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Mortgage Jargon

• 100% mortgage - mortgage in which the borrower puts down no deposit and borrows the capital required to buy their desired property in its entirety.
• Advance - term used to describe the amount of money conferred upon you by your lender in order to purchase your property.
• Adverse credit mortgage - see ‘bad credit mortgage’.
• Arrears - owed payments that have not been made; the sum total of overdue payments.
• Bad credit mortgage - a mortgage that is suited to those who may have had credit problems in the past, with an application process that recognises this and may not involve regular credit scoring methods.
• Bank of England base rate - see ‘base rate’.
• Base rate - interest rate set by the Bank of England affected by economic changes and influencing all forms of variable rate interest repayment.
• Buy to let mortgage - a mortgage that is designed for buyers who intend to purchase a property with a view to letting it out.
• Capped rate - a type of interest rate that is guaranteed not to rise above a certain level for a specific period of time.
• Cash back mortgage - a mortgage that offers the borrower payment of a lump sum in addition to the capital requested for the purchase of property.
• Discounted rate - a rate that offers the borrower a discounted version of the standard variable rate for a certain period of time.
• Early redemption penalty - see ‘redemption penalty’.
• Fixed rate - a rate that will remain at a certain level for a specified period of time without changing due to market forces.
• Flexible mortgage - mortgage allowing the borrower to make flexible payments over and under the agreed level of repayment and also take payment holidays.
• Interest only mortgage - a mortgage where repayments cover only the interest that is owed upon the lump sum. An investment product accompanies this type of mortgage and is paid into regularly so that by the end of the mortgage enough capital has accrued to pay off the sum borrowed at the end of the term of the mortgage.
• Joint application - a mortgage application that is shared by two borrowers.
• MIG - see ‘mortgage indemnity guarantee’.
• Mortgage indemnity guarantee - a type of insurance that protects the lender should the property of the borrower be repossessed and sold for a value less than that owed on the mortgage.
• Mortgage indemnity insurance - see ‘mortgage indemnity guarantee’.
• Mortgage protection insurance - a type of insurance that will cover your mortgage payments should you be unable to earn your normal income due to sickness or unemployment.
• Overhanging policy agreement - a clause in a mortgage agreement that will mean that you will be liable for a fine (the redemption penalty) should you decide to end the agreement within a fixed period of time.
• Redemption penalty - a fine imposed on mortgages including an overhanging policy agreement should the borrower decide to quit the agreement within a specified amount of time.
• Remortgage - any mortgage after the first mortgage taken out on a property.
• Repayment only mortgage - mortgage in which each repayment made by the borrower contributes to paying off both the capital borrowed and the interest that has accrued upon it. At the end of the term of the repayment only mortgage, so long as all repayments have been made as agreed, the borrower will owe nothing and will own their property outright.
• Term - the period of time for which it is agreed that the mortgage will run.
• Variable rate - a variable rate will change in accordance with variations in the Bank of England base rate and follow it as it moves up or down.