Jargon buster

A

Affordability check:

We do this to work out how much you can afford to borrow. We’ll need to look at the amount you earn and how much you spend. This will help us to work out how much you can afford.

APRC:

The APRC is the total cost of the loan. This includes fees and charges and is shown as an annual percentage. You can use the APRC to compare the cost of mortgages from other lenders. 

Arrears:

If you miss or make late payments on your mortgage, you will be “in arrears”.

B

Bank of England:

The Bank of England is the central bank of the United Kingdom. It is responsible for setting the Bank of England Base Rate.

Bank of England Base Rate:

The base rate is the interest rate the Bank of England charges other banks and lenders when they borrow money. Some mortgages are based on it.

Bonds:

Bonds are sometimes known as fixed interest investments. When you invest in a bond, you are lending money to the company that issues the bond. In return the company agrees to pay interest on the amount of the bond. They also agree to return your initial loan amount, at the end of the agreed investment period.

Broker/Intermediary:

A broker is an independent adviser who can help you find a mortgage that is right for you. They may also be able to help you with other financial matters.

Buildings insurance:

Buildings insurance covers the costs of rebuilding your property if it is damaged or destroyed. For example, if there was a fire in your home. Most lenders will insist that you have this in place as part of your mortgage terms.

Building Survey (Home Survey Level 3):

This is the most detailed type of survey. The surveyor will report on every aspect of the property, including its structural condition. It will also tell you about any problems that could come up from hidden issues.

C

Capital:

The “Capital” is the amount of money that you have borrowed, and that we charge interest on. This amount includes the original loan plus any charges that we could add during the mortgage term. For example, if you don’t pay a fee when we ask you to, we may add this to the capital.

CCJ (County Court Judgment):

A CCJ is a court order that could be registered against you if you don’t repay money that you owe. A CCJ can affect your credit score and make it more difficult for you to borrow money or get other forms of credit.

Completion:

If you’re buying a new home, “completion day” is the day you can move in.

If you’re remortgaging to a new lender, completion day is the day the transfer of your loan takes place.

Conveyancing:

Conveyancing is the legal process of buying and selling property. You can’t buy your first home or move house without going through the conveyancing process. You will need a solicitor or licenced conveyancer to complete this process for you.

D

Decision in Principle (DIP)

A Decision in Principle, also known as an Agreement in Principle, gives you an idea of how much you may be able to borrow. It’s a document that you can use to show the seller or estate agent that you may be able to buy the property.

Direct Debit:

When you set up a Direct Debit, you give your bank permission for a company to collect payments from your account. This is how we will collect payments for your mortgage.

E

Early Repayment Charge (ERC):

An ERC is a fee that may be charged if you make overpayments or repay your mortgage in full during a specified period of your term. The ERC period is often much shorter than the full legal term of the mortgage. Your mortgage documents will tell you if this charge applies and how much it will be.

Equity (Home Equity):

The equity you have in your property, is the difference between the current value of your property and the amount you still owe on your mortgage.

Exit Fees:

A mortgage exit fee may be charged if you repay the mortgage in full before the end of the agreed term. Your mortgage documents will tell you if this charge applies and how much it will be.

Estate Agent:

An estate agent is a professional who helps people who want to buy or sell a property.

F

Fixed-rate mortgage:

A fixed rate mortgage is where the interest rate remains the same for a set period (e.g. 5 years or 40 years).

Fixed for life:

“Fixed for life” means that the interest rate on the mortgage will remain the same for the entire term of the loan. It gives you the security of a monthly payment that won’t change. It also removes the worry of having to remortgage regularly.

Flexible mortgage:

A flexible mortgage is a mortgage with some additional product features. They usually help you to manage your mortgage in a way that suits you. For example, a flexible product may allow you to move home and take your mortgage with with you (known as porting) and make overpayments. 

Financial Conduct Authority (FCA):

The FCA is one of two regulators responsible for regulating mortgages (and other financial services in the UK). One of their key roles is to protect consumers. They do this by supervising financial businesses to make sure they meet their rules and standards. 

First-time buyer:

This is someone who is buying a property for the first time.

Freehold:

Freehold is a type of ownership in England and Wales. It means that you own both the property and the land it is built on.

G

Gifted deposit: 

If someone else gives you a gift of money to put towards buying a house, this is known as a gifted deposit. You may be asked to provide a letter to prove that the money is a gift, and that you don’t need to pay it back.

