaulted - A term to mean that you have missed a repayment on your mortgage/loan. As this can have serious consequences, you are advised to contact your lender as soon as you become aware that it will happen or has happened.

Deposit - This is the amount of money that you give towards the purchase of a property. The remaining balance of the purchase price will then be paid by your lender.

Disbursements - Disbursements are administrative and third-party expenses incurred by the conveyancer (on your behalf) during the process of the sale/purchase of your property/land. Examples of disbursements include HM Land Registry Fees, CHAPS Fees, SDLT and Search Fees. These are payable in addition to the conveyancers’ professional fees.

Discounted Period - This is the period of time that a discounted rate is valid for.

Discounted Rate - A fixed interest rate that is payable by the borrower and which is reduced from the lender’s usual Standard Variable Rate (SVR) for a set period. After the set period (i.e. discounted period) has expired, the discounted rate reverts to the lender’s SVR.

Draw Down Facility - A feature of a mortgage/loan agreement that allows you to borrow more money under the original mortgage/loan agreement.

Early Redemption Charge (ERC) / Early Redemption Penalty / Fee - The money that the lender will charge you if you decide to pay back some or all the mortgage in excess of what is stated in the mortgage agreement and within a set period. This fee is normally expressed as a percentage of the total outstanding amount.

Endowment Mortgage - A mortgage product that combines an interest only mortgage with an insurance-based savings plan (i.e. endowment policy that insures your life). As a consequence, you pay interest on the borrowed amount and a premium on the life insurance product. The value of the endowment policy may fluctuate depending on the performance of its investments. If at the end of the mortgage term the value of the endowment policy is less than the amount owed, you will need to pay the difference. Alternatively, if the value exceeds the amount owed, you will receive the surplus amount.

Endowment Policy - An insurance-based savings product that will either pay you a sum of money upon death (or if you suffer a critical illness) or once the policy reaches maturity. These are sometimes linked to mortgages.

Equity - This is your share in the value of your property. If there is a mortgage on your property, your equity will be the market value of the property minus the amount outstanding.

Estate Agency Fees - This is the money that an estate agent will charge you for selling your property or finding a tenant or managing the rental of the property. In the case of a sale, the money charged is normally expressed as a percentage of the sale price. In the case of finding a tenant or managing the whole tenancy, this can be expressed as a fixed sum or a percentage of the monthly rental.

Exchange of Contracts - In England and Wales, this is when the seller and buyer both become legally bound to complete the sale and purchase of the property/land. This process is managed by the conveyancer.

First Charge - In the context of a mortgage, a document that gives a lender the legal right to the title of your property ahead of any other party.

First Time Buyer - An individual who has not previously owned a property.

Fittings and Fixtures - In the context of the sale of a property, these are items (e.g. cupboards, built in ovens, toilet) that the Vendor decides are available, will be left or will be taken by them upon completion of the sale of their property.

Fixed Rate Mortgage - A mortgage product in which the interest rate is fixed for a set period. Upon the expiration of the set period, the mortgage product’s interest rate normally reverts to the lender’s Standard Variable Rate (SVR).

Freehold - In common law jurisdictions such as England and Wales, this refers to when you legally own the building and the land upon which it sits, forever. This is the opposite to leasehold.

Full Status Mortgage - This type of mortgage is for people who may have adverse credit history. Therefore, a full status mortgage is a situation when the lender requires evidence of your income and credit history to make sure you will be able to pay the monthly mortgage amounts.

Further Advance - This is additional money you borrow on an existing mortgage/loan agreement.

Gross Annual Income - This is your total income for the year before any taxes are deducted.

Ground Rent - This is the annual fee that is payable by the leaseholder to the freeholder for maintaining the land upon which the leaseholder’s property sits.

Guarantor - This is the person who agrees to be legally liable for a mortgage/loan in the event that the borrower is unable to meet the regular repayments. A guarantor normally has to be able to demonstrate to the lender that they have sufficient assets and/or has the ability to make the repayments if the borrower defaults on the mortgage/loan.

Help to Buy Schemes - These schemes are designed to help qualifying individuals (e.g. teachers, health workers) to own a property by offering financial assistance. For more information, see www.helptobuy.gov.uk

Higher Lending Charge - This is effectively an insurance premium that is charged by the lender when the loan to value (LTV) exceeds their usual lending criteria and thus signifies additional risk they (the lender) are being asked to assume. However, the insurer may still pursue you for any money they pay to your lender.

Home and Contents Insurance - Another name for buildings and contents insurance (see Buildings and Contents Insurance).

Home Buyer’s Report - A report on the overall condition of your property (including the main fixtures and fittings) usually prepared by a qualified surveyor. Also see Valuation Report and Structural Survey.

Illustration - In the case of a mortgage, an Illustration is a document that contains the mortgage product’s key information such as legal statements, details of the actual mortgage, applicable interest rate, the predicted monthly payments, set-up costs, any commission payable, and consequences for your repayments if interest rates increase.

Income - The money you earn from employment, investments, business, or other sources.

Independent Financial Adviser (IFA) - A qualified adviser who is able to offer you impartial advice on insurance, mortgages, pensions, loans and other financial products from the whole of the market.

Interest - This is the money the lender charges you for borrowing its money.

Interest-Only Mortgage - A mortgage product in which you pay the lender only the interest on the borrowed amount. The expectation is that by the time the mortgage term expires, you will have money (either through savings or alternative investments) to repay the borrowed amount (i.e. principal).

Joint Income - This is the combined income of applicants of a mortgage/loan. Joint income will include money earned from employment, investments, business or other sources.

Joint Life Insurance - An insurance policy that covers two individuals and pays out when the first person dies, at which point the policy will lapse.

Landlord’s Reference - A document completed by an existing or past landlord to verify the applicants’ conduct and their ability to pay due rent on time.

Leasehold Property - In England and Wales, a property that is leased (by the Freeholder) to an individual/company for a set period (e.g. 125 or 999 years).

Leaseholder - This is the person who owns the lease to a property and is therefore obliged to adhere to the terms of the lease agreement.

Legal Charge - The lender’s legal right to exercise control over the title of an asset (e.g. property) that the borrower has secured a loan against.

Lender - Typically, an organisation such as a bank, that has agreed to lend money to a borrower.

Liabilities - These are an individuals’ or companies’ financial commitments and examples include loans, mortgages, hire purchase agreements, and rental/lease payments.

Life Insurance - An insurance policy designed to pay out a lump sum when the policyholder dies. There are options to upgrade such policies to include terminal illness.

Loan to Value (LTV) - Technically, it is the borrowed amount divided by the property’s purchase price and is usually depicted as a percentage. For example, if you wanted to borrow £100k to buy a house worth £300k, your LTV would be (100,000 ÷ 300,000 x 100) 33%. All other things being equal, a lower LTV will help you to get a more competitive mortgage/loan deal.

London Inter-Bank Offered Rate (LIBOR) - This is the average of the basic interest rate that leading London banks would charge each other to lend money on the London interbank market. The Libor is often used as a benchmark for setting other loan rates.

1) The amount of money borrowed to purchase a property.

2) The legal agreement between the borrower and lender (e.g. bank) in which both parties share an interest in the title of the purchased property. Once the loan and relevant interest has been fully repaid, the mortgage becomes void.

Mortgage Deed - This is the legal document prepared by the conveyancer, that records the lender’s (i.e. mortgagee’s) interest in the title of the property.

Mortgagee - This the organisation (e.g. bank, building society) that lends money to help you buy your property.

Mortgagor - This is the individual/entity which borrows the money from the mortgagee to buy a property.

Negative Equity - This is when the market value of a property is worth less than the amount of debt that is outstanding on it.

Net Profit - Turnover minus relevant deductions such as taxes and operating costs.

Non-Status Mortgage - A mortgage where the lender decides they do not need evidence of the borrower’s income.

Offset Mortgages - A situation where your savings and mortgage are with the same lender and the amount of your savings are used to offset (i.e. reduce) the value of the debt upon which your mortgage interest is calculated. Therefore, while you will not earn interest on your savings, you will benefit from paying less on your mortgage.

Overpayments - In the context of a mortgage, overpayments are payments that the borrower makes that are in excess of their regular mortgage payments. Overpayments can sometimes result in penalties being imposed by the lender, so it’s important to check the Illustration to see whether they are permitted and by what amount (normally expressed as a percentage of the outstanding debt).

Payment Holiday - In the context of a mortgage (e.g. flexible mortgage), a situation where the borrower can stop making regular mortgage payments for a short period.

Pension Mortgage - A mortgage in which you, as the borrower, only repay the interest element and also pay towards a pension plan that will eventually pay a lump sum which can be used to pay of the principal element.

Premium - With reference to insurance policy, the premium is the money that is paid to maintain cover.

Procurement Fee - The money that is paid by a lender to a third party (e.g. mortgage adviser) for providing them with applications from borrowers.

Quotation - See Illustration

Redemption - This is the process of clearing off the outstanding debt. This can arise as a result of, for example, reaching the end of the full mortgage term, selling your house, when you remortgage with a new lender or paying off your mortgage by any other means.

Redemption Amount - The money (capital and interest) required to pay off your mortgage in full.

Remortgaging - The process of changing one mortgage product to another using the same property as security. This can be with the same or different lender.

Repayment Mortgage - A mortgage product whereby you make monthly payments to pay off the interest and principal. The alternative to this is, Interest-Only Mortgage

Reservation Fee - Also known as a Booking Fee, this is the money payable to the lender to reserve a particular product until the full application is received by the lender.

Retention - In the context of mortgages, this is when a lender decides to withhold part of the total mortgage until certain conditions have been complied with. This situation can arise when the condition of the property does not meet the lender’s criteria, e.g. property needs remedial work. Once the conditions have been met, the retained amount is released to the borrower.

Right-to-Buy - A scheme designed to enable long-term council and housing association’ tenants to purchase their homes at discounted prices.

Searches - In the context of a mortgage, these are local authority checks performed by conveyancers to ensure that the property being purchased is not subject to any adverse planning or land/property development matters.

Second Charge - An agreement that documents the lender’s contractual right to the legal title of a property if the borrower fails to meet the terms of the signed agreement.

Self-Certification Mortgage - A mortgage product usually offered to those who do not have consistent/standard income, such as self-employed people. The mortgage lender will not normally require proof of income but will expect the borrower to declare their full annual earnings.

Shared Ownership - A situation where the legal title of the property is divided between the home buyer and the local housing association. The home buyer will take a mortgage on their share of the property and pay rent to the local housing authority, which owns the remaining equity in the property.

Stamp Duty - In England and Northern Ireland, this is the tax payable by the buyer when they purchase property or land costing over £125k (or £40k for second homes) irrespective of whether it is leasehold or freehold. If you buy a property in Scotland you will need to pay Land and Buildings Transaction Tax (LBTT) and in Wales you will pay Land Transaction Tax (LTT).

Standard Construction - A property that has been built using normal methods and material such as bricks, tiled roof and cavity walls.

Standard Variable Rate (SVR) - As the name suggests, the is the normal (standard) interest rate that your mortgage lender will charge you for the duration of your mortgage and the SVR is liable to fluctuate depending on the interest rate set by the Bank of England.

Structural Survey - This is a detailed property survey usually carried out by a qualified surveyor. It provides more description on the condition of the property than a Home Buyer’s Report. A structural survey will provide you with detailed information on the general structure of the building from the foundation to the roof and will list any identified defects and whether you will need to instruct additional professionals for further specialist reports.

Terminal Illness Cover - This type of cover is permissible in life insurance policies and will pay a lump sum if the policy holder becomes terminally ill.

Tie-in Period - In the case of certain incentivised mortgage deals (e.g. fixed or capped rate), the period that the borrower is tied to the mortgage product.

Tracker Mortgage - A mortgage product whereby the interest rate is linked to (tracks) a benchmark rate such as the Bank of England’s base rate. This means that your mortgage rate will go up and down with the benchmarked interest rate.

Underpayment - A mortgage/loan payment that is below the regular agreed amount. If this is not pre-authorised (e.g. in the case of a flexible mortgage), then penalties can ensue.

Underwriter - These are professionals who evaluate their prospective customers’ history and application, and then decide whether to underwrite the risk (i.e. whether to insure the policyholder or lend money to the borrower) and at what price.

Valuation Report - This is the report produced by a surveyor for the benefit of the lender and will assess the property/land’s condition, area etc, and provide a value for the property/land.

Vendor - The seller of the property/land.

Will - A document in which a person, the testator, states how they would like their assets to be distributed upon their death. A will should be prepared carefully (e.g. signatures should be witnessed) in order to be robust and valid, and can be revised repeatedly up and until the testator’s death.