A glossary has been provided for your information below. Links to other related pages on this site, whether to related documents or products we offer are included to help you locate articles of interest you may feel appropriate.  


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

Auction

Public sale of a property to the highest bidder. The purchaser must immediately sign a binding contract and should ensure that all valuations, searches etc. are carried out prior to the sale.

APR

Annual percentage rate. A term defined in consumer credit legislation with the intention of providing a standard basis for comparing different forms of credit. It has had limited success and can be confusing. For example, case law has established that a lender can quote a mortgage APR based on a short-term fixed rate without including in the calculation the fact that, at the end of the fixed rate period, the rate will change. The allowable assumption is that the rate will continue throughout the mortgage term. The calculation must however include the 'total charge for credit' which includes such things as arrangement fees, valuation fees etc. and so does have some merit. The concept is overdue for overhaul and redefinition.

Authority to Inspect The Register

Document from registered proprietor of land allowing another party, such as the purchasers' solicitor, to be given information from the register of a property.

Assignment

Document transferring rights of ownership from one person to another, such as an endowment policy to the building society in connection with a mortgage. Can also be the document transferring the lease on a property.

Apportionment

The division of liability for property tax, water charges etc. between the buyer and seller of a property.

Agricultural Restriction

A Freehold covenant restricting the occupancy of a property to those engaged in agriculture.

Additional Security Fee

An Additional Security Fee (Higher Lending Charge) is paid to take out an insurance policy designed to indemnify the mortgagee (lender) against loss in the event of default on the mortgage repayment. It is normally taken out by the lender at the start of the mortgage and the mortgagor (borrower) is made to pay the premium! The premium is normally calculated as a percentage of that part of the loan above a certain percentage of the property value, normally 70 - 75%. It is charged as a lump sum to the borrower and can usually be added to the mortgage advance. It should be understood that such policies are for the protection of the lender and NOT the borrower.

Bankers Draft

A cheque drawn on the Bank itself against deposit of cash. Normally required in property transactions.

Building Society

Mutual organisation specialising in lending money to individuals to purchase or remortgage residential properties. Most of this money comes from individual saving members who are paid interest. A proportion of building society funds is also raised on the commercial money markets. Since the early eighties there has been a progressive relaxation of the rules governing the allowable sources of building society funds for lending to allow societies to compete more effectively with banks and there is now no restrictions as between the allowable proportions of 'retail' and wholesale funding.

Bridging Loan

Short term loan to facilitate the purchase of one property prior to the sale of another releasing funds that are required for the purchase. Professional advice should always be taken prior to considering any bridging finance as it can be a solution which is worse than the problem.

Building Societies Commission

Regulatory organisation for Building Societies. Reporting to Treasury Ministers.

Charge Certificate

The certificate issued by HM Land Registry to the mortgagee of a property with registered title. Contains three parts - charges register, property register and proprietorship register. Contains details of restrictions, mortgages and other interests. Where there is no mortgage it is called the Land Certificate and issued to the registered proprietor.

Contract

Legally binding agreement for sale. In two identical parts, one signed by seller and one by purchaser. When the two parts are exchanged (exchange of contracts) both parties are committed to the transaction.

Chattels

Moveable items such as furniture or personal possessions.

Chief Rent

A rent payable by the owner of a freehold property similar to the ground rent payable by a leaseholder. Normally only found in the North of England. Can be bought out by freeholder.

Capped Rate

An interest rate charged on a mortgage where there is a guarantee from the mortgagee that the rate will not exceed a certain amount usually for a set period of 1 - 5 years but which will reduce if the standard variable rate falls below the capped rate.

Conveyance

The deed by which freehold, unregistered title changes hands. If the property is leasehold and unregistered it is called an assignment. If the title is registered the deed is called a transfer.

Covenant

A promise contained in a deed.

Charge

Any right or interest, especially a mortgage, to which a freehold or leasehold property may be held.

Centralised Lender

Term used to describe a mortgage lender who does not rely on a branch network for distribution. Originally applied to specialist lenders who entered the mortgage market in the mid-late eighties (National Home Loans, The Mortgage Corporation, First Mortgage Securities, Mortgage Express and many others). This followed some deregulation, which made the securitisation of mortgage loans a viable and potentially profitable option for lenders. (See SECURITISATION). Several building societies now have "centralised lending" operations which operate quite separately from their branch networks and rely exclusively on mortgages from intermediary sources.

Deed

A legal document which is 'signed, sealed and delivered' not just signed. This has special significance in law. Title to both freehold and leasehold property can only be transferred by deed.

Discount Rate

An interest rate which is set at a set margin below standard variable rate usually for a period of 1 - 5 years. Used as an incentive to attract potential new borrowers.

EASEMENT

A right, such as a right of way, which the owner of one property has over an adjoining property.

ENGROSSMENT

The actual deed for signing. Prepared from the approved draft document.

EXCHANGE OF CONTRACTS

The point at which the agreement between a buyer and seller of a property to transfer title to the property becomes binding in law.

ENDOWMENT POLICY

A hybrid life insurance policy comprising life insurance and investment. In the context of mortgages, such policies are designed: to repay a mortgage in the event of the death of a borrower, and to repay the mortgage at the end of the mortgage term, whichever happens first. They are either "With Profits" or "Unit linked" It is rare for an endowment contract to GUARANTEE to repay a mortgage (i.e. mature for the full amount of the mortgage). Where there is a guarantee, you will pay extra for it. However, in setting endowment premiums, Life companies normally assume investment returns about midway between the maximum and minimum amounts that they are allowed by statute to use in illustrating their policies.

ENDOWMENT MORTGAGE

An INTEREST-ONLY mortgage where an endowment policy is earmarked to repay the capital at the end of the mortgage term. Different lenders take varying degrees of interest in the endowment policy itself. The trend is for lenders NOT to take assignments on the policies, but to treat borrowers as responsible adults who will make adequate provision to repay the mortgage at the end of the mortgage term.

FREEHOLD

Absolute ownership of a property as opposed to Leasehold.

FIXTURES

Articles such as radiators and light fittings attached to the house itself and deemed to be part of it. Included in the sale unless specifically excluded in the contract.

FORM 53

The form on which a mortgagee of registered title acknowledges that the mortgage has been paid off. The discharge of a registered charge.

FLYING FREEHOLD

A term used to describe that part of a freehold property that is built above a land which is not part of the property freehold, e.g. a bedroom built over a common access passageway. Can cause problems with mortgages.

FIXED INTEREST RATE

An interest rate that does not vary with rates generally. In the UK most fixed mortgage rates are fixed for a period of 1 - 10 years, Unlike in the USA where the norm is for the rate to be fixed for the entire mortgage term.

GROUND RENT

The rent paid to the landlord by a leaseholder in respect of a leasehold property. Set when the lease is first granted and may contain provisions for rent increases during the term.

GUARANTEE

To repay a mortgage (i.e. mature for the full amount of the mortgage). Where there is a guarantee, you will pay extra for it. However, in setting endowment premiums, Life companies normally assume investment returns about midway between the maximum and minimum amounts that they are allowed by statute to use in illustrating their policies.

INTEREST-ONLY MORTGAGE

A mortgage where the lender requires only payment of interest during the term.

INDEMNITY POLICY (MIG Policy)

A Mortgage Indemnity Guarantee policy is an insurance policy designed to indemnify the mortgagee (lender) against loss in the event of default on the mortgage repayment. It is normally taken out by the lender at the start of the mortgage and the mortgagor (borrower) is made to pay the premium! The premium is normally calculated as a percentage of that part of the loan above a certain percentage of the property value, normally 70 - 75%. It is charged as a lump sum to the borrower and can usually be added to the mortgage advance. It should be understood that such policies are for the protection of the lender and NOT the borrower.

INTEREST

Charge made for lending money. Usually set at a percentage of the sum borrowed but with many different bases of calculation. The norm in mortgage lending is for interest to be calculated annually as a percentage of the outstanding capital balance.

JOINT TENANTS

Owners of a property hold it jointly in such a way that when one dies it automatically passes to the survivor. This is in contrast to property held by 'tenants in common'.

LAND REGISTRY

Government Department responsible for maintaining and updating the register of all properties in England & Wales with registered titles.

LEASEHOLD

Ownership of property for a fixed term granted by lease. The lease sets out details of rents and obligations such as repairs etc. In contrast to Freehold where ownership is absolute.

LANDLORD

The person entitled to receive the (ground) rent from the property leased.

LIBOR

London Interbank Offered Rate. The interest rate available between banking institutions to borrow money. Quoted daily for terms between 1 month and 5 years. Many securitised mortgages are linked to 3 month LIBOR.

LOW-COST ENDOWMENT

Term originally used to describe a particular kind of with profits endowment policy designed to protect and repay an interest only mortgage. The basic sum assured is set well below the mortgage amount, at a level such that, on allowable assumptions of overall growth, bonus additions will increase the basic sum assured to equal or exceed the mortgage amount at maturity. Additional life insurance is added whilst the basic sum assured + bonuses remains below the amount borrowed to fully protect the mortgage. The term now also applies to unit linked policies where the total premiums over the term of the policy are less than the amount borrowed i.e. a positive investment return is needed to make the maturity value equal or exceed the amount borrowed.

LOCAL SEARCH

Application to Local Authority for information about a particular property and it's area. Should reveal whether the property is affected by road building or outstanding matters such as sanitary notices.

MORTGAGE PROTECTION POLICY

A life insurance policy designed to repay the loan in the event of the death of the borrower(s) during the mortgage term. Normally describes a pure life insurance policy with a decreasing sum assured and designed to protect a repayment type mortgage. (As distinct from an endowment policy which is designed to both protect an interest-only mortgage throughout its term AND repay it at the end of the term).

MORTGAGOR

The party who borrows money on mortgage. The Borrower.

MIG

Mortgage Indemnity Guarantee see INDEMNITY POLICY or ADDITIONAL SECURITY FEE

MORTGAGE

Deed pledging freehold or leasehold property as security for a loan (also called legal charge). Gives the lender certain rights, particularly to sell the property if repayments are not maintained.

MORTGAGEE

The party (such as the building society) who lends money on mortgage. The Lender.

MIRAS

Mortgage Interest Relief at Source. Until 6.4.2000 all mortgages granted for the purpose of purchasing a main residence were normally eligible for mortgage interest relief at source (MIRAS), for the first £30,000 of the loan. This benefit was withdrawn completely from 6.4.2000. (See also TAX RELIEF)

OFFER OF MORTGAGE

The document issued by the lender to a prospective borrower following approval of the mortgage application. The document sets out the conditions of the mortgage in considerable detail and should be studied carefully. Offers are normally valid for a period of 3 - 6 months. You should however note that a mortgage offer is not irrevocable. In other words, it can be withdrawn if there are material changes to applicants' circumstances before the loan is completed. If the loan does complete then both borrower and lender are bound by the conditions and terms outlined in the offer.

OFFICE COPY

Copy of an official document by the department (usually the land registry) holding the original.

PAYMENT PROTECTION

An insurance policy designed to cover mortgage payments in the event of a borrower being unable to work through accident, sickness or redundancy. Becoming a much more important consideration now that DSS support for distressed mortgage payers has been drastically reduced.

PRIVATE TREATY

A contract for sale not made at a public auction.

RACK RENT

A rent representing the full letting value of a property. In contrast to a ground rent that is smaller as a capital sum has been paid for the lease.

REMORTGAGE

Replacement of an existing mortgage with a new one without change of ownership of property.

REGISTERED TITLE

Title or ownership of property which has been registered at HM Land Registry. When registered ownership is guaranteed by the state.

RESTRICTIVE COVENANTS

Obligations imposed on the owner of freehold property in the deeds. To prevent certain actions such as opening a business or adding to the buildings.

REPAYMENT MORTGAGE

A mortgage where the capital is repaid gradually over the term of the mortgage. Monthly payments comprise both the interest due on the outstanding capital balance AND an additional sum applied to reducing the capital balance.

STAMP DUTY

Government tax on transfers of property in excess of £120,000. Duty is stepped in line with the property purchase price. 1% of the full purchase price between £120,001 and £250,000, 3% of the full purchase price between £250,001 and £500,000 4% on the full purchase price above £500,000. Not payable on remortgages.

SECURITISATION

Technical terms describing the process of bundling a group of mortgages together such that they can be treated, for funding purposes, as a single entity and made available to prospective investors in mortgage debt. Through the late eighties UK mortgage debt was seen as a relatively attractive investment by many institutions, pension funds etc. Securitisation allowed both existing and new lenders to raise money in the money markets, lend it to domestic property purchasers and then sell the resulting group of mortgages on to other institutions. This is also known as "off balance sheet lending" since the debt does not form part of the lender's assets. This does not affect the terms and conditions of the original mortgage offer in any way.

SOLICITORS UNDERTAKING

A personal guarantee by the solicitor that something will be done, such as repayment of a mortgage or production of deeds.

SECOND MORTGAGE

Term used to describe a loan secured on a property but whose legal charge ranks second to the 'first' mortgage. Sometimes called a 'Secured Loan'. e.g. a loan from a bank for improvements.

SEARCH

An enquiry for information that is held by an official body such as the Land Registry or Local Authority.

STANDARD VARIABLE RATE (SVR)

The normal variable rate charged by a mortgagee. The rate will vary as interest rates generally vary. In particular, Building Societies need to set the SVR at a level sufficient to allow them to both attract savers and cover administration and marketing overheads.

TITLE DEEDS

Deeds and documents proving ownership of freehold or leasehold property (generally the charge or land certificate).

TRUSTEE

The person who has legal ownership of a property but is holding it for the benefit of someone else the beneficiary.

TAX RELIEF

Also known as Mortgage Interest Relief at Source. Until 6.4.2000 all mortgages granted for the purpose of purchasing a main residence were normally eligible for mortgage interest tax relief at source (MIRAS), for the first £30,000 of the loan. This benefit was withdrawn completely from 6.4.2000.

TRANSFER

Document transferring ownership of freehold or leasehold property that is registered at HM Land Registry.

TENANTS IN COMMON

Joint ownership of a property in such a way that when one dies, but ownership does not pass automatically to the survivors. The deceased's share of the property passes to their estate.

UNIT LINKED

A term used in connection with regular investment into insurance funds and describing a type of endowment or pension policy. In the context of endowment policies, premiums are used to purchase units in one or more funds. A small proportion of these units is encashed each month (or period) and used to provide life insurance (and possibly other protection); the remainder participate in the investment performance of the fund(s).

VALUATION

Report of a chartered or suitably qualified surveyor on the market value, condition and reinstatement value of a property proposed as security for a mortgage advance.

WITH PROFITS

A term used to describe a certain type of endowment or pension policy. The premiums for such policies secure a "basic sum assured" and the policyholder participates in the profits of the insurance company by having reversionary bonuses added to the basic sum assured each year. Once added such bonuses cannot be taken away. At maturity the policy pays out the basic sum assured plus accumulated bonuses which normally also include a "Terminal" or "Capital" bonus.

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