Ground rent:

Ground rent is a payment you (the property owner) make to the owner of the land (the freeholder). If you have a leasehold property, you will usually need to pay ground rent as a condition of your lease. If you don’t pay your ground rent, the freeholder can apply to the court to take possession of the property.

Guarantor:

A guarantor is a third party who agrees to repay the loan if you’re unable to. This is usually a family member or close friend. They won’t own a share of the property – but they will be legally responsible for making the mortgage payments if you don’t.

At Perenna we don’t currently offer guarantor mortgages.

H

Help to Buy Scheme:

Help to Buy is the name given to a number of UK government home ownership schemes. These schemes aim to help first time buyers onto the property ladder. Some of the schemes have now ended, including the Help to Buy ISA and the Equity loan scheme.

Perenna is not currently participating in any Help to Buy schemes.

Homebuyer Report (Home Survey Level 2):

This type of survey gives you a valuation and details about the condition of the property. It will highlight any areas that need urgent attention. This only focuses on visible issues. For example, the surveyor won’t check under your floorboards.

House Price Index (HPI):

A measure of the change in the average price of homes in a particular market, used to track the performance of the housing market.

I

Initial rate:

The initial rate is an interest rate that applies for a set period. At the end of that period, the interest rate usually changes to the lender’s Standard Variable Rate.

Interest-only mortgage:

With an Interest-only mortgage, your monthly payments only cover the interest charges on the loan. They don’t repay any of the original amount you borrowed (the capital). You will need to have a repayment plan in place to pay this back at the end of the mortgage term.

Interest rate:

An interest rate is how much you are charged for borrowing money. This is shown as a percentage.

J

Joint mortgage:

This is when you borrow money to buy a property with someone else. Some lenders allow “joint” applications from more than two people.

A type of joint property ownership is where each owner has an equal share and a right of survivorship.

L

Lending criteria:

All lenders have their own lending criteria. These are the rules they have in place for approving mortgages. If you don’t meet this, they won’t approve your mortgage application. A mortgage broker can help you find the right lender and product for you.

Leasehold:

Leasehold is a type of ownership in England and Wales. It means that you own the property but not the land it is built on for a set period. If you’re looking to buy a leasehold property, it’s important to understand how many years are left on the lease. You may find it difficult to get a mortgage if there isn’t long left. This may also affect the value of the property.

Loan

The loan is a sum of money that we lend to you. You need to pay this back to us over a period of time.

Loan balance

This is the outstanding amount of money that you need to repay. It includes all interest and charges.

Loan to value (LTV):

This is the size of your mortgage as a percentage of the value of your property. For example, if you borrow £100,000 on a property worth £200,000, your LTV is 50%.

M

Monthly repayment:
The amount that you need to pay back each month. It’s important that you make your repayments in full and on time.

Mortgage:

A loan used to purchase a property. The property is used as security for the loan. This means that you give us rights over the property. These rights stay in place until you’ve repaid everything you owe.

Mortgage deed:

A legal document that you sign to give us rights over the property as security for the loan.

Mortgage deposit:

The amount of money you need to pay upfront when buying a property. This amount may vary depending on the type of product and lender.

Mortgage illustration:

Your broker or lender should give you a Mortgage Illustration before you make an application. It tells you key details about the product, fees and how much your payments will be. The document is in a standard format so that you can easily compare different mortgages.

Mortgage maturity date:

The mortgage maturity date is the date that your mortgage term ends.

Mortgage offer:

If your mortgage application is approved, your lender will make you a mortgage offer. It means they are happy to lend you the money for your property. The offer letter will also set out the terms and conditions that apply.

Mortgage term:

This is the length of time you have chosen to repay your mortgage. For example, 20 or 40 years.

N

Negative equity:

This means your property is worth less than the amount you owe on your mortgage.

New build:

A new build property is one that is less than two years old. Or, is a property that has not been lived in.

O

Outstanding balance:

This is the outstanding amount of money that you need to repay. It includes all interest and charges. It may also be referred to as the loan balance.

Overpayment:

A payment that is over and above your usual monthly payment. Overpayments can help you pay your mortgage off quicker. And means you’ll pay less interest overall.

P

Payment Holiday:

An agreement you make with your lender to temporarily take a break from making monthly payments. Payment holidays are sometimes an option with flexible mortgage products. They can also be offered to help during times of financial hardship. You should remember that interest will still be charged during the payment holiday. After the temporary agreement ends, your monthly payments will go up. This is to cover the payments that you’ve missed and ensure your loan is still repaid by the end of the term.

Porting:

Porting is a flexible feature. It is the process of keeping your existing mortgage when moving home. One of the main benefits of porting is that if your loan amount is staying the same, you may not have to pay an early repayment charge. To port your product, you will need to make a new application and meet your lender’s current criteria.

Power of Attorney:

A legal document that gives someone the authority to act on behalf of another person. There could be many reasons for needing someone else to act on your behalf or help you with your mortgage. For example, if you have a health condition or just for your own peace of mind.

Prudential Regulation Authority (PRA):

The PRA is one of two regulators responsible for regulating mortgages (and other financial services in the UK). They are part of the Bank of England, and it is their role to ensure that financial businesses act safely.

Product fee:

A product fee is charged on some mortgages as part of the product deal. Your Mortgage Illustration will tell you if this fee applies and how much it is.

Product switch / Product transfer:

A product switch is like a remortgage except you take a new mortgage product with your existing lender. It’s often a simpler process with less paperwork. Customers often product switch when their current deal ends. It can be a cheaper alternative than moving to SVR. Customers with a longer-term fixed rate or “fixed for life” product may also choose to switch if there are other products on sale with a lower interest rate. It’s important to check any early repayment charges that may apply to your current deal before you do this.

Property Value:

The property value is how much your property is worth. This is based on things such as location, size, condition and market trends.

R

Redemption:

By redemption we mean the process of paying off your mortgage in full. Redemption can happen either at the end of the mortgage term when you’ve made your last payment, or you can choose to repay early. If you want to repay early, you will need to request a “redemption statement”. This will show you exactly how much you owe, plus any early repayment charges or exit fees you need to pay.

Remortgage / Remortgaging:

Remortgaging means moving your mortgage from one lender to another without moving house.

Repayment Mortgage:

With a repayment mortgage, your monthly payments cover the interest you need to pay, plus some of the original amount you borrowed. If you make all your payments in full and on time, your mortgage will be repaid in full at the end of the term.

Repayment plan / Repayment strategy:

A repayment plan is what you need to have in place to make sure you can repay your interest-only mortgage at the end of the term. With an interest-only mortgage your monthly payments only pay off the interest charges. So, it’s vital that you have a plan in place to repay the amount you borrowed. For example, this could be a savings or investment plan, sale of the property or a pension.

Repossession:

A legal process which involves a lender taking possession of a property which was used as the security for the loan. Lenders will only take this action if you break your agreement, for example if you fail to keep up your repayments. Repossession is always a last resort. Your lender will do everything they can to help you remain in your home.

Retirement Interest-only (RIO):

A RIO mortgage is an interest-only mortgage where the loan doesn’t need to be repaid until you die or move out of the property permanently. You still need to make monthly payments to cover the interest charges though. So, you need to be confident you can afford these payments both now and in the future. RIO mortgages are usually only available to customers who are over 55 years old.

S

Stamp Duty:

This is a tax you pay when you buy a property. The amount you pay is based on the purchase price of the property. In Wales this tax is now known as Land Transaction Tax (LLT). For more information about how much this might cost you, please visit: Stamp Duty Land Tax: Overview – GOV.UK (www.gov.uk)

Standard Variable Rate (SVR):

Most mortgage lenders set their own SVR. As it’s a variable interest rate, it can go up or down at any time. If the Base Rate changes, lenders will often change their SVR too. But the Base Rate isn’t the only thing that affects it. Usually, your mortgage will move onto SVR when your current deal ends. For example, if you have a 5-year fixed rate product, after year 5 you will be charged the SVR.

T

Tracker mortgage: 

A Tracker is a variable rate mortgage product. Your interest rate is set at a fixed percentage above or below another interest rate, typically The Bank of England Base Rate. Your rate will move up and down, in line with any changes to the other rate, for a set amount of time.

Transfer of equity: 

A transfer of equity, also known as a change of parties, is the legal process used to add or remove an owner of the property. There is no sale of the property and at least one of the original owners will stay the same.

U

Underwriting:

Underwriting is a stage in the mortgage application process. This is the part where the lender decides whether to approve or decline your application. The lender’s decision is based on several things. They will look at your income, outgoings, credit history and the property you’re buying.

V

Valuation:

Lenders arrange for a valuation of the property to make sure it is worth the amount that you want to borrow. This basic valuation might not highlight potential problems or future costs. You may also want to pay for your own detailed survey to identify any repairs or maintenance that you might need to do.

Valuation Fee:

On some mortgage deals, the lender will charge you a fee to pay for their basic valuation report. The cost of the fee may vary depending on the value of the property. If you want to arrange your own, more detailed survey, there will be an additional cost. This is separate to this fee.