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UK mortgage terminology

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362:โ€“ the lender may incur many forms of up-front costs (for example property valuation costs, if not charged explicitly; or by offering a lower interest rate in the first few years of the mortgage; or โ€“ not least โ€“ remuneration of intermediaries or sales teams). It would seek to recoup these costs by charging higher interest rates over the remainder of the mortgage term. Therefore, they typically impose a penalty if the borrower repays the loan earlier than planned in order to ensure that at least some of these costs are recouped. These penalties used to be called a 1725: 258:โ€“ the interest rate remains fixed for a set period, typically for 2, 3, 4, 5 or 10 years; after which the arrangement reverts to a variable rate. Longer term fixed rates (over 5 years), if available, tend to be more expensive and/or have more onerous early repayment charges, and are therefore less popular than shorter term fixed rates. The high early repayment charges are necessary to protect the lender against a fall in market interest rates. 22: 387:(HLC) โ€“ a fee levied by lenders in respect of mortgages exceeding a pre-defined loan-to-value (LTV) percentage threshold. Until the 1990s these were typically levied on all mortgages with an LTV percentage over 75%, but the market generally moved to a 90% threshold at that time. Subsequently, certain lenders have moved away from charging an explicit HLC, in favour of charging an increased interest rate on higher LTV mortgages. 270:โ€“ a variable interest rate, but there is also a guarantee that the rate will not rise above a stated maximum. In order to provide this, the lender would probably need to purchase a derivative contract to protect itself against market interest rates rising above the cap, and would need to pass the cost of this on to the borrower. Sometimes there is also a 184:โ€“ where the payments to the lender cover the interest only. No capital is repaid, so that the full amount of the loan is still outstanding at the end of the mortgage term. For example, if the amount of the loan is ยฃ90,000, and the interest rate (charged monthly) is 5.6% per year, the monthly interest payment will be {(90000*5.6%)/12}=ยฃ420. 178:โ€“ in principle, and other things being equal, a flat amount is paid to the lender each month, which covers the interest due for that month on the outstanding loan, plus a repayment of part of the capital. The flat amount is calculated so that the whole of the loan has been repaid by the end of the mortgage term. 328:
Deferred interest mortgage โ€“ a mortgage that allows the borrower to make repayments that are lower than the amount of interest owed. The remainder is added to the principal, which is likely to increase to more than the original amount owed; the remaining interest payments will then be significantly
341:โ€“ where the debt is expressed in a foreign currency (typically one in which market interest rates are lower) in an attempt to reduce capital and interest payments. However this might well turn out to be more expensive for the borrower if the foreign currency appreciates against sterling. 317:
Self-certified mortgage โ€“ a mortgage where the lender does not seek proof of income to demonstrate affordability, but instead relies on a statement of earnings as "certified" by the borrower(s). Self-certified mortgages were banned by the
432:
Net mortgage lending โ€“ the total change in balances outstanding between two points in time, this can also be calculated by adding together the total gross lending in a period, less repayments, redemptions and loan losses in the same time
264:โ€“ where the interest rate charged is lower (e.g. 2% per year lower) for a short fixed period (typically 1 to 5 years), after which the full rate is charged. Sometimes the rate is stepped (e.g. 3% in year 1, 2% in year 2, 1% in year 3). 436:
Redemption โ€“ paying back a mortgage 'early' as opposed to paying back a mortgage following a set repayment plan, typically when remortgaging to another mortgage provider or by way of some other lump sum payment (e.g. when selling the
300:
Let to buy โ€“ a form of transaction whereby homeowners rent out their current main residence, either by obtaining consent from their current mortgage lender or remortgaging to a buy to let loan, in order to purchase another
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Since 1982, when the market was substantially deregulated, there has been substantial innovation and diversification of strategies employed by lenders to attract borrowers. This has led to a wide range of mortgage types.
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Non-status mortgage โ€“ a mortgage where the borrowing is not dependent on the income of the applicant and the applicant states that they can afford the repayments.
