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Glossary of Mortgage, Finance and Property Terms
Ability to Pay The process of determining an applicant's credit standing by calculating how much will be left to make mortgage payments after all deductions from gross pay have been made. See Credit Check
Acceleration Clause Allows the lender to demand and collect the full balance of the loan if the borrower misses one or more payments.
Acceptance To accept an offer or a counter-offer thereby creating a legal contract. These may be conditional on certain actions, express (in writing) implied (by the actions of the parties) or qualified in some way, depending on the circumstances. See Conveyancing
Accident An event which is unforeseen and unexpected, usually referring to personal injury or fatality, but sometimes to property. The financial loss through accidents would affect the ability to make mortgage payments unless it is limited by insurance.
Accident, Sickness & Unemployment Insurance (ASU) An insurance policy which take care of all or some percentage of mortgage payments in the event of sickness, an accident or loss of employment income. Sometimes called Income Protection Insurance, Accident, Sickness and Redundancy Insurance (ASR) or Mortgage Repayment Protection (MRP) or Mortgage Payment Protection Insurance (MPPI).
Accidental Damage Cover An addition to an insurance policy on buildings / contents to cover against accidental damage to the structure of the property or its contents.
Account Formal contractual relationship providing for regular banking, brokerage or business services: Bank Account, Mortgage Account, Credit Account, Trade Account, Offshore Bank Account, Foreign Currency Account.
Accountant A professional who is qualified to account for money and finance and authorised to audit and prepare tax returns: Chartered or Certified Accountant
Accountant's Letter A letter supplied by an accountant (normally chartered or certified) as confirmation of income for the self-employed or those of independent means.
Actual Completion Date The date when completion takes place or is treated as taking place for the purposes of apportionment and calculating interest.
ADR - Alternative Dispute Resolution The phrase Alternative Dispute Resolution covers a variety of processes which provide an alternative to litigation in the courts. It can be used to resolve disputes where it can be agreed between the parties to use these alternatives.
Added to Loan Additional costs associated with arranging a mortgage (e.g. search fees etc) which can be added to the amount borrowed. The additional costs allowed will vary from lender to lender lender.
Addendum An amendment or addition to the conditions contained in a docuement or an auction catalogue. This may be a written notice, or announced at an auction.
Administration Charge A fee charged by a bank or other financial institution to cover additional account running costs. Typically these would be for sending letters, references etc.
Administration Fee A fee paid to the lender to cover the costs of processing the application which may include the valuation fee. If an application fails to proceed, this fee may not be refunded, even in some cases where the valuation has not been done.
Advance The amount of the actual mortgage loan.
Adverse Credit This applies to someone with a poor credit history (Low Credit Score) due to late or failed mortgage, rent or credit payments, having County Court Judgements (CCJs) on their record, Individual Voluntary Arrangement (IVA) or bankruptcy.
Advice Centre A centre offering advice on personal issues, including financial problems such as debt, unemployment or divorce. Citizens' Advice Bureaux, Student Advice centres, Job centres, and some councils and solicitors offer free advice.
Affidavit A statement made in writing and in the presence of a solicitor (commissioner for oaths) or other legal professional. From the Latin affidare, affidavit "I have pledged".
Affidavit Swear Fee A fee charged where a mortgage lender is required to swear an affidavit to a solicitor (commissioner for oaths) in connection with mortgage arrears.
Agreement in Principle Where agreement has been reached and accepted for a mortgage or loan but the final approval will depend on other issues such as confirmation of income and a valuation report.
Agricultural Restriction Where a covenant exists in the deeds of a property restricting the use of the property to agriculture.
Amortise (depreciate) To amortise an asset is to write it off (depreciate) in accounting terms over its life or estimated life (Latin - Mort = Death). A leasehold interest needs to be written down to a nil value at the exact time the lease expires. Physical assets which wear out need to be depreciated in the books. Unfortunately in the UK, profits set aside to amortise a lease or value of a property are not tax deductible, except in the case of plant and equipment - known as capital allowances. See Mortgages
Amortisation The process of paying off a loan through structured periodic payments. Mortgage payments are a common form of amortised loans, calculated to exactly pay-off the capital value and the interest amount of the mortgage with a specific number and amount of monthly payments usually over several years. The terms "mortgage" and "amortisation" have the same Latin root word "mort" meaning to kill or "kill off".
Annual Any payment due once each year - yearly.
Annual Bonus A bonus which is paid annually on an endowment mortgage, dependent on the performance of the investment fund being used to repay the mortgage.
Annual Percentage Rate (APR) An interest rate quoted by lenders to identify the true cost of borrowing and a standard in order to provide a method of comparing costs of different loans. It is now a legal requirement that a true APR figure be provided with any loan. The APR takes into account all fees and charges as well as the monthly payments over the life of the mortgage or loan.
Annuity A special investment whereby a lump sum is invested with a financial institution in return for a guaranteed income for the rest of your life. On death the annuity can continue to be paid to a partner for the rest of their life.
Annuity Mortgage Another term to describe a capital & interest repayment mortgage.
Applicant(s) The individual or individuals applying for a mortgage and whose name(s) will appear on the mortgage documents. Single or Joint Applicants.
Applied Or Nominal Interest Rate The rate of interest used to calculate the amount of re-payment due.
 
APR See - Annualised Percentage Rate.
Achitect A professional employed to design plans and supervise work to buildings. Some building works require the approval of an RIBA qualified Architect, to get approval for a loan or re-mortgage.
ARLA The Association of Residential Letting Agents - a professional association to which some letting agents belong. They lay down a code of conduct which includes carrying adequate insurance cover to which members must comply.
Arrangement Fee A fee covering the administration work involved in arranging a mortgage, usually where there are special complications or special rate. Sometimes called: Application Fee, Booking Fee, Reservation Fee.
Arrears When mortgage payments fall behind schedule. This can also mean when the payments are to be made: a payment after the event, e.g. salaries are usually paid "monthly in arrears".
Arrears Fee Charges made for late payments - Late Payment Fee.
Asking Price The starting price at which a property is put on the market by the owner/agent. After negotiations the property often sells (the deal is closed) at a different price to the original asking price.
Assignment This is a legal term used to describe the transfer of ownership of an interest in a property asset or policy (e.g. a Lease, Endowment or Personal Pension Plan). In the case of mortgages, the ownership of a policy can be transferred to a lender so that the proceeds of the policy are used to redeem the loan.
Assumption Where a buyer "assumes" (takes over) the loan payments and obligations of the seller. In this case where the purchaser defaults on the loan both the buyer and seller can be held responsible for the debt.
Atrium A inner courtyard or centre of a building open to all floors and the sky.
Attic A space between the ceiling an the roof of a building. People often convert this space into extra rooms, significantly increasing the value of a property.
Auction The process buying at a price that arises from a process of bidding. Property auctions are arranged on a regular basis throughout the country. If you bid for and win a property at auction you will be legally bound to buy it, therefore you need to arrange finance before the auction takes place. See Auctions
Auctioneer The person who controls the bidding process at an auction.
Audited Figures A set of business accounts that have been audited and ratified by an accountant. The self-employed commonly need to provide 3 years' worth of audited figures to get a mortgage.
Auditor Independent accountants who verify the annual accounts of a firm or company and certify in the auditors report that these are correct, or need to be qualified in some way.
ASR See - Accident Sickness and Unemployment Insurance.
Australian Style Mortgage A mortgage where the repayment period is reduced by interest being calculated on a daily basis.
ASU See - Accident Sickness and Unemployment Insurance.
Attitue to Risk Your own feelings towards the amount of risk you are willing to take when investing money. High risk investments have the potential to give the best returns, but also the greatest losses, they are also more volatile in price movements. Attitudes vary as to an individual's own personality and stage in life. As people age their attitudes to risk are usually more cautious.
Average (Mean) A sum of an amount divided by a number count. The average or mean is statistical term - e.g. average house price, average earnings, average rate of inflation.
BACS Banks Automatic Clearing System - payment method is ideally suited to business-to-business transactions an one-off large money transfer payments. It is already used to pay over 70 per cent of salaries of the UK workforce.
Bank A financial institution authorised and controlled by the Bank of England under the Banking Act 1987
Bailiff A court official, or private debt enforcer entitled to repossess goods or property belonging to an individual or business failing to make their credit payments, and who also fail to agree to a re-payment schedule with their creditors.
Bankruptcy A process where a debtor that, upon voluntary petition or one invoked by the debtor's creditors, is judged legally insolvent. The debtor's remaining property is then administered for the creditors or is distributed among them. Bankruptcy remains on an individual's credit rating and limits a person's ability to borrow.
Bankruptcy Discharge In the normal course of events a debtor is discharged from bankruptcy after three years and the debt is treated as paid, but credit reference agencies can identify former bankrupts for up to 15 years after their discharge.
Base Rate The interest rate from which lenders set their rates for lending and savings products. It is usually based on the Base Rate set by the Bank of England. The minimum lending rate was abolished in 1981. The base rate was introduced and used to refer to the mortgage lender's standard variable rate.
Basic Income This is the gross salary before taxes, excluding commissions, overtime, bonuses etc.
Basis Point A basis point is 1/100th of 1%. For example the difference between a loan at 7.00% and a mortgage at 7.25% is 25 basis points.
Before Tax Income An individual's total (gross) income before any taxes are deducted.
Benefit Period Time period in which the interest rate of a mortgage is discounted. (See fixed or capped mortgage).
Bidding by Auctioneers

The auctioneer is able to take bids from: People who are not present but have made proxy bids, People who are bidding by telephone, People who have instructed him by letter or fax to bid up to a certain sum on a lot, Himself on behalf of the vendor, Himself on behalf of himself or his firm, Broker Fee, A fee charged by a broker or other intermediary for advising / negotiating a loan.

Black Listed This is a colloquial term for someone with a poor credit score, originating from gentlemen's clubs (blackballing) to be excluded as a member. Being declined credit does not necessarily mean being blacklisted - it could just mean the individual did do not meet the criteria for one particular institution at that time.
Bonding Scheme An agreement by members of a profession or trade to establish a central compensation fund which consumers can draw on in cases of fraud or insolvency.
Booking Fee A fee charged guaranteeing a special rate, providing that the application is received by a given date. Also called a Reservation Fee.
Breach of Contract Failure to fulfil the terms and conditions of a contract.
Breach of Covenant Failure to obey all terms (promises) contained in and agreed to in a legal agreement.
Bridging Loan A short-term loan used as a stop gap measure to provide sufficient funds when buying a new property before selling the existing one.
Broker A person who advises on and/or facilitates the purchase of a financial product. A third party individual who attempts to find the best available financial or other package. Brokers could be affiliated with a larger network in finance, or they may be independent. In the USA property or estate agents are known as brokers.
Brokerage Term used to describe the work of a broker.
Broker Fee The fee charged by a broker or financial adviser for his work - advising and/or facilitating the purchase of a financial product or property.
BSA A trade/professional association for building societies - the Building Societies Association.
Building Society Are mutual organisations owned by their members and regulated by the Buildings Societies Act. Some of these in the UK have de-mutualised and are now owned by shareholders. The Building Societies Commission lays down restrictions on their lending criteria.
Buildings Survey Structural Survey on the Property
Buildings and Contents Insurance Combined insurance covering both the structure of the property, and its contents. Where the property is leasehold the buildings insurance will normally be arranged by the freeholder and the cost charged on to the leaseholders via service charges.
Buildings Insurance Insurance protecting against loss or damage to the main structure of the property including fixtures and fittings, perimeter fences/walls and outbuildings.
Business Day A day on which banks are open for business other than Saturdays, Sundays and bank or public holidays.
Buyer's Market This is when the buyer is more in demand than the seller. The buyer is more able to dictate terms. (the opposite is a seller's market)
Buy-to-Let Mortgage A mortgage designed for those wanting to buy a property with the intention of letting it to others. See Buy-to-Let
Cancellation Clause A clause incorporated into a loan agreement allowing a lender to demand the outstanding balance at any time.
Cap A ceiling applied to a Capped-Rate Mortgage meaning the interest rate cannot increase above this.
Cap and Collar Mortgage A mortgage with a maximum AND minimum interest rate over a given period. The Cap specifies the maximum rate and the Collar the minimum rate. The interest rate may fluctuate between these rates for the given period.
Capital Gains Tax A tax on gains made in the value of an investment asset over time. See Taxation
Capital and Interest Mortgage Paying off capital as well as interest as opposed to interest only. See - Repayment Mortgage and Interest Only.
Capital Raising The process of re-mortgaging (changing lenders) where additional funds are raised, over and above the existing mortgage amount - re-mortgaging a property based at a higher value (capital appreciation) compared to the original purchase price. The capital raised is the amount left over after repayment of the original loan is deducted from the new loan. Lenders may take into account increases in property values, property improvements and rental income as part of the re-mortgage, if they are likely to significantly raise the value of the property. The process is commonly used by investors to take out equity from their properties, thereby releasing funds to use as deposits for further property purchases.
Capitalise (capitalisation) To capitalise interest or amounts is to add it to the cost of the project (to the capital value) as opposed to charging it as a revenue expense. For example, repairs to a property may be allowable as an expense against profits for tax purposes, but an improvement must be capitalised. You can claim the cost of the improvement only when the property is sold as an allowance against capital gains. To capitalise a (rental) income flow (used to value properties) is to put a present value on future income. If an investor buys a property at 10 times the annual rent (10 year's purchase) then 10 is the capitalisation (cap) rate.
Capitalisation Rate or Cap Rate The ratio used to estimate the value of income producing properties. It is the net operating income divided by the sales price or value of a property expressed as a percentage. Investors, lenders and valuers use the cap rate to estimate the purchase price for different types of income producing properties. The relationship between estimated Value, Income and interest Rate (yield) - V = I / R, I = V x R, R = I / V  See Investment
Capped Rate An interest rate that is guaranteed not to rise over a given period, but which can fall during that period.
Capped Rate Mortgage A mortgage where the interest rate is guaranteed not to rise above a maximum level over a given period, but which can fall during that period. See also Cap and Collar Mortgage.
Cash APR The APR charged by credit cards for cash advances. This is usually higher than the purchase APR. The cash APR quoted also includes any cash advance handling fee as part of the calculation.
Cash Back Mortgage This is the sum of money paid to the borrower when a Cash Back Mortgage completes. This may be a fixed amount, or a percentage of the mortgage. The amount of cash provided on completion is usually calculated as a percentage of the overall loan amount, though it can be a set figure. This percentage typically varies between 1% to 5%.
Cash Buyer Person who does not need a mortgage in order to buy a property and who therefore is not dependent on selling an existing property to progress the sale.
Cash Deficit (Mortgage) The amount of money still owed to the lender at the end of the repayment period of an interest only mortgage.
Cash Discount (Mortgage) A discount offered to a purchaser in a store for paying in cash, as the retailer will avoid paying any transaction charges and will get the funds instantly. Larger multiple stores are unlikely to offer cash discounts, as their transaction charges are calculated from head office.
Cash Flow Perhaps the most important aspect of a property investor's remit: maintaining positive cash flow is paramount otherwise you go bust. Budgeting your cash flows - rent (in) and and expenses (out) using a spread sheet is an important exercise. It is quite possible to make big profits (your property value has increased by 50%) but go bust because you can't make this month's mortgage payments. See Cash Flow
CAT Mark A CAT make appears on products that meet government standards for financial products. This gives an indication of the quality of the financial product, but not its suitability for any one individual.
CAT Standard CAT is a government standard for financial products. It sets out minimum conditions for Charges, Access, and Terms. A financial product meeting the standards can display the CAT mark.
Caveat An injunction to stop proceedings; a warning. Formal notice asking a court to suspend action until the party which filed the challenge can be heard.
Caveat Emptor From the Latin "let the buyer beware." A legal and moral obligation on purchasers of property to satisfy themselves that it is free from defects.
Chain Where the sale of one property is dependant on the sale of one or more others for finance. If the people buying from you are also depending on others buying/selling their homes then this is a "chain".
Charge (see legal charge) The legal document held by Land Registry that records who has a claim to the legal title on a property e.g. the mortgage lender or a creditor. It is the main type of mortgage deed in England and Wales.
CHAPS The Banks' Clearing House Automated Payment System. A system allowing money to be transferred from one bank account to another on the same day.
CHAPS Fee This is a fee that lenders and solicitors charge for the same day transfer of funds, usually to complete a mortgage speedily.
Commission A fee which is paid by mortgage lenders to a brokers for introducing business.
Compulsory Purchase Order (CPO)

Local authorities and government agencies in England have powers under various acts of parliament, to buy land that is not necessarily for sale by the owner. These are called 'compulsory purchase' powers and are important for local authorities and other public bodies to use in order to buy land that is needed to help deliver social and economic changes.

Completion This is a date which is usually agreed at the time Contracts are Exchanged when the buyer's solicitor transfers the funds to complete the purchase of a property to the seller's solicitor. With re-mortgages, it is usually the date that the mortgage is transferred from existing to new lender.
Completion Fee An fee deemed to be for administration sometimes payable to the lender on completion of the mortgage.
Compulsory Insurance See - Conditional Insurance.
Conclusion of Missives The equivalent Exchange of Contracts in Scotland.
Conditions of Sale - Sale by Auction Conditions of sale are normally the General Conditions of Sale, The Special Conditions of Sale, The Addendum and any Amendments. Can also have Extra Conditions or other conditions under any other name. Each Lot is sold subject to these conditions of Sale.
Conditional Insurance Insurance that the borrower is required to take out as a condition of the loan. Examples are insurance on the property - building, contents, or on the person - accident, sickness and unemployment insurance (ASU).
Contents Insurance Insurance covering loss or damage to the contents (not fixtures and fittings) which would normally kept in the property. Very expensive items should be named and listed on the policy.
Converted Flat / Apartment A flat, Studio or Apartment that has been created within a large property by converting and sub-divinding.
Conveyancing This legal work and process involved in the purchase and sale (transfer) of land or the transfer of a mortgage. This is usually, but is not always, done by a solicitor or licensed conveyancer. See Conveyancing
County Court Judgement (CCJ) A judgement set against a person who has not paid off a debt, issued by a county or higher court by the person or company owed the money successfully suing for the debt. The judgement will set-out the terms under which the person owing the money is required to repay. See Credit Check
Credit Check A report obtained from a credit reference agency showing a person's Credit File, which indicates his use of credit. The information obtained includes credit card repayment, outstanding debts, past or current arrears, County Court Judgements and CCJs) etc. See Credit Check
Credit Reference Agency These are organisations that specialise in searching financial and public records for information about the credit payment records of individuals. Searches include residency and court judgements, and a  score for previous credit use and/or fraud. If you apply for a mortgage it is a routine procedure for the lender to check your records with a credit reference agency. See Credit Check
Credit Report  See Credit Check
Credit Search   See Credit Check
Current Account Mortgage This is a mortgage which is linked to a bank current account. This gives a very Flexible Mortgage allowing cheques to be written, overpayments and underpayments and payment holidays.
Debt Money owