FAQ About Mortgages Page 1
What is the Administration Fee ?[+] Expand
This is a fee charged by some lenders which is not normally refundable if your mortgage application does not proceed. The Administration Fee will often form part of the valuation fee but will be retained by the lender even if the valuation has not been carried out.
What is the Advance ?[+] Expand
This is the term used to describe the money released by your mortgage lender to your solicitor when your mortgage application is complete.
What is Adverse Credit?[+] Expand
This is a general term describing customers with arrears and county court judgments. It refers to customers who have failed to keep up their repayments on a loan. Some companies specialise in providing credit to these customers.
What is an Affordability Check?[+] Expand
Lenders want to be confident that you are able to repay what you borrow. So they use a calculation method to work out how much they are prepared to lend you. This usually involves adding up all your monthly outgoings and taking this number away from your monthly income before multiplying it by a pre-determined figure, to calculate the maximum amount they are willing to lend.
What is an Annual Percentage Rate (APR)?[+] Expand
All lenders are required to show the APR on their advertising. It’s the rate of charges on your loan and is calculated to include the interest rate and associated costs. The APR is generally regarded as the best way to compare loans, though you should also check what additional fees or charges will be linked to your loan when comparing different mortgages.
What is the Arrangement Fee?[+] Expand
This is a fee charged by some lenders in order to access particular mortgage deals. Arrangement fees tend to apply if you are looking for a fixed rate or discounted rate mortgage and these may either be payable up front, added to the loan on completion, or deducted from the loan on completion (check with your chosen lender which one applies).
What are Arrears?[+] Expand
Arrears describe the status of a loan account when payments are late or missing. Borrowers who have any type of loan account in arrears may experience problems if they are attempting to arrange new finance through a mainstream lender. A number of lenders do, however, specialise in this area of the market.
What is Buy To Let?[+] Expand
This is a term used to describe the purchase of a residential property for the sole purpose of letting the property to a tenant.
What is Capital Raising?[+] Expand
This is the term used to describe the raising of money (or capital) that is secured against your property. The money is usually used to finance some form of personal spending, purchase or loan consolidation. For further information see the Secured Loans section in Mortgages FAQs.
What is a Commercial Loan?[+] Expand
This is a loan secured against a business practice.
What is Completion?[+] Expand
This is the point at which the mortgage is signed and executed and all its conditions come into effect. In the sale and purchase of property, it is when the purchaser pays the balance of the purchase price to the seller and, in exchange the seller hands over the deeds.
What is a Consent to Mortgage form?[+] Expand
Lenders require this to be completed by any occupier of the property aged 17 or over who is not party to the mortgage. The form waives any rights of residence that this person may have, and enables the lender to obtain possession if mortgage payments are not made. For further information see Arrears section above.
What is conveyancing?[+] Expand
This is the series of legal transactions conducted by a specialist solicitor, performed on behalf of a person selling or purchasing a property prior to completing on the sale or purchase. For further information regarding what steps a solicitor conducts on your behalf, take a look at our guide to buying a property link from the Home Page.
What is a County Court Judgement (CCJ)?[+] Expand
This is a judgement for debt recorded at a County Court. These judgements will be shown when the lender carries out a credit search. If the debt has been repaid, subsequent to the judgement being recorded, then the entry will be marked ‘satisfied’. The appearance of CCJ’s on the credit register will greatly reduce mortgage options and nearly all lenders will insist that they are satisfied before considering an application. Even with the judgement(s) satisfied few lenders are prepared to consider lending other than for the most minor judgements.
What are covenants?[+] Expand
This is a legal term for conditions made in a lease or title deeds of a property. Covenant normally describe what can or cannot be done.
What is a Credit Bureau?[+] Expand
This is a company which maintains a database on the credit history of data in order to advise lenders and other, interested parties on the credit status of a prospective customer.
What is Exchange of Contracts?[+] Expand
This is the stage in the property transaction at which legally binding contracts are exchanged between the buyer and the seller. Once contracts are exchanged the vendor becomes legally obliged to sell and the purchaser to buy on the terms agreed. Note: This does not apply to Scotland.
What is the Data Protection Act?[+] Expand
The Data Protection Act gives rights to individuals about whom information is recorded on computer or otherwise. You have the right to find out information about yourself, after payment of a small fee, and you can challenge the accuracy of data if incorrect and claim compensation in certain circumstances. The Act places obligations on The Mortgage Store to be open about the use of data (through the Data Protection Register) and follow sound and proper practices (the Data Protection Principles).
What is Credit Scoring?[+] Expand
This is a technique based on probabilities that is used to assess the degree of risk exposure involved with lending to a customer with a particular lending and repayment history.
What is Debt Consolidation?[+] Expand
This refers to the raising of money, sometimes against the security of your property, in order to pay off other debts such as loans and credit cards.
What is a Default Notice?[+] Expand
Your lender must issue this if it wishes to enforce a loan regulated under the Consumer Credit Act 1974 where the borrower is in default. It must state how the breach has taken place and how and when the borrower can remedy this.
What is a First Time Buyer (FTB or FTP)?[+] Expand
Lenders differ in their definition of a First Time Buyer. Some lenders will include in this someone who has owned a property before but has no property to sell (i.e. may be renting temporarily after selling) and other lenders will include joint borrowers where just one party is a FTB. Other lenders will take a more literal definition and only include someone who has never owned a property before.
What is Freehold?[+] Expand
This describes the tenure of a property where ownership of the property and land is held indefinitely. Note: This does not apply to Scotland.
What is a Full Structural Survey?[+] Expand
This is a comprehensive report by a qualified surveyor on the condition of a property to be purchased. The survey is expensive but provides absolute peace of mind, as all matters affecting the value and condition of the property are reported on. The price varies, depending on the value of the property.
What is a Further Advance?[+] Expand
This is further monies borrowed from the mortgage lender to finance personal purchases. Also can be described as secured loan or home improvement loan.
What is a Guarantor?[+] Expand
A Guarantor is a person who promises to be answerable for the debt of another.
What is a Home Buyers Report?[+] Expand
This is a type of survey report which is more detailed than a Mortgage Valuation but not as in-depth as a Full Structural Survey.
What is a Home Equity Release Mortgage?[+] Expand
This is generally available to people over the age of 60. It provides the ability to release equity from your home for the purpose of providing a lump sum or monthly income.
What is a Home Improvement Loan?[+] Expand
See the What is a Further Advance section above.
What is an Income Multiple?[+] Expand
This is the factor by which lenders will multiply the gross annual salary of mortgage applications in order to determine the maximum borrowing capability.
What is Initial Interest or Accrued Interest?[+] Expand
This figure is usually shown on the mortgage completion statement and refers to the amount of interest charged from the date that the funds are drawn down to the first full mortgage payment. The amount of the initial interest payable will depend on the time in the month when the mortgage is completed. Eg, if the mortgage payment is due on the 1st of the month and the mortgage is completed on 18 April then the first monthly mortgage payment will become due on 1 May. A request will be made by the lender for you to pay a one off payment of 13 days interest from 18 April – 30 April that represents the initial interest.
What is Joint Tenancy?[+] Expand
This is where two or more persons own land in common. It is impossible to point to one part of the property and say that belongs to one person rather than the other or others. On the death of one joint owner, the land passes to the survivors.