252:), plus a fixed interest rate margin. For instance LIBOR + 1.5%, so if LIBOR was 4% per year, the interest rate charged to the borrower would be 5.5% per year. 142:). For a number of years the market operated with minimal state intervention, although this changed at least temporarily following the 2008 nationalisation of 417:
Arrangement fee โ€“ either a percentage of the loan advance or a set fee charged by the mortgage lender or mortgage brokers to provide and arrange a mortgage.
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higher. These mortgages were marketed during periods of high interest rates to young professionals whose salaries were expected to increase quickly.
1749: 1573: 673: 700: 288: 274:, i.e. a stated minimum rate as well as a maximum. Capped rates are often offered over periods similar to fixed rates, e.g. 2, 3, 4 or 5 years. 130:
The UK mortgage market is one of the most innovative and competitive in the world. Most borrowing is funded by either mutual organisations (
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mortgage โ€“ a mortgage arranged in connection with the "right to buy your home" legislation for council or housing association tenants.
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Valuation fee, which pays for a chartered surveyor to visit the property and ensure it is worth enough to cover the mortgage amount.
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Introductory period โ€“ the period of time where there is a lower interest rate on a mortgage such as on a fixed rate mortgage.
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Mortgage gross lending โ€“ all new lending done in a given period, including remortgaging and new loans for house purchase.
335:โ€“ a mortgage where the borrower can reduce the interest charged by offsetting a credit balance against the mortgage debt. 197:
Investment backed mortgage โ€“ an interest-only mortgage where the capital is planned to be repaid from the proceeds of an
72: 307:โ€“ a mortgage that allows additional capital payments without penalty and often allows payment holidays or underpayments. 1666: 1626: 870: 689: 105: 54: 1656: 860: 785: 538: 1682: 1583: 1568: 875: 201:(ISA) or other investment plan at the end of the mortgage term. Sometimes these are referred to as ISA mortgages. 800: 43: 1438: 710: 190:โ€“ an interest-only mortgage where the capital is planned to be repaid from the maturity value of one or more 562: 371: 1563: 1057: 440:
Remortgaging โ€“ refinancing of a mortgage, usually understood to mean moving from one provider to another.
319: 242:โ€“ the default variable rate the lender offers to mortgage borrowers with a standard residential mortgage. 1558: 198: 1611: 1453: 960: 940: 610: 338: 79: 1209: 1013: 865: 845: 1521: 1128: 993: 885: 429:
Mortgage balances outstanding โ€“ the total mortgage balances outstanding at a given point of time.
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used to purchase residential real estate with the intention of letting it to paying tenants.
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Product fee โ€“ a fee payable by the borrower to obtain a (usually incentivised) product.
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Adverse credit mortgage โ€“ mortgages aimed at borrowers with credit problems, e.g.
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is used to repay an interest-only mortgage on retirement.
