Jargon buster
Are you confused by 'compound interest' or puzzled by 'Part redemption'?
Our Jargon Buster gives clear and concise definitions for some of the commonly used mortgage and financial terms you may see in our literature.
Click on a letter to display all jargon words that start with that letter.
Accountant reference
A certificate completed by an accountant confirming gross and net profit of a self employed person.
Added to loan
This phrase relates to the costs borrowers face when arranging a mortgage. Often these costs are added to the mortgage amount being borrowed, hence the term. The costs may include items such as mortgage indemnity fees, arrangement fees, or administration fees.
Administration fee
A fee charged by the organisation for any number of administration procedures.
Administration order
An administration order is a single county court order that covers credit debts and certain other debts, which are all treated together. It allows the borrower to make a single payment every month into the court. The court staff will then divide the money amongst the creditors on a pro-rata basis. An administration order stops creditors from taking further action against the borrower.
Affordability check
A series of checks to establish the likelihood of the applicant being able to meet mortgage payments.
Agricultural restrictions
A restrictive covenant attached to a piece of land requiring that the land be used only for agricultural purposes - generally farming. The restriction may also apply to that piece of land on which a house or other building such as a barn or garage stands, in which case that house or building may also only be used for agricultural purposes. In the case of a house this generally means that the house may only be lived in by someone who 'works' the surrounding land.
Annual percentage rate (APR)
The annual rate that is charged for borrowing, expressed as a single percentage number that represents the actual yearly cost of funds over the term of the loan. This includes any fees or additional costs associated with the transaction. Every firm in the business of lending money or advancing credit is required by law to quote this rate, and the APR calculation is defined by the Financial Services Authority for all regulated mortgages.
Architects certificate
The Architect's confirmation that a property is fully complete.
Arrangement fee
A fee that is charged to the customer for arranging the mortgage.
Arrears
Arrears is used to describe missed, late or under paid mortgage repayments. Borrowers with a history of mortgage arrears will find it harder to effect a further mortgage with their current lender or a new lender in the future.
Assignable contracts
Where a contract to buy a property is transferred to another individual.
Audit valuation
An audit of the valuation, which has been conducted on the property.
AVM
Automated Valuation Model.
Bad Credit
Poor credit record.
Bankrupt
This occurs when a debtor is unable to pay their debts. The lender(s) or creditors move to secure what monies they can from any existing assets (property) held by that person. All property is then administered by the official receiver.
Basic salary
An amount of money paid to the employee, excluding bonus and overtime payments.
BBR
Bank Base Rate - the rate set by the Bank of England.
Block policy
An insurance policy arranged by the lender.
Book keepers
The practice or profession of recording the accounts and transactions of a business.
Buildings insurance
An insurance policy covering the property plus fixtures and fittings. All lenders require a property to be insured. It should be insured for the full rebuilding cost including professional fees and such insurance cover is normally a condition of the mortgage.
Buy to let
Where a property is purchased for the purpose of letting it out to tenants.
Capital
The amount borrowed on the mortgage and on which interest is charged.
Capital and interest mortgage
This is one of the most usual types of mortgage. The monthly repayment made by the borrower includes a repayment of capital borrowed and an amount for the interest charged. At the beginning of the mortgage most of the payment is used to cover the interest and only a small amount is paid towards reducing the mortgage. Over the term of the mortgage more and more of the monthly payment is comprised of paying back the capital borrowed. As long as the monthly payments (which may alter due to changes in interest rates) are always made on time, the mortgage is guaranteed to be paid off at the end of the term.
Carers allowance
A financial allowance paid by the DSS to an individual deemed to be caring for another person.
Charge or legal charge
When an individual takes out a mortgage, the lender takes a charge or a legal charge over the property. This means that they are registering their interest in the property.
Commission
A variable payment made to an individual normally based on sales performance.
Completion (legal completion)
When the borrower(s) become the legal owner(s) of the property.
Completion (GMAC-RFC mortgage)
The completion date on the mortgage with GMAC-RFC is the date on which funds are released.
Compound interest
The interest paid on the principal balance (initial loan) on a mortgage and on the accrued and unpaid interest of the loan.
Concrete No Fines
A form of concrete construction.
Consumer Credit Act (CCA)
The Consumer Credit Act 1974 lays down the rules relating to lending money in certain circumstances and is aimed at protecting the consumer when a loan is entered into. First charge mortgages, such as those offered by GMAC-RFC Limited, are regulated under the Financial Services and Markets Act (FSMA) and not the Consumer Credit Act 1974.
Conveyancer
A solicitor or licensed conveyancer who does the legal work involved in selling and buying property.
Conveyancing
The legal work involved in selling and buying property.
County Court Judgements (CCJ's)
A County Court Judgement or CCJ is the term used to describe when a judgement is made against a person or company for debt in the county court.
Credit Account Information Sharing (CAIS)
Comprehensive and timely information on credit accounts, including their status, from the credit reference agency.
Credit check
This is where the mortgage lender evaluates the credit history of an applicant by referring to the services of a credit reference agency. A credit check determines the applicant's credit history, whether there are any CCJ's, defaults or outstanding credit card bills.
Credit reference agency
An organisation that keeps details of individuals and their credit histories. GMAC-RFC use data from the credit reference agency as part of the application assessment.
Credit score
A numerical expression based on a statistical analysis of a person's credit files.
Credit search
A report retrieved from a credit reference agency such as Experian.
Criteria (mortgage)
A standard ruling or test on which a judgement or decision can be based. These standards will vary depending on the product chosen.
Crosswall
A form of concrete construction.
Cumulative value
Total value.
Debt Consolidation
Where outstanding credit commitments are combined into one loan with one monthly payment.
Debt to Income (DTI)
A calculation based upon the applicant's outstanding credit commitments, required mortgage and their annual income. This is used as part of affordability calculations.
Decree
Scottish equivalent of a County Court Judgement.
Deed of Postponement
A Deed of Postponement is a document used to re-order the priority of charges held over a piece of land. Such charges usually relate to secured mortgages or loans and the Deed of Postponement will allow, for example, a new loan to enjoy a greater priority than an existing one by "postponing" the existing loan in favour of the new one. The priority of loans is important as the loan secured with the greatest priority is the one that will be repaid first should the land be sold.
Defaults
If the borrower has defaulted on a loan or mortgage it means that he/she has failed to meet the repayment date. This will be marked on their credit record. When considering a GMAC-RFC mortgage, a loan defaults when the borrower fails to make a payment in the month that it is due.
Deposit
The amount of money the borrower puts into buying a home (not including the money that is borrowed). The phrase may also refer to the amount paid upon exchange of contracts.
Disability benefit
A financial sum paid by the Department of Work and Pensions to a person with a disability.
Disbursements
These are costs related to the conveyancing of a property. These costs usually encompass photocopying, postage, couriers and legal documentation.
Discharged bankruptcy
After a period of time, a bankrupt individual can be discharged from bankruptcy. This then releases them from their financial obligations.
Discount rate period
A set amount of time that a reduced interest rate applies for.
DSS
Department of Social Security.
Early Repayment Charge (ERC)
A charge that may be incurred if the mortgage is repaid early.
Easement
An Easement is a right attached to a piece of land which is intended to benefit or burden another (usually adjacent) piece of land. An example of an easement is a right of way over a piece of land (Land A) exercised by the owner of adjacent land (Land B). The right of way burdens Land A by allowing someone else use of it whilst benefiting Land B by making it a slightly better property as it has the use of land outside its boundaries.
Employment
When someone is paid to work for a company or organisation.
Employer reference
A certificate or letter from an employer confirming details of an employee to include income.
Employment history
Normally the last 12 months employment details.
Employment status
The type of employment, e.g. employed, self employed, retired etc.
End of mortgage term
The date the mortgage agreement ceases and all funds must be repaid to the lender.
Enforcement notice
An Enforcement Notice is a notice served on a property owner and the planning authority specifies in the notice what they consider to be a breach of planning control. The notice will also specify the remedial action that must be taken by the property owner to remedy the breach of planning control and a deadline for carrying out this remedial action. Failure to comply with an Enforcement Notice is an offence and the guilty person is liable on summary conviction to a fine up to £20,000.
Equity
The total value of the property, less the amount of the mortgage. For example, if the house is worth £60,000 and there is a mortgage of £50,000, there is equity of £10,000.
Ex-local authority
A property previously owned by the Local Authority.
Exchange of contracts (England & Wales only)
At this stage of property purchase, legally binding contracts are exchanged between the buyer and the seller.
Existing commitments
This phrase simply refers to all the other financial commitments apart from the existing or proposed mortgage. Liabilities will include credit cards, bank loans, maintenance payments to ex-spouse and school fees, etc. Lenders will take these items into account when evaluating the mortgage amount they are prepared to lend.
First charge
A lender will always use this to secure the main mortgage, therefore a lender who has a first legal charge over a property will have the first call on any funds raised from the property sale.
First Time Buyer
Someone who is not currently a homeowner, nor having redeemed a mortgage within the last 12 months.
Fixed rate mortgage
A mortgage where an interest rate is fixed/set for a number of months or years. After the fixed rate period has ended, the interest rate will revert to the normal variable mortgage rate. If the mortgage is redeemed during the fixed rate period there are usually early repayment charges (see Early Repayment Charges).
Flying Freehold
Part of the freehold property which is built above land that does not form part of that property freehold. The flying part need not be in mid-air, it can be over a part of someone else's freehold, or over a common part, (e.g. some semi-detached houses have a room over a common passageway). The common part need not be enclosed; it can be an external passage.
Freehold (England & Wales only)
This refers to land or property owned indefinitely, giving complete ownership of the land and all buildings on it. Leasehold property only gives the owner a right to hold for a limited period of time.
Full status
Where the applicant's income could be verified by the lender.
Further advance
This describes when a further loan has been granted by the current mortgage lender. This loan is also secured by the first charge on the property. Further advances are generally used for debt consolidation or home improvements. Lenders reserve the right to progress a further advance as a remortgage.
Guarantor
Someone who formally accepts responsibility for another person or for something that belongs to another person, such as the payment of debt.
General conditions
These are the standard conditions applicable to a mortgage. These will be found in the mortgage conditions supplied at the time of completing the mortgage.
Grade 1 listed
A building or other structure officially designated as being of special architectural, historical or cultural significance.
Ground rent
A yearly fee leaseholders have to pay to the freeholder or landlord who owns the land the leasehold property is on.
Gross monthly income
Monthly income earned before any deductions.
Guaranteed overtime
Additional income earned by working over and above standard contracted hours which can be guaranteed by an employer.
Higher Lending Charge (HLC)
A charge made by the lender if the applicants are borrowing above a certain percentage of the value of the property.
Holiday home
A property that is used on an occasional basis.
Home Information Pack (HIP)
The Home Information Pack contains important information that buyers and sellers need to know. The pack includes an Energy Performance Certificate (EPC), which contains advice on how to cut carbon emissions and fuel bills. Also included are documents such as a sale statement, searches and evidence of title. As of the 14th December 2007, they are required for all properties placed on the market with 2 or more bedrooms. This will be extended to smaller properties in time.
Housing allowance
A financial allowance given to a person to assist toward the purchase/rental of a property.
Housing associations
Independent 'not for profit' bodies that provide low cost 'social housing' for people in housing need.
Income Multiple
A figure by which the applicant's income is multiplied to determine the maximum loan available.
Income reasonability
A check to ensure that the income declared by the applicant is within acceptable parameters based upon the information supplied.
Income requirement
Where the lender requests that proof of income is provided.
Individual Voluntary Arrangement (IVA)
This is an alternative to bankruptcy called an 'Individual Voluntary Arrangement' (IVA). This is a formal arrangement through the county court to pay an agreed amount off debts over a shorter period. This usually means paying a monthly instalment over three to five years. The rest of the debts are written off. Some IVA's are set up on the basis of using a lump sum to make offers to the creditors rather than make monthly payments. Some IVA's are a mixture of both.
Initial interest
Initial interest is a payment covering the period between mortgage completion and the end of the month. Therefore, the first mortgage payment will be the normal monthly payment plus the initial interest.
Instant offer
A mortgage offer which is produced on-line.
Interest only mortgage
A mortgage where only the interest is paid each month to the lender and no capital is repaid. As such, at the end of the mortgage term the full amount of the capital will need to be repaid. Usually the capital is repaid from an endowment policy, pension plan or PEP/ISA. If the borrower is expecting to use one of these methods to repay the capital, it is the borrower's responsibility to ensure that it is on track to pay off the ful amount of the capital outstanding.
Interest rate
Interest rate is the rate of interest that we use to calculate the interest payable on a mortgage loan that is taken out with us. We apply this rate to the amount the borrower owes us under their mortgage loan.
Laing Easiform
A form of concrete construction.
Lease
A legal contract, which gives the ownership of a leasehold property to the buyer for a fixed period of time.
Leasehold (England only)
If a property has a tenure, which is Leasehold, it only gives the owner a right to hold for a certain fixed period of time. The land is not owned by the property purchaser.
Leaseholder
A leaseholder is someone who owns a leasehold interest in a property and who holds the property on a lease made between a landlord and the leaseholder. This could apply to a person who buys part of a large building, for example a flat or maisonette within a block. The other properties within the building may also be owned by other leaseholders who each hold their property on the terms set out in their own lease.
Legal Charge
When an individual takes out a mortgage, the lender takes a charge or a legal charge over the property. This means that they are registering their interest in the property.
Lending assessors
A person assessing any correspondence connected with the mortgage application.
Let to buy
A property owned which is let out to enable the purchase of a residential property.
LIBOR (London Inter-Bank Offered Rate)
Interest rate at which banks lend funds to other banks.
Licensed conveyancers
A legal representative who specialises in land law.
Live/Work Unit
A property which includes residential and business premises.
Loan to value (LTV)
The amount of money borrowed compared as a percentage to the value of the property e.g. a mortgage of £75,000 on a property valued at £100,000 would have an LTV of 75%.
Local authority search
This is carried out by the purchaser's solicitor to check the status of the property. This search reveals whether any proposed changes in the area are taking place, details of planning permission for the property and whether enforcement notices have been served by the Local Authority on the property.
Main residence
Sometimes referred to as the principal private residence. This is the home where someone spends most of their time.
Mainstream
A mortgage product offered to a person who has a good credit record.
Maximum term
The maximum amount of years allowed for the repayment of the mortgage.
Minimum term
The minimum amount of years allowed for the repayment of the mortgage.
Minimum age
The minimum age of a person permitted to enter into the mortgage contract, normally product specific.
Missed payments
Where one or more mortgage payments have not been made.
Mortgage
A loan to buy a property. The property acts as security for the loan and so can be repossessed and sold if the mortgage repayments are not made.
Mortgage deed
The legal agreement, giving the lender a legal right to property until the mortgage is repaid in full.
Mortgage term
The length of time over which the mortgage will be repaid.
Near prime
A mortgage product offered to a person who may have had slight credit difficulties in the past.
Negative equity
This occurs when the property value has fallen below the amount of mortgage still owing, i.e. the property is worth less than the amount owed on it. In other words when the loan to value is greater than 100%.
New build
A property built within last two years.
NHBC
National House Building Council.
Non-standard construction
Non-standard construction is where the property is not built of brick or stone or does not have a tiled or slated roof, for example, timber framed properties or concrete house constructions.
Notice Of Correction (NOC)
Where a note has been added by the customer to their credit file stating that the data may not be correct.
Notice of Dispute (NOD)
Where a note has been added by the customer to their credit file stating that the data may not be correct.
Part capital and interest mortgage
This refers to a mortgage which is partly repaid on a capital and interest basis and partly repaid by another method.
Part Redemption
Part redemption occurs when a lump sum capital repayment in part settlement of the mortgage is made.
Payrate
The interest rate currently applicable to a mortgage.
Pension
An income paid to a person who has retired from their employment/self employment.
Permanent employee
Someone who is employed on a permanent contract of employment.
Permanent resident
Whereby a person is allowed to reside indefinitely within a country despite not having citizenship.
Permanent Health Insurance (PHI)
A form of income protection designed to pay a regular tax free monthly income if the insured person is incapacitated and unable to work due to illness or injury.
Physical Valuation
Where a qualified surveyor visits the property to be mortgaged in order to provide a valuation.
Portable
The facility to move a particular type of mortgage from one property to another if a property move is required. Subject to the mortgage chosen and GMAC-RFC's criteria being met.
Power of Attorney
A document wherein one person authorises another person, or people, to manage their affairs on their behalf. An individual may grant a Power of Attorney for the management of a specific transaction (for example a soldier may grant a Power of Attorney in favour of another person allowing that person to complete his or her house purchase whilst he or she is posted overseas) or more generally for the management of all their affairs. There are numerous types of Powers of Attorney and legal advice should be sought.
Pre-emption
A Right to Buy application which is still within the 5 year tie in period.
Proof of residency
Evidence that a person resides at a certain property, normally in the form of a utility bill or bank statement.
Ranking Agreement
A Ranking Agreement is another term for a Deed of Postponement most commonly encountered in Scotland.
Redemption
This refers to repaying the mortgage when moving to another property, or at the end of the mortgage term.
Rental calculation
This is used for Buy to Let applications to determine whether the anticipated monthly rental income received on the property would be sufficient to maintain the monthly mortgage payments based upon a set interest rate and percentage.
Repossession
Where a property is taken into ownership of the lender, following a court order after the customer has been unable to fulfil the terms of their mortgage contract or come to a suitable arrangement.
Restrictive Covenant
A clause attached to a piece of land intended to benefit or burden that piece of land to the benefit or burden of another (usually adjacent) piece of land. Restrictive covenants are generally contained in the contractual documents entered into between the builder of the property and the original purchaser and examples are clauses that prohibit the owner (both original and successive) from erecting fences around the land, parking caravans and/or commercial vehicles on the land etc.
Revert
To return to.
Right to Buy
Sitting tenants in some Housing Association, MOD or council properties have an option to purchase the property in which they live. Usually the property can be purchased at a discount based on the length of time they have been a tenant.
Road Bond Agreement
This is a term usually used to refer to a part of an agreement entered into by the builder of a new property and the relevant Local Authority under Section 106 of the Town and Country Planning Act 1990. Such agreements relate to the planning permission and any associated planning obligations granted to or imposed upon the builder. In this example the part of the agreement referred to as the "Road Bond" is the part that requires the builder to create roadways which are intended to be for public use in and around a new development. The agreement's terms will usually require the builder to create the roadways up to a minimum standard, as defined by the Local Authority in the Agreement, and then maintain those roadways until the final property on the development has been transferred to a new owner at which point the Local Authority will "adopt" or take over the onward maintenance of the roadways and the builder will then no longer be obliged to maintain them.
Second charge
This is a legal charge, which is used usually to secure a second mortgage or other borrowings. It will always rank behind a first charge. (see also Secured loan).
Secured Loan
This is a Personal Loan that uses equity in the home for security to allow better interest rates than on an Unsecured Loan. This loan may be used for debt consolidation or home improvement.
Security
The property is the lender's 'security' for the loan. This means that the lender has rights over the property. If the mortgage repayments are not kept up to date, the lender can repossess the property and sell it to recover the debt.
Sequestration
Scottish equivalent of bankruptcy.
Standard Security
A Standard Security is a document that a landowner in Scotland would sign in order to grant another person (or company) a security over their land. Such a security would usually be security for a loan. A Scottish landowner may grant more than one security over their land and the priority of these securities would be regulated by the Ranking Agreement or Deed of Postponement referred to above.
Standard Variable Rate (SVR)
A variable interest rate without any discounts or deals.
State benefits
A financial sum paid by the Department of Work and Pensions to individuals who meet certain circumstances. E.g. Disability benefit or Widows pension.
Sub Prime
A mortgage that is offered at a higher interest rate to people with less-than-perfect credit.
Tenure
Tenure is the right to hold or occupy land for a defined amount of time.
Term
The length of the mortgage, normally expressed in years.
Title Deed
The legal document that sets out the ownership of a property.
Tracker rate period
A set amount of time that the interest rate 'tracks' either the Bank Base Rate or London Inter-Bank Offered Rate.
Trust Deed
Typically referred to as the Scottish equivalent to an IVA (Individual Voluntary Arrangement) however the nature of a Deed is significantly different to an IVA.
Variable rate
This rate moves up and down.
Voters' roll
Central register held by Local Authority of those persons in their district who have registered to vote.
Weighting allowance
A sum of money paid to an individual who works in a large town.
Working family tax credit
A financial sum paid by HM Revenue and Customs to a working person on a low income or who has a child/children of school age.