Jargon Buster
Set out below is a brief explanation of some of the main terms commonly used in the mortgage and general insurance industry. The list is by no means exhaustive of all the terminology commonly encountered when seeking a mortgage or general insurance services.
Accident, Sickness and Unemployment Insurance (ASU)
Insurance cover arranged by the borrower to protect against inability to meet mortgage payments. This cover could be more accurately described as accident, sickness and redundancy insurance as unemployment cover is generally restricted to cover only events that are entirely beyond the control of the insured person. Typical exclusions include dismissal following professional misconduct and any act of voluntary redundancy. The accident and sickness cover will also be subject to exclusions such as any act of self-injury or any injury related to the use of alcohol or drugs.
Accountant’s Letter
A letter of income confirmation provided by an accountant (normally chartered or certified). Some lenders may accept an accountant’s letter in place of audited accounts. It is normally used only for the self employed or controlling directors.
Added to Loan
A reference to the additional costs associated with arranging a mortgage such as arrangement fees, which can be incorporated into the amount you borrow. Fees added to the loan will attract extra interest. Fees that may be added vary by lender. Care should be exercised when the sum of the loan and any costs added to the loan may cause the total advance to exceed a given loan-to-value limit. In certain cases additional conditions or charges may apply.
Additional Security
When lending exceeds a certain Loan to Value lenders may require additional security. The usual form is a High percentage Advance Fee “HPA”. The lender uses this fee to purchase indemnity cover to protect the lender in the event of loss. No protection is offered to the borrower who remains responsible for repaying the whole of the debt to the lender. Alternatively lenders may accept other security such as cash or shares or a charge over another property.
Administration Charge
Some lenders will reserve a proportion of the fee charged for the valuation to cover their own costs. This element of the valuation fee may not be refunded should an application not proceed even if the valuation has not taken place.
Arrangement Fee
Fee charged for setting up the loan. May be payable up front, upon completion or may be added to the loan.
Arrears
Mortgage payments that have not been made by the due date in accordance with the contractual agreement.
Bank
An institution authorised for banking activities by the Financial Services Authority.
Base Rate
Introduced by banks following the abolition of Minimum Lending Rate by Geoffrey Howe, the then Chancellor of the Exchequer, in 1981.
Basic Annual Income
The amount of money earned that is guaranteed regardless of the individual or the company performance.
Booking Fee
Fee charged by a lender to secure mortgage funds, payable at the time the application is submitted. Normally applies to special offer loans, such as fixed or capped rates.
Broker (mortgage & finance)
An intermediary who finds and places customers who need a loan or mortgage with the lender. The broker can carry out all administration and paperwork to do with processing the loan for which additional fees may be charged.
Building Society
An institution constituted under the various Building Societies Acts. Building Societies are mutual organisations owned by their members. They are regulated by the Financial Services Authority.
Capital
The principal part of a loan, i.e. the original amount borrowed.
Capital & Interest
Otherwise known as a repayment loan. The borrower pays an amount each month to cover the amount borrowed or principal and the interest charged on that.
Capital Raising
When you remortgage, (change your mortgage provider but stay in the same property) your new loan pays off the existing/outstanding mortgage and may leave a surplus at the disposal of the borrower. Additional funds are allowed by some lenders for home improvements.
CCJ
County Court Judgement (CCJ) judgement for debt in the county court. If a judgement is settled in full within 30 days of the date of the judgement it will not appear in the credit register.
In the event of a payment after that date the judgement will appear in the register but will be shown as being satisfied. If a judgement has not been settled and is outstanding this is likely to lead to a lender refusing a mortgage application. Once the ruling has taken place it will be recorded against the person’s credit history and will appear on every credit search for the next six years. Some lenders will consider applications from potential borrowers who have CCJ’s registered against them.
Centralised Lender
Generic term applied to mortgage lenders, other than building societies and high street banks, who generally do not have retail outlets and operate wholly from a head office location.
CML
The Council of Mortgage Lenders is a trade body for Mortgage Lenders.
Completion
Completion is the final legal transfer of ownership of property – when the legal formalities of a property purchase or mortgage are finalised and the property legally becomes yours. In the case of a purchase, the purchasers should not be allowed to take occupation until after completion has taken place.
Conditional Insurance
An insurance policy that has to be taken out as a condition of obtaining a loan.
Contents Insurance
The insurance of property within your home i.e. furniture, clothing, personal possessions etc. as distinct from the buildings insurance.
Converted Flat
A self contained flat that has been converted out of part of a larger property.
Conveyancing Fee
Fee charged by a solicitor or licensed conveyancer for arranging the necessary legal work in transferring the ownership of a property. As well as the fee charged by the solicitor for their work, there will also be stamp duty, land registry fees and disbursements.
Credit Check
Enquiry made on the credit history of an applicant, normally by reference to one of the major credit agencies such as Equifax, Experian or Westcott Data to help assess your application.
It will reveal details about your credit history, together with information about credit agreements you may have with other organisations. Even if your credit search reveals credit problems in the past, you shouldn’t worry. Each case is treated individually, and we will still try to help you.
Criteria
The lender’s standard terms and conditions for acceptable loan applications. These vary from mortgage to mortgage.
Current Service (employment)
Length of time that you have spent with your current employer.
Debt Consolidation
Replacing a number of existing loans with a single loan from a new lender. This can result in a reduction in your monthly payments by spreading the larger loan over a longer period and possibly, by reducing the overall interest rate. You should be mindful that the loan is secured on your property if provided via a mortgage.
Decision in Principle
Based on the information you provide, we can normally let you know if we are likely to be able to arrange a mortgage for you – often in just a few minutes. This is our decision in principle, and is made subject to references, a valuation and other conditions.
Deducted from Loan
Expression used by lenders to refer to certain fees, such as the arrangement fee, that will be deducted from the amount borrowed on completion. It effectively means that they have added the fee to the mortgage.
Defaults
If an individual fails to make payments on a credit agreement, or fails to comply with their creditors requirements, they will be described as having ‘defaulted’. Defaults can, over time, lead to County Court Judgements if the individual fails to satisfy the terms laid down by their creditor. Defaults are recorded on a person’s credit file to enable lenders to assess whether they are a viable lending proposition. Many lenders may reject an application where the borrower has a default registered.
Deposit
Money paid upon exchange of contracts. Also, the borrower’s equity in a property may be referred to as the deposit.
Disbursements (conveyancing)
Costs incurred by solicitors in carrying out their work which they will re-charge to their clients, e.g. searches, stamp duty and land registry fee.
Discharge Fee
Fee charged by a lender releasing its charge over a property following the redemption of a mortgage. Also known as Deeds release fee or Sealing fee.
Discount Purchase Price
Price of a property that has been reduced below the open-market value, such as in the case of a right-to-buy purchase or a builder’s discount. Under right to buy legislation, properties can be offered at a discount. There are sometimes restrictions on dealing with properties during the discount period.
Discount Rate
The mortgage interest rate is lower than the current normal standard variable rate for a certain period, usually shown as a fixed percentage reduction to the lender’s normal variable rate eg. 2.00% discount for 2 years. There is usually a penalty if you pay off all or part of the loan during the discounted period.
Draw Down Facility
An additional borrowing opportunity that is agreed with a lender but the amount of which has not yet been lent to the borrower. This may be used either to guarantee the availability of future money for a specific purpose (e.g. home improvements) or simply to give the borrower access to further funds without the need for additional checks on their ability to make the payments.
DSS Payments
Income received from the Department of Social Security towards the payment of a mortgage. These are used by a lender only in exceptional circumstances to confirm ability to service a loan.
For loans arranged after 2nd October 1995 benefits are paid only after the first 39 weeks of an income support claim. Borrowers whose loans completed before this date will receive assistance at 50% of the amount payable after the first eight weeks of a claim increasing to 100% after a further 18 weeks.
Early Repayment Charge
Charge levied by a lender for withdrawing from a mortgage before a given date specified in the mortgage conditions.
Earned Income
Income that is earned from employment or self employment, as distinct from investment income from property or securities.
Employed
Normally refers to a person (the employee) who has an open-ended contract of employment and has income tax and national insurance contributions deducted from their salary.
Employer’s Reference
A written statement from an employer confirming the borrower’s employment, giving details of his or her salary and length of service; an essential requirement for assessing an employee’s ability to repayment the mortgage.
Employment Status
The basis of an individual’s employment, i.e. employed, self-employed, controlling director or not in employment.
Equity
This is the amount of money you would have if you sold your home. To calculate this, subtract the value of your outstanding mortgage and any secured loans from the current value of the property.
Exchange
Exchange of contracts takes place when you pay your deposit, and agree a completion date. Once this has taken place, you are legally bound to buy the property and will be liable for any losses should you withdraw.
Existing Liabilities
Your debts, including an existing mortgage, hire purchase, personal loans, school fees etc.
Fee
Amount charged by a lender, broker or other intermediary for arranging a mortgage or property purchase.
Feuhold
Equivalent of a freehold under Scottish law.
First Charge
Method of securing the main mortgage. A lender with a first legal charge over a property has a first call on any funds available from the sale of the property.
First Time Buyer
Person wishing to purchase a property for the first time. Some lenders offer preferential lending terms to first time buyers.
A borrower who has owned a property before but has sold this prior to buying again may be offered first time buyer terms by some lenders. However, this will vary on a lender to lender basis.
Fixed Rates
A loan where the initial payments are based on a certain interest rate for a stated period and the rate payable will not change during that period regardless of changes in the lender’s standard variable rate. There is usually a penalty if you pay off all or part of the loan during the fixed period.
Flat Over Shop
Flats where a smell or noise disturbance exist are often unacceptable as are flats that do not have their own access.
Freehold
A freehold property is one where you are the outright owner of the property.
Freehold Flat
A flat which is not owned in the usual leasehold format. Such properties are difficult to mortgage if they are not set up under the usual leasehold framework, which allows owners to claim rights such as support from adjoining properties.
Full Status
A loan where complete checks are made on the borrower’s credit history and income.
General Conditions
The set of standard conditions that apply to a mortgage. They are usually provided to the borrower in booklet form at the time the mortgage offer is provided.
General Insurance
Insurance companies identify different types of insurance policy as falling into different branches. For instance the Life branch covers the insurance of people and is generally known as life assurance. The insurance of property, rather than businesses, is known as personal lines.
Guaranteed Earned Income
Any income received on top of your basic salary that is not part of your normal basic pay under the terms and conditions of your employment but which you are guaranteed to receive.
Holiday Home
A property which will not be your main address or place of residence.
Home Improvements
Works carried out to improve your home.
Homebuyer’s Valuation Fee
The fee paid if you want a more in depth inspection of the property you are thinking of buying. This may be referred to as an Option 2 valuation fee.
House or Flat Buyer’s Report
A more thorough survey than the simple valuation carried out on the property by the lender (although you still have to pay for it). If your lender does not offer this as an alternative to the basic valuation, you may be able to negotiate with the surveyor carrying out the valuation to provide a fuller inspection as this may cost you less than a separate inspection.
Housing Association
A society, body of trustees or company which is established for the purposes of providing, building, improving or managing, or facilitating, or encouraging the construction or improvement of, housing accommodation. It does not trade for profit. Anyone wanting help with housing places his or her name on the housing association list which operates in the same manner as council house lists.
Illustration
Example of the monthly cost of a mortgage and other expenses associated with the loan such as set-up costs. These must be given in the form of a Key Features Illustration.
Incentive
Offers such as cashback offered to the borrowers to encourage them to take out a loan with a lender.
Individual Saving Accounts (ISA)
A means of holding, individually or in combination, cash deposits, life assurance policies and investments in stock and shares in a tax privileged way.
The Government have stated that ISA’s will be available from launch for a minimum of ten years.
Initial Interest
The payment of interest to cover the period between the date of completion and the normal date from which an interest payment is due. For example if mortgage payments are normally due on the 30th of a month and the loan completes on 14th March, the first monthly payment may be due one month from 30th March, on 30th April. Any interest due for the period from completion until 29th March will be due with the initial mortgage payment. Thus, the borrower’s first mortgage payment will normally comprise one full month’s payment plus the initial interest.
Initial Rate
This is the rate of interest you pay when you first begin to repay your mortgage. Many mortgage products, e.g. fixed and discount, have an initial rate of interest which will change at the end of the initial period.
Interest Only
With an interest only mortgage or loan, the monthly repayment covers only the interest element of the mortgage or loan leaving the capital outstanding at the end of the mortgage or loan term.
Introducer
Person who introduces a loan to a lender.
Investment Income
Income received from investments. This could be from rental income on investment property, dividends on equities or interest on deposits with financial institutions.
Joint Application
Mortgage application involving more than one person as the borrower.
Land Registry
A record of property. Ownership and the mortgage is registered in a central register at HM Land Registry.
Land Registry Fees
Fee payable to the land registry to change an entry in their records following a transaction involving registered land. This can be following a change of ownership or just a change of mortgage.
Landlord’s Reference
Reference from the previous landlord regarding the general conduct of the tenant and whether rent has been paid promptly.
Large Town Allowance
Additional portion of salary payable to an employee to compensate for the additional expenses incurred as a result of working in a major conurbation.
In theory the payment is made to cover either increased housing or commuting costs and is normally considered as part of basic income when applying income multipliers.
Leasehold
The property is not owned directly by the property purchaser and is held under a lease for a fixed period.
As a leaseholder you have the right to live there for a specified length of time, and should pay rent and service charges to the landowner.
Legal Charge
This legal document grants rights of security over your property to the Lender. There are various types of legal charge which will vary from lender to lender. Some lenders will use a charge for the specific amount that they have lent. Others will use an all monies charge, which secures all borrowing the owner has with them. This may allow them to recover overdrafts and other loans. A primary mortgage will normally be secured by a first charge. Second or subsequent charges may be secured against a property if additional money has been borrowed using the property security.
Legal Mortgage Fee
Fee charged by the solicitors acting for the lender in creating their legal charge over the property.
Lender
The company providing the finance to meet a request from a borrower for a loan or mortgage.
LIBOR
London Interbank Offered Rate is the rate at which banks notionally buy and sell money to each other. It varies from day to day and is closely linked to Base Rate. The relationship of LIBOR to base rate can give an indication of the possible future direction of base rates. If LIBOR is significantly above base rate it indicates that the money market believes interest rates are about to increase. If it is significantly below, the reverse is true. The key LIBOR rate is 3 month LIBOR, however rates are also quoted for one, six and twelve month periods.
LIBOR-linked
A mortgage linked to LIBOR will be charged at a given margin over the Interbank rate (typically 1 to 1.5%) and is likely to be reset quarterly. LIBOR rates tend to be more volatile than variable mortgage rates as the rate payable will change almost every quarter. LIBOR linked loans offer the customer the opportunity to pay a rate closer to the true cost of money. In a low interest rate environment they are likely to result in lower overall payments but will be more expensive in periods of higher interest rates.
Life Insurance
Policy payable upon the death of the insured, usually referred to as assurance.
Loan
The amount to be borrowed.
Loan Illustration
Example of the monthly cost of a mortgage and other expenses associated with the loan such as set-up costs. These must be given in the form of a Key Features Illustration.
Loan – Secured
The equity in the property is used as security against the loan not being repaid, and the loan is secured against your property.
Loan – Unsecured
The credit rating, financial position of the applicant, size of the loan or other factors are such that no security for the loan is required by the lender.
Local Authority Search
A search of local authority records to confirm the status of the property. Local authority searches should reveal any proposed changes in the area, details of the planning permission for the subject property and whether any enforcement notices have been served by the local authority.
Loyalty Bonus
A concessionary bonus (usually by way of a temporary reduction in interest) payable for maintaining a satisfactory account with a lender for a period of years. Alternatively, loyalty bonuses may be offered to existing customers who return to the lender for a new mortgage. In which case the bonus may be dealt with by way of a reduction in the set-up costs of the new loan or a lump sum payable upon completion.
Maisonette
Usually used to describe a house that is split horizontally into two dwellings each of which has its own entrance at street level.
Mortgage
A loan to purchase a home where the property is used as security in the event of non-payment of the mortgage.
Mortgage Deed
Legal document securing a loan on property.
Mortgage Officer
The dedicated Mortgages UK-Wide representative who is on hand when you’ve got questions to ask, or paperwork that needs filling out. We try to ensure you always deal with the same Mortgage Officer from your initial enquiry through every step of the loan process.
Mortgage Subsidy
A payment made by an employer to subsidise the cost of interest payments on a home loan. The amount and extent of the subsidy will vary from employer to employer and these can be calculated in a variety of different ways. It is advisable to seek a specific statement from your employer on the operation of the arrangement.
Mortgage Term
Length of time before the mortgage loan must legally be repaid.
MPPI
Mortgage Payment Protection Insurance cover to protect your mortgage payments. Also see “Accident, Sickness and Unemployment Insurance”.
Multipliers (income)
Factor applied to a prospective borrower’s income to calculate how much can be borrowed.
Negative Equity
Situation which occurs when the amount loaned against a property is in excess of the market value of the property.
Net Profit
The income of a company or self employed business after making full allowance for the expenses of running the business (and, in the case of a limited company, corporation tax). This should be the amount available to the owners of the business for their own benefit and consequently is the figure that can be used to calculate their ability to service a mortgage.
Net Profit, Declining
Where net profit from a business decreases from one year to the next. Many lenders will not lend in this situation, as in the future the business may not provide sufficient income to cover the cost of loan repayments. Capital raising remortgages are especially avoided in this situation as the borrower may be seeking funds to shore up a failing business.
New Build
Can refer to a single property or whole estates.
No Capital Raising
The application is for a loan to simply replace the existing loan without any additional borrowing.
No Credit History
Individuals who have no previous or existing credit agreements in place may find it difficult to obtain credit. This is because they have no credit history and lenders are unable to assess whether they are reliable payers or a good risk. Self-employed individuals may also find it difficult to obtain credit, as there is a higher risk of non-payment due to annual earnings being non-guaranteed.
Non Contributory Pension Income
Pension scheme provided by an employer into which the employee makes no payments.
Non Status
Loan granted without making enquiries as to the borrower’s income or credit history.
Not in Employment
Not in employment or receiving any regular salary; not self-employed.
Obligatory Insurance
Same as conditional insurance.
Occupational Pension
Pension provided by an employer.
Office of Fair Trading (OFT)
A non-ministerial government department, headed by the Director General of Fair Trading which aims to protect consumers by ensuring that trading practices are as fair as possible and by encouraging competition among businesses. One of the OFT’s major responsibilities is the administration and enforcement of the Consumer Credit Act 1974.
Open Market Value
Value of a property on the basis of a willing buyer and willing seller in the open market allowing for a reasonable period for sale.
Other Income
Income in addition to basic annual salary or, in the case of self-employed, annual net profits.
Outgoings
Existing liabilities – your debts and expenses such as hire purchase, personal loans, school fees etc.
Outstanding Discount
For property purchased under the Right to Buy scheme at a discounted price, the value of the discount, or a portion of it, that has to be repaid to the local authority in certain circumstances e.g. if the property is sold within a certain period of time, normally 3 years from date of purchase.
Part & Part
A generic phrase referring to a loan, part of which is interest only (i.e. the capital never declines) with the remaining part being repaid as under capital and interest arrangement.
Part Endowment
A mortgage that is arranged partly on an endowment basis, the balance of the loan most commonly being arranged on a capital and interest basis.
Payment Method
Means by which the mortgage capital is eventually repaid e.g. endowment plan, cash sum from pension.
Payment Protection Insurance
See ASU accident, sickness and unemployment insurance.
Payment Schedule
Schedule of monthly payments under a loan.
Pension Mortgage
An interest-only mortgage where it is intended the capital will be repaid from the cash sum that may be received from the pension fund at maturity.
Personal Equity Plan
An investment in shares, unit trusts or investment trusts where all the proceeds are currently free of income and capital gains tax. Some lenders will allow you to use PEP’s towards a repayment of the capital on an interest only mortgage. Individual Saving Accounts (ISA’s) were issued to replace PEP’s from April 1999.
Personal Pension
Established under the Social Security Act 1986, personal pensions allow individuals to make their own provision for an income in retirement.
Portable
Describes a mortgage that can be transferred from one property to another at the discretion of the lender.
Previous Lender’s Reference
Reference from a lender who has previously lent money to a prospective borrower regarding the conduct of the loan account.
Principal
The original amount of the loan, the capital.
Profit
Gross profit of a company before allowing for the expenses of running the business.
This is not a reliable measure of a company’s ability to provide income as not all of the gross profit will be available to the owners for distribution.
Profit Cost
That part of a solicitor’s bill which covers his or her own time and profit.
Purpose Built Flat
Flat designed and built as such.
Qualifying Rules
Inland Revenue rules which define the conditions that must be met for the proceeds of a life assurance policy to be tax free when paid.
Quotation
A detailed document itemising costs, fees etc. which will be incurred in taking out the specified loan. These must be given in the form of a Key Features Illustration.
Redemption
Paying off the mortgage, either to move to another property or at the end of the mortgage term.
With some products redemption charged can be levied by the lender if the mortgage loan is repaid.
Redundancy Insurance
Known as accident, sickness and unemployment insurance (ASU).
Refinancing
Rearranging borrowing with a different lender, often to obtain more attractive terms or to raise fresh capital.
Regular Earned Income
Payment which is not guaranteed but is still a regular part of an employees remuneration.
Lenders will normally wish to see evidence of such payments being made on a regular basis, e.g. payslips or P60s covering a period of months or years. See also: Guaranteed Earned Income.
Regulated Loan
Loan of under £25,000 regulated under the terms of the Consumer Credit Act.
Remortgage
A remortgage is when you decide to switch your existing mortgage without actually moving house. Normally this involves redeeming an existing loan on the property. You may well want to remortgage if you are looking to raise extra cash or save money on your repayments. Take a look at our remortgages page to see how we can help you.
Remortgage with Outstanding Discount
Refers to a property that was purchased under a Right to Buy legislation, where the owner now wishes to remortgage whilst there is still an outstanding discount remaining.
Rent Allowance
Payment received from an employer to be used towards the cost of accommodation.
Repayment
Payment made to cover interest or reduction in principal of a loan; monthly amount due to the lender.
Repayment Mortgage
With a repayment mortgage you pay part interest and part capital repayments to the lender each month and in this way the capital that you borrowed is reduced until the loan is repaid.
Retired
No longer working, either as an employee or on one’s own account.
Right to Buy (RTB)
Option for council tenants to purchase the property in which they reside, often at a discount proportional to the length of the occupancy.
Schedule of Payments
Schedule of monthly payments under a loan.
Second Charge
A legal charge that ranks behind a first charge, possibly to secure a second mortgage, or a guarantee given to secure other borrowings.
Second Home
An alternative to your main residence possibly subject to Capital Gains Tax.
Second Mortgage
A further loan on a property which ranks after the first charge mortgage.
Security Address
When taking a secured loan or mortgage, the security address is the address of the property which is being offered as security for the loan.
Self-build
A property, the construction of which is controlled by the borrower; not a finished unit. Loans on self build properties will normally be advanced in stage payments and are subject to strict limits on loan to value. A qualified architect will need to be involved and lenders will frequently look for the builder to have NHBC or Foundation 15 guarantees.
Self-certified
This applied up to some time in 2007 where if an applicant was self employed and or could not provide evidence of annual income, he / she could self certify their income. Currently there are no self cert mortgages available from any lender in the UK.
Self Employed
Working on one’s own account. For mortgage purposes this will include partners in unlimited liability businesses and professional practices.
Semi-commercial
A property that has part commercial use. A semi-commercial mortgage is a loan on security that is not entirely used for residential purposes, e.g. a shop and upper part.
Sitting Tenant
A person having a legal right of occupation, even if the property changes ownership, and who is able to apply to the local authority to set a fair rent.
Sole Occupancy
A property that is occupied by the borrower and his or her immediate family only. No paying tenants are in residence.
Special Conditions
Specific terms, usually outlined on the mortgage offer document, that apply to a particular loan offer.
Special Status or Non-Status
Unable to provide the necessary documentary evidence of income and status.
Stamp Duty
This is the government tax you’ll need to pay on any property sale over £60,000.
Standard Construction
Constructed of brick with a tile or slate roof. Lenders may be less inclined to provide funds on properties of non-standard construction.
Standard Property
A detached, semi-detached or terraced house or bungalow.
Start-up Business
A new business venture without a trading record.
Status
The credit-worthiness or otherwise of a potential borrower.
Structural Survey
A detailed survey of the structure of a building carried out by a Structural Engineer or Chartered Building Surveyor.
Subsidy (mortgage)
A payment made by an employer to subsidise the cost of interest payments on a home loan. The amount and extent of the subsidy will vary from employer to employer and these can be calculated in a variety of different ways. It is advisable to seek a specific statement from your employer on the operation of the arrangement.
Sum Assured
The maximum amount payable under a policy of insurance. In the case of a life assurance policy this is the amount payable upon death. Under a general insurance policy it is the maximum amount that can be paid out in the event of a claim. The sum assured under a general policy must be adequate to represent the full value of goods at risk. If an insurer feels that a policyholder has not declared the full value of goods at risk and a claim occurs, the insurer may reduce the claim by applying average.
TAP (Total Amount Payable)
Total due to the lender over the lifetime of the loan, including all fees and other associated charges from the lender.
Tax Free Cash Sum
Optional withdrawal of a lump sum from a pension fund on retirement.
Term (mortgage)
Length of time before the loan must be repaid, expressed in months or years.
Term Assurance
Simplest form of life assurance. The insured person or persons are covered against death within a fixed period subject to the payment of the premiums as they fall due (normally monthly or yearly). If an insured person dies within the policy term the sum assured is paid out. If all insured persons survive the term the insurance ends with nothing being paid to the policyholders.
Thatched Roof
Insurers will normally impose special terms for fire insurance on thatched properties. It is advisable to check that full fire cover is available with an insurer acceptable to the lender before proceeding.
Timber Framed (house construction)
Timber framed properties have traditionally often suffered from poor damp-proofing and this may restrict the number of lenders willing to accept them as security. Modern building techniques have largely removed these difficulties and properties constructed since about 1980 should be acceptable security to most lenders.
Tracking
Process of following the progress of a loan application. This information should be fed back from the lender or packager to the introducer.
Top-up Loan
Form of second mortgage normally used to provide an overall loan in excess of the loan to value ratio allowed by the primary lender.
Typical APR
Example of the annual percentage rate for a given mortgage product.
Underwriting
The process by which the ability of a prospective borrower to repay a loan is assessed (this is also the name of the department that undertakes this work). The process takes into account various factors including employment history, financial status, previous credit history and current earnings.
Unemployed
Not in employment or receiving any regular salary; not self-employed. (Could be receiving state benefits).
Unemployment Insurance
Also known as Redundancy cover, this is insurance cover arranged by the borrower to protect against inability to meet mortgage payments. There may be exclusions under the policy, such as dismissal following professional misconduct and any act of voluntary redundancy.
Unencumbered
Property that is owned without borrowing or other legal charge over it.
Valuation
A brief inspection of a property for mortgage purposes confirming the suitability of a property to secure money against and its value. Whilst the borrower may be given a copy of the valuation this is only a limited form of inspection and should not be relied upon when deciding whether to purchase a property. Purchasers should be advised to obtain either a House or Flat Buyer’s report or a full structural survey before proceeding with a purchase.
Valuation Fee
Fee paid by the prospective borrower for the lender’s inspection of the property. Normally paid on application.
Variable Rate
Interest rate that will vary over the term of the loan, normally in line with the general cost of borrowing.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage and other loans secured on it.