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Netherlands Journal of Housing and the Built Environment
476:"Ten years after the nationalisation of Northern Rock" 688: 278: 501:"Housing Finance Deregulation: Britain's Experience" 46:. Unsourced material may be challenged and removed. 639:"Glossary: Introductory period | Nuts About Money" 411: 234:โ€“ the rate varies at the discretion of the lender. 1741: 1574:Institute of Workplace and Facilities Management 674: 158: 1617:Authorised Conveyancing Practitioners Board 1662:Tenancy Deposit Scheme (England and Wales) 1622:Building regulations in the United Kingdom 681: 667: 120:mortgage terminology in the United Kingdom 212: 106:Learn how and when to remove this message 1594:Royal Institution of Chartered Surveyors 498: 1750:Mortgage industry of the United Kingdom 611:"Deferred Interest Mortgage Definition" 1742: 374:regulation they are referred to as an 204:Pension mortgage โ€“ where money from a 1589:Royal Institute of British Architects 1579:National Association of Estate Agents 662: 138:) or proprietary lenders (typically 44:adding citations to reliable sources 15: 1708:Public estate in the United Kingdom 598:New mortgage rules come into force. 118:This article gives descriptions of 13: 1667:Tenancy deposit schemes (Scotland) 1252:Nathaniel Lichfield & Partners 871:London & Associated Properties 279:Other ways to categorise mortgages 14: 1771: 1755:Real estate in the United Kingdom 1627:Council for Licensed Conveyancers 861:London & Continental Railways 786:Capital & Counties Properties 690:Real estate in the United Kingdom 153: 1724: 1723: 1657:Short Assured Tenancy (Scotland) 876:London & Regional Properties 194:at the end of the mortgage term. 20: 1683:British Railways Property Board 1584:National House Building Council 1569:Building Research Establishment 412:Statistical and industry jargon 125: 31:needs additional citations for 1439:London & Stamford Property 801:Coin Street Community Builders 631: 617: 603: 591: 588:Commercial Trust. 21 Jun 2013. 579: 555: 531: 492: 468: 391: 370:; however, since the onset of 1: 711:Economy of the United Kingdom 461: 372:Financial Services Authority 7: 1564:British Property Federation 586:What exactly is let to buy? 444: 320:Financial Conduct Authority 10: 1776: 199:Individual Savings Account 1721: 1675: 1612:Assured shorthold tenancy 1602: 1549: 1497: 1454:Primary Health Properties 1382: 1307: 1114: 974: 941:St Martins Property Group 741: 734: 696: 339:Foreign currency mortgage 159:Ways to repay the capital 55:"UK mortgage terminology" 866:London Central Portfolio 701:Affordability of housing 354:Early repayment charge, 1713:UK mortgage terminology 1522:Howard de Walden Estate 1178:Cushman & Wakefield 1129:BNP Paribas Real Estate 499:Stephens, Mark (1993). 345: 206:personal pension scheme 1642:The Property Ombudsman 1632:Land tenure in England 1459:Redefine International 1414:Great Portland Estates 1161:Colliers International 643:www.nutsaboutmoney.com 376:early repayment charge 239:Standard variable rate 213:Types of interest rate 182:Interest-only mortgage 1247:LSL Property Services 1237:John D Wood & Co. 916:Sellar Property Group 791:Capital & Centric 385:Higher lending charge 287:mortgage โ€“ a form of 1195:Deloitte Real Estate 1039:McCarthy & Stone 946:St Modwen Properties 322:(FCA) in April 2014. 40:improve this article 1272:RH & RW Clutton 1134:Strutt & Parker 1069:Retirement Villages 921:Shaftesbury Capital 901:Opal Property Group 836:Heron International 480:The British Academy 289:commercial mortgage 781:Canary Wharf Group 776:Cain International 742:Developers, Owners 567:www.experian.co.uk 527:– via JSTOR. 517:10.1007/BF02496495 364:redemption penalty 356:redemption penalty 192:endowment policies 188:Endowment mortgage 176:Repayment mortgage 132:building societies 1737: 1736: 1545: 1544: 1500:Estates in London 1424:Hansteen Holdings 936:Span Developments 726:Property retailer 600:FCA. 26 Apr 2014. 305:Flexible mortgage 116: 115: 108: 90: 1767: 1727: 1726: 1532:Pettiward Estate 1399:Big Yellow Group 1372:UK Property Shop 1294:The Modern House 739: 738: 683: 676: 669: 660: 659: 653: 652: 650: 649: 635: 629: 628: 621: 615: 614: 607: 601: 595: 589: 583: 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Index


verification
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"UK mortgage terminology"
news
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books
scholar
JSTOR
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building societies
credit unions
banks
Northern Rock
Repayment mortgage
Interest-only mortgage
Endowment mortgage
endowment policies
Individual Savings Account
personal pension scheme
Variable rate
Standard variable rate
LIBOR
Buy to let
commercial mortgage
Right to buy
Flexible mortgage
county court
Financial Conduct Authority

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