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guide | Mortgage glossary
- A record of property, ownership and the mortgage is registered in
a central register at HM Land Registry.
- fee payable to the land registry to change an entry in their records
following a transaction involving registered land. This can be following
a change of ownership or just a change of mortgage.
- reference from the previous landlord regarding the general conduct
of the tenant and whether rent has been paid promptly.
- additional portion of salary payable to an employee to compensate
for the additional expenses incurred as a result of working in a
major conurbation. In theory the payment is made to cover either
increased housing or commuting costs and is normally considered
as part of basic income when applying income multipliers.
- the land on which the property is built is not owned directly
by the property purchaser and is held under a lease for a fixed
- the means by which lenders enforce their rights to a property
- it is recorded at the land registry. There are various different
types of legal charge and the type used will vary from lender to
lender. Building Societies tend to use a charge for the specific
amount that they have lent. Banks tend to use an all monies charge,
allowing them to free equity in a property if it is owned by them.
This may allow them to recover overdrafts and other loans if they
have granted more than just a mortgage. A primary mortgage will
normally be secured by a first charge. Building societies are allowed
to lend only if they have a first charge on a property. Second or
subsequent charges may be granted on a property if additional money
has been borrowed against it.
- fee charged by the solicitors acting for the lender in creating
their legal charge over the property.
- An organisation which offers mortgage products.
- London Interbank Offered Rate is the rate at which banks notionally
buy and sell money to each other. It varies from day to day and
is closely linked to Base Rate. The relationship of LIBOR to base
rate can give an indication of the possible future direction of
base rates. If LIBOR is significantly above base rate it indicates
that the money market believes interest rates are about to increase.
If it is significantly below, the reverse is true. The key LIBOR
rate is 3 month LIBOR, however rates are also quoted for one, six
and twelve month periods.
- A mortgage linked to libor will be charged at a given margin over
the Interbank rate (typically 1 to 1.5%) and is likely to be reset
quarterly. LIBOR rates tend to be more volatile than variable mortgage
rates as the rate payable will change almost every quarter. They
offer the customer the opportunity to pay a rate closer to the true
cost of money. In a low interest rate environment they are likely
to result in lower overall payments but will be more expensive in
periods of higher interest rates.
- a life assurance company.
- policy payable upon the death of the insured, usually referred
to as assurance.
- the amount to be borrowed. First charge mortgages are now regulated
by the FSA and no longer fall within the remit of the Consumer Credit
- example of the monthly cost of a mortgage and other expenses associated
with the loan such as set-up costs.
- is the ratio of the loan amount to the property valuation expressed
as a percentage. E.g. if a borrower is seeking a loan of £20,000
on a property worth £40,000 it has a 50% loan to value rate.
If the loan were £30,000, the LTV would be 75%. The higher
the loan to value the greater the lender's perceived risk. Lenders
will be more cautious in underwriting high loan to value loans.
Loans above normal lending LTV ratios may require additional security.
- a search of local authority records to confirm the status of the
property. Local authority searches should reveal any proposed changes
in the area, the details of the planning permission for the subject
property and whether any enforcement notices have been served by
the local authority.
- fee payable for the local authority search.
- the most common form of endowment policy used to repay a home
loan. It is a mix of full endowment and term assurance designed
to provide full life cover in the event of death during the loan
period. If investment returns are high enough it should also provide
sufficient funds to repay the loan at the end of the term and ideally
provide the borrower with a tax free cash surplus. It is not guaranteed
to pay off the loan and that any shortfall will have to be made
up by the borrower.
- (premiums) - a premium structure for a low cost endowment or other
investment policy which allows the level of premiums payable to
commence at a low level and build up over a period of time (normally
the first five years). The total premiums payable under a low-start
arrangement will exceed those payable under a normal contribution
structure to compensate for the loss of investment growth on the
reduced payments in the early years.
- a concessionary bonus (usually by way of a temporary reduction
in interest) payable for maintaining a satisfactory account with
a lender for a period of years. Alternatively, loyalty bonuses may
be offered to existing customers who return to the lender for a
new mortgage. In which case the bonus may be dealt with by way of
a reduction in the set-up costs of the new loan or a lump sum payable
- loan to value ratio (LTV) - is the ratio of the loan amount to
the property valuation expressed as a percentage. E.g. if a borrower
is seeking a loan of £20,000 on a property worth £40,000
it has a 50% loan to value rate. If the loan were £30,000,
the LTV would be 75%. The higher the loan to value the greater the
lender's perceived risk. Lenders will be more cautious in underwriting
high loan to value loans. Loans above normal lending LTV ratios
may require additional security.
Courtesy of UKMortgageangels.co.uk