Glossary

Accent Lighting
A type of lighting that highlights an area or object to emphasize that aspect of a room's character.

Accident, Sickness and Unemployment Insurance (ASU) 
Pays a percentage of your monthly mortgage payments if you are made unemployed or are unable to work due to an accident or sickness. The policyholder chooses the deferral period, determining how quickly the policy will payout in the event of any of the three incidences listed above. Also known as Payment Protection Insurance. 

Abstract of Title
This gives details of ownership of the property if it is not registered.

Acetate
The plastic sheet material often used for making stencils.

Acrylic Paint
A water-soluble paint with a plastic polymer (acrylic) binder. 

Acrylic Varnish
A coating that contains the same medium used to make water-soluble paints and glazes. 

Art Nouveau
A late-nineteenth-century decorative style that was based on natural forms. It was the first style to reject historical references and create its own design vocabulary, which included stylized curved details. 

Artificial Break
The point where the wallpaper or border ends against a decorative wood strip, spindle or other object. This lets the wallpaper or border end without an obvious mismatch. 

Administration Fee 
Charged by the lender to cover the administration costs involved in setting up a new mortgage. It is sometimes refunded. 

Advancing Colours
Warm, saturated colors that seem to come forward toward the viewer. Advancing colors can make rooms seem more cozy and objects slightly larger. 

Adjustment Date 
This is the date on which the interest rate changes for a variable rate mortgage 

Alligatoring
Paint-failure condition where the paint pulls apart in a crazed line pattern resembling alligator skin. Caused by paint applied too thickly; paint that dried too quickly; or a second coat painted over a first coat that was not dry. 

Amortisation 
The amount by which your mortgage falls as a result of making regular payments. 

Amortisation Term 
Expressed in months, this term simply states how long it will take you to pay off your mortgage. 

Annual Percentage Rate (APR) 
The overall interest rate with fees, charges and benefit periods taken into account. Seen as a means of comparing the cost of different mortgages. However, methods of APR calculation vary wildly between lenders. 

Annualised Payment Scheme
Although the borrower pays interest at a variable rate, which can change from month to month, the lender charges a set amount of interest each month and then adjusts the balance at the end of the year. 

Antiquing
Any technique used to make a painted surface look old; usually refers to a thin glaze that is applied to a surface, allowing the undercoat to show through. 

Appraised Value 
A surveyor’s estimation of the value of the property. 

Armoire 
A large, ornate cupboard or wardrobe that is used for storage. 

Arrangement Fee 
Similar to an administration fee. Paid before the loan is completed. Sometimes refunded, other times added to the loan. 

Arrears 
Arrears occur when the borrower misses one or a series of monthly payments. Arrears can lead to the repossession of the property. 

Art Deco
A decorative style that was based on geometric forms. It was popular during the 1920s and 1930s.

Assumption 
Occurs when the seller's outstanding mortgage is passed over to the buyer of the property. 

Assumption Clause 
A clause stipulating that the seller has passed on full responsibility for the mortgage on the property to the buyer. Often an assumption fee must be paid to the mortgage lender. 

Backlighting
Illumination coming from a source behind or at the side of an object. 

Base Rate 
The national interest rate set by the Bank of England’s Monetary Policy Committee each month. Lenders’ standard variable rates generally reflect changes in the base rate. 

Base Tile
Tile that has a finished top edge; it is designed specifically for the floor line. 

Base Trim
Sometimes called base molding, base trim protects the lower portion of the walls, and covers any gaps between the wall and the floor. 

Bay Window
A window, typically three sided, that projects from a wall, creating a recessed area in the structure's interior. Also called an oriel. 

Benefit Period 
The time period over which for the interest rate of a loan is discounted, fixed or capped, for example. 

Bisque
The clay body of a tile, or the clay from which the tile is made. 

Blistering
Paint problem characterized by paint coming off the surface in bubbles. Caused by paint applied over a wet, oily or dirty surface. Also occurs when water vapor escapes from the house interior. 

Bow Window
A rounded bay or bowed window projecting out from a building in an arced shape. 

Boxing
Pouring all paint of the same color and formula into one large container and then mixing it together to eliminate minor variations in color between cans. 

Bridging Loan 
Used to finance the purchase of one home while waiting for the money released through the sale of another. This is an expensive and short-term measure. 

Broker 
Searches available deals on the market and acts as an intermediary between the borrower and lender. Usually charges a fee or commission. 

Building Paper 
Also called felt paper or tar paper, used as a cushion or a moisture barrier between layers in a house, such as between a hardwood floor and the subfloor. 

Building Society 
A mutual society with no shareholders. All customers are treated as ‘members’. Building societies often boast lower standard variable rates than banks as they do not have to pay out dividends to shareholders. 

Building Survey 
An in-depth property survey recommended for older or unusual properties. Carried out by a surveyor or consulting structural engineer. Checks loft space, flooring and sub-flooring areas. 

Buildings Insurance 
Protects your actual property against damage caused by storms and fire, for example. A lender will insist this taken out to protect the property, which acts as collateral on the loan. 

Bullnose Tile
A trim tile with one rounded edge, used to finish off outside corners.

Buy to Let Mortgage 
A mortgage on a property bought as investment to rent out. 

Call Option 
The lender can demand the mortgage be paid back by the end of a specified period for any reason. 

Capped Rate Mortgage 
The interest rate charged can not exceed a maximum rate, known as a cap. The cap applies for a set period. Capped rates are popular because if the lender’s standard variable rate falls below the cap, the borrower’s rate of interest will also fall – giving security and the opportunity for interest rates to fall. 

Cap and Collar Mortgage
Not only is a maximum rate of interest set but a minimum rate too. 

Cashback 
When the mortgage is completed the lender gives the borrower some cashback, which is usually the equivalent of a certain percentage of the loan advance. Often used to fund home improvements or to buy household appliances. 

Charge Certificate
Prospective buyers should check this as part of the conveyancing process for registered properties with existing mortgages. It shows that boundaries of a property and gives details of any covenants affecting it. 

Clear Title 
There are no legal complexities regarding ownership of the property. 

Collateral 
In most cases, the home is collateral on a mortgage. If the borrower fails to repay the loan, the property will be repossessed. 

Commission 
The fee paid to a broker for their mortgage finding service. Often expressed as a percentage of the loan. 

Completion 
This is the date when the buyer's solicitor forwards the funds for the purchase of the house to the seller's solicitor. Once the seller's solicitor has received the funds, the buyer legally becomes the owner of the property and can move in. The mortgage must be effective before this date in order for the funds to be transferred. The buyer must also pay stamp duty, if applicable, and register their name with the Land Registry. 

Conditional Insurance 
The borrower must sign up to one or more insurance policy with the lender in order to take out a specific mortgage. Check that the insurance premiums are competitive. 

Contents Insurance
Insurance that protects the homeowner against the damage and theft of their possessions. The best policies are old-for-new, whereby the policyholder receives new replacements for any damaged goods rather than the cost taking into account depreciation of goods. 

Conveyancing 
The process of transferring legal ownership of a property from one party to another. Conveyancing can be carried out by an individual but most people chose to employ the services of a solicitor or licensed conveyancer. 

Conveyancing Fee 
The fee charges to carry out conveyancing work. 

County Court Judgement (CCJ) 
An adverse ruling for debts obtained against a person by a creditor in a county or higher court. This judgement will be recorded and shown whenever a person's credit is checked. 

Credit Averse
When a borrower has a poor credit history, has previously been declared bankrupt or has outstanding County Court Judgements, they are often described as credit averse. People with averse credit ratings often have to pay higher interest rates on a mortgage. 

Credit Rating Check 
Carried out by all mortgage lenders to check an applicant’s credit history. The check covers credit card repayments, outstanding debts, arrears, County Court Judgements and more. Individuals can contact credit reference agencies and find out their own credit rating for a small fee. 

Closure Fees 
A fee charged by the lender when you pay off the homeloan at the end of the mortgage term. 

Daily Interest 
Interest on the homeloan is calculated and applied on a daily rather than a monthly or yearly basis. Can lead to big savings. 

Decreasing Term Assurance 
A life insurance policy that pays out a lump sum in the event of death. The amount paid out can be calculated so that it fall in line with your outstanding mortgage debt – meaning that over time the borrowers premiums also fall. This type of policy is well suited to providing cover on a repayment mortgage. 

Deed 
Gives details of the legal ownership of the property. 

Deeds Release Fee 
The fee charged to switch ownership from the mortgage lender to the borrower once the mortgage has been repaid. 

Default
When one mortgage payment or a series of payments are missed, the borrower is referred to as being in default. 

Deferred Interest Mortgage 
Offered to those people whose incomes are expected to rise dramatically in the future. Full interest payments are deferred for the early years of the mortgage. 

Deposit 
A cash lump sum, usually expressed as a percentage of the value of the property, given by the buyer to the seller. 

Disbursements 
Administration and legal costs relating to the conveyancing process. 

Discharge Fee 
Covers the administration costs of transferring the property ownership documents from the mortgage lender to the borrower. 

Discounted Rate 
The borrower receives a discount, expressed as a percentage, off the lender’s standard variable rate for a given amount of time, known as the discounted period. 

Due-on-Sale Provision 
This is a clause that insists the mortgage must be repaid in the event that the property is sold. 

Early Redemption Penalty
A penalty incurred by the borrower should they repay the loan early. Early redemption charges often apply for the duration of any benefit period and sometimes several years after. An early redemption charge that lasts beyond the benefit period is referred to as an extended or overhanging redemption penalty. 

Earnest Money Deposit 
The potential homebuyer puts down money to show they are intent on buying the house. 

Easement 
A right of way giving persons other than the owner access to or over a property. 

Effective Age 
A surveyor's estimate of the physical condition of a building - it may differ from the property’s actual age. 

Endowment Mortgage
The borrower pays interest on the loan back to the lender each month and makes separate monthly payments into an insurance policy, called an endowment. This policy is then used to pay off the loan at the end of the mortgage term. Endowments can be unit linked, with profits or unitised with profits. 

Equity 
The difference between the market value of a property and the amount still owed on the mortgage. 

Equity Release 
This occurs when the homeowner takes out a mortgage on the property despite fully owning the house. It is a way of releasing the equity tied up in the property. 

Estate 
The total value of a deceased person’s property and assets. 

Euro Mortgage
A mortgage taken out by those paid in Euros to avoid the need to exchange currency. 

Exchange of Contracts 
In England and Wales this is the stage of the buying process where the draft contract between the buyer and vendor becomes legally binding. 

Existing Liabilities 
Expenses taken into account by a mortgage lender when assessing an applicant’s ability to repay the loan. These include loan repayments, maintenance payments etc. 

Extended Redemption Penalty
An early redemption charge that lasts beyond the benefit period is referred to as an extended or overhanging redemption penalty. These should be avoided where possible. 

Fee Simple 
The owner has the right to decide who inherits the property. Almost all property in Scotland is Fee Simple. 

Feuhold 
A system of feudal tenure exists in Scotland. If a property is feuhold, you own the land and the property on it. But you may not have a free rein over what you do with it. A Feudal Superior may have imposed restrictions on the use and development of your plot. 

Finder's Fee 
A fee or commission paid to a broker for finding you a mortgage. 

First Charge 
If your property is collateral for more than one property and the borrower defaults on payments, the lender with First Charge has the option to repossess the home. 

First Time Buyer (FTB) 
Someone who is buying a home for the first time. 

Fixed Rate Mortgage 
The interest rate on the mortgage is fixed for a certain period, known as the benefit or fixed rate period. 

Flexible Mortgage 
A mortgage that allows the borrower to make overpayments, underpayments, payment breaks, borrow back overpayments. Interest is applied daily. Some flexible mortgage accounts can be used as a current account. Flexible mortgages can reduce the term of the mortgage and save thousands on interest payments by allowing overpayments. 

Foreign Currency Mortgage 
A mortgage is taken out in a foreign currency. These mortgages are taken out by those who want to avoid having to exchange currency each month or by those with high-risk attitudes who believe they can save by taking out a mortgage in a foreign currency. 

Freehold 
The ownership of a property and the land it is built is not limited to a specific any period of time but restrictions and covenants relating to it could still exist. 

Full Status 
A full-status mortgage is available to those who have been successfully credit checked. 

Gazumping 
Occurs when a buyer turns down an already-accepted offer in favour of a higher bid. 

Guarantor 
Normally this is a parent or relative. They guarantee payment of the loan if the mortgage holder defaults on payments. 

Hold Period 
The length of time for which you keep a mortgage before repaying it or remortgaging. 

Holiday Home 
A larger deposit may be asked for a mortgage on a holiday home. The interest rates charged may also be higher than normal. 

Home Buyer’s Report 
A property survey. More detailed than a valuation report - should itemize problems and major defects. Not as in depth as a full structural survey. 

Impaired Credit 
A person with a less-than-perfect credit rating. 

Income Multipliers
Used by most lenders to determine how much can be borrowed. Averages tend to be a single income multiplied by three or joint income multiplied by 2.5. 

Independent Financial Adviser (IFA) 
A qualified professional who is not tied to any company and who can advise you on a range of products including mortgages, insurance and pensions from a range of providers. 

Index 
An interest rate such as the base rate or LIBOR (London Inter Bank Offer Rate). Lender’s base their mortgage interest rates on a certain index. 

Index Tracker Mortgage
The interest rate tracks an index such as the base rate or LIBOR and often has a set percentage added to it. 

Initial Fees 
All the initial costs involved in the homebuying process, such as solicitor’s fee, valuation fees, application and arrangement fees. 

Initial Interest 
This is the first payment of interest. It includes interest for the time between completion date and date of the normal monthly repayment plus the interest for the first month 

Initial Rate 
The rate payable at the outset of the loan, between the start of the mortgage and the end of any benefit period. 

Interest-only Mortgage 
The borrower pays back only interest on the loan each month. They pay off the rest at the capital debt at the end of the loan with money saved into a separate investment vehicle over the years. 

Intermediary 
Link up borrowers and lenders for a fee. 

Introducer 
Inform borrowers about certain mortgages and ‘introduce’ them to the lender. Introducers receive a fee for passing on new business. 

Individual Savings Account (ISA)
Replaced Personal Equity Plans last year. They are tax-free savings plans that allow the individual to invest in cash, stocks or shares or insurance. 

Individual Savings Account (ISA) Mortgage 
An interest-only mortgage where the individual saves into an Individual Savings Plan to build up enough money to pay off the loan in full at the end of the mortgage term. 

Interest Rate 
The rate of interest charged on a loan, expressed as a percentage, and based on a particular index. 

Joint Income 
The total gross income of the mortgage applicants. 

Land Certificate
Proof of ownership for a property with no mortgage on it. Gives details of the boundaries of the property and covenants affecting it. 

Land Registration 
The process by which the owners of a property officially register the title in their name. 

Land Registry Fee 
A fee paid to register ownership of an area of land with the Land Registry. It is charged on a sliding scale according to the value of the property. 

Landlord’s Reference 
A lender may refer to a landlord’s reference to check the borrower’s previous rent payment history and assess whether they constitute a lending risk. 

Leasehold (not Scotland) 
Ownership of the property lasts for a specified period, determined by the details of the lease, but usually 99 years. Once the lease expires, ownership of the property reverts to the leaseholder. The property can be sold while the lease is still running but the value of the property will fall as the lease expiry date nears 

Legal Charge 
A document held by the Land Registry showing which parties have first and second charge on the property. 

Legal Fees 
The charges paid to a solicitor. 

Lender 
The building society, bank, mortgage company or mortgage broker with whom you take out your mortgage. 

Lender’s Fee 
Lender's fees cover fees such as arrangement fees, booking charges, administration fees etc. 

Level Term Assurance 
Pays out a lump sum if the borrower dies before the mortgage has been paid off. This is a set amount that does not decrease over time - regardless of how much of the mortgage has been paid off. 

Life Insurance 
Pays out a lump sum on the death of the policyholder. Lenders usually insist that their mortgage customers have life insurance. 

London Inter Bank Offered Rate (LIBOR) Linked Mortgage 
The interest rate tracks this index. It is normally quoted as 6 Month LIBOR and so stays the same for a six-month period. The lenders adds a percentage on top. 

Loan Consolidation 
When one large loan is taken out to pay off a variety of smaller loans held with different providers. A mortgage can be used for this purpose and in some cases can work out cheaper as mortgage rates tend to be cheaper than personal loan interest rates. 

Loan to Value Ratio (LTV) 
The ratio of your mortgage to the market value of your property. Expressed as a percentage. For example, if you have a mortgage of £95,000 on a property worth £100,000, the loan to value is 95%. 

Local Authority Search 
This is carried out as part of the conveyancing process and can reveal any financial charges relating to the property as well as any planning decisions that could affect the property in the future. It is usually carried out by post and takes between two and six weeks. 

Low-Cost Endowment 
Designed to accumulate the sum needed to pay after a given period, usually for the purpose of paying off a mortgage. However there are no guarantees and investors may have to increase their premiums to build up enough to pay off their mortgage. 

Low-Start Low-Cost Endowment 
Similar to a low cost endowment, the difference being that premiums are lower at the beginning of the loan and then rise in the future. Once again, there are no guarantees. 

MIRAS 
Mortgage Interest Relief At Source, a form of tax relief on the first £30,000 of a mortgage, is to be abolished on the 1st April 2000. 

Mortgage 
A long-term loan with interest paid on it. The property itself acts as security. 

Mortgage Code Arbitration Scheme 
An arbitration service between members of the public and lenders. 

Mortgage Deed 
The legal document proving a loan exists on a property. 

Mortgage Indemnity Guarantee (MIG)
When you borrow over a certain amount of the property’s value, some lenders will impose a MIG charge to protect themselves should you default on payments. It is often charged for loan-to-values of over 75% and can run into thousands of pounds. It offers no protection to the borrower. 

Mortgage Term 
The period over which a mortgage must be repaid. 

Mortgage Types 
For example, repayment or interest. Or fixed, capped, tracker, discount or stepped rate etc. 

Negative Equity 
This occurs when the market value of the property is less than the value of the loan secured on it. 

New Build Home 
A recently built home with no previous owners. 

Non-Status Mortgage 
For lenders without the borrower offering any proof of income and without a previous mortgage history. A credit check is made. Maximum LTV (Loan to Value Ratio) offered with this type of mortgage is typically around 70%. 

Ombudsman 
The independent person responsible for investigating complaints made about member institutions. 

Origination Fee 
A charge made by the lender to cover costs involved in setting up the mortgage. 

Overhanging Redemption Penalty
An early redemption charge that lasts beyond the benefit period is referred to as an extended or overhanging redemption penalty. These should be avoided where possible. 

Payment Holiday 
A feature of flexible mortgages. The borrower skips one or a series of monthly repayments. 

Pension Mortgage 
An interest-only mortgage. The borrower uses the tax-free lump sum of their pension to pay off their mortgage. Rarely used because the borrower has to wait until retirement to pay off the mortgage and is eating away at their retirement fund. 

PEPs
Personal Equity Plans. Now replaced by ISAs. 

Permanent Health Insurance (PHI) 
The policy pays out a monthly income if you become ill and cannot work. It will pay out until retirement age or until the policy expires. 

Portable 
Describes a mortgage that can be transferred from one property to another when you move. 

Pre-contract Enquiries
The buyer and their solicitor put forward a list of questions to the seller’s solicitor regarding the property. These could include questions about the neighbours, alterations, etc. 

Qualifying Ratios 
The ratio of your fixed monthly expenses to your gross monthly income, used to determine how much you can afford to borrow. 

Quotations 
An illustration of the costs involved in the mortgage and repayments. 

Redemption 
The process of paying off the mortgage at the end of the mortgage term. 

Redemption Charges / Penalty
Charges made by the lender when the borrower pays off the loan. 

Remortgaging 
Taking out a new mortgage and using it to pay off the old mortgage, using the same property as collateral. 

Repayment Method 
A mortgage can be a repayment mortgage or interest-only, or a combination of the two. 

Repayment Mortgage 
The borrower pays off a proportion of the capital debt and the interest on the loan each month. 

Repayment Period 
The period over which the borrower must repay the lender. 

Repossession 
Usually occurs after a borrower seriously defaults on payments. The lender then legally evicts the borrower and usually auctions the property to recover losses. 

Retention 
A lender may hold back part of the mortgage until certain conditions are met. 

Self-Build 
A mortgage that is taken out on a property that is under construction or which needs serious renovation to be made habitable. Due to the higher risk involved, the mortgage is handed out in parts, to ensure that the loan to value never exceeds a reasonable level.

Self-Certification 
Often used by the self-employed. The borrower applies for a mortgage but does not need to provide proof of income. 

Self -Employed 
A person who operates as a sole trader or as part of a partnership. 

Shared Ownership 
The occupant does not fully own the property. Common in housing association properties whereby both the association and occupier own a part of the property. 

Stamp duty 
£60,000 or less – No stamp duty payable
More than £60,000 – 1% of the property price
More than £250,000 – 3% of the property price
More than £500,000 – 4% of the property price 

Standard Variable Rates (SVR)
The lender’s standard mortgage interest rate - without any discount. Usually tracks an index. 

Stepped Rate Mortgages 
The interest rate is tiered and alters over time. 

Structural Survey 
An indepth survey into a property. Recommended for older and unusual properties. 

Studio Flat 
A flat with a combined living / sleeping area. Sometimes with separate kitchen and bathroom. 

Surrender Value
The amount received when converting an investment, such as an endowment, into cash. 

Surveyor 
A professional who is capable of valuing property and land. 

Tied agent 
An adviser who gives advice on a single company's products. A bank or building society typically employs this type of adviser. 

Title 
Evidence of ownership of land or property. 

Title Search 
Carried out as part of the conveyancing process to verify that the seller has clear ownership and is free to transfer the property. 

Tracker Mortgage 
The interest rate paid is directly linked to a certain index and changes in line with it. A margin, expresses as a percentage, is added on to the index. 

Valuation Fee 
The fee charged by the lender for a valuation report.

Valuation Report
A basic report carried out for the peace of the mind of the lender to ensure that the property is worth lending on. The borrower often foots the bill for the report. A valuation report alone gives the buyer little insight into the actual state of the house. 

Valuation Fee 
A fee paid by a borrower to cover the cost of the Valuation Report 

Variable rate 
The mortgage interest charged by the lender can vary from month to month and is set by the lender.