Glossary

Accident, Sickness and Unemployment insurance (ASU)
This is a form of insurance taken out to cover your mortgage repayments in the event that you are made redundant or suffer an illness or accident (as included in the policy) that leaves you unable to work.

Annual Percentage Rate (APR)
This is the rate of interest which represents the true cost of a loan (including mortgages) as it takes into account not only the basic rate of interest charged on the loan but also all the other related fees and charges over the course of the loan term.

Arrangement Fee
This is an administrative fee charged by lenders to cover their costs in organising the mortgage and the related paperwork.

Arrears
This is the term for loan payments not made by the specified date.

Base Rate
This is the interest rate provided by the Bank of England and it is the rate upon which mortgage lenders base their own interest rates.

Buildings Insurance
A compulsory form of insurance intended to provide cover for the physical structure of your property.

Capital
This is also known as the 'principal' and refers to the original loan amount.

Capped Rate
An agreed variable interest rate, which usually only applies for a specific period (typically between 1 and 5 years). During the set period the rate may rise or fall in line with the market but it will not rise above the 'cap'.

Cash Back
A type of mortgage product where the borrower receives a lump sum cash payment as an incentive to borrow. Normally used as a way of attracting new customers.

County Court Judgement (CCJ)
This is the term for a judgment for debt (loan defaults, for example) made against you in the county court. If a judgment has been made against you but you repay the debt within 30 days the CCJ will not go into the public register. If you do not repay the debt within this period, the CCJ will be entered into the register. It will remain there for up to 6 years and will effect any applications for credit you may make in the future.

Completion
The finalisation of the legal processes related to the mortgage and usually the point at which you take possession of the property.

Contents Insurance
This is insurance intended to cover the personal possessions kept in your property against loss or damage.

Conveyancing Fee
This is a fee charged by your solicitor for processing the legal work related to your property, such as stamp duty, land registry costs and local searches.

Credit Check
This refers to a check of your credit history which will be made by most lenders when you apply for a mortgage.

Discounted Rate
A rate of interest offered by a lender for a set period of time. The rate is usually fixed at a certain amount (of the lenders choosing) below their Standard Variable Rate.

Early Redemption Penalty
A charge made by your lender if you choose to opt out of your mortgage (in the case of remortgaging, for example) before the date agreed to in your mortgage contract. The highest penalties are charged if you switch lenders while still in an introductory period.

First Time Buyer
This refers to someone who is purchasing a home for the first time.

Fixed Rates
This is a rate of interest usually offered for a set period which remains the same throughout the specified period, regardless of changes to interest rates in the market

Interest Only
This is a form of mortgage repayment where throughout the entire term of the loan the repayments consist solely of interest. The capital of the mortgage remains untouched and a separate savings repayment vehicle such as an endowment or pension plan must be taken out to ensure that the balance of the mortgage can be paid off when the loan term ends.

Low Cost Endowment
A type of repayment vehicle taken out in conjunction with an interest only mortgage. Payments are made into a fund which is then invested in stocks and shares with the intention that at the end of the loan term the investments will have generated enough of a return to pay off the balance of the mortgage. There are however, no guarantees that this will be the case.

MPPI
Mortgage Payment Protection Insurance taken out as a separate policy to protect your mortgage repayments. See also ASU.

Redemption
This occurs when you make your final payment mortgage payment.

Remortgage
A loan taken out, usually with another lender, to repay your existing loan in order to benefit from a new mortgage deal which will result in lower repayments.

Self Certification
A non-standard type of mortgage commonly used by the self-employed where the borrower states their own income because due to the nature of their employment they can't provide the usual forms of proof of income, such as pay slips.

Stamp Duty
A Government Tax which is charged as a percentage of the purchase price of all property transactions in the UK .

Valuation
This refers to the inspection that the lender will carry out to assess the quality of a property and whether it represents good security.

Valuation Fee
This refers to a fee paid by the borrower to cover the charge for the lender's inspection of the property.

Variable Rate
This rate of interest moves up and down with the fluctuations of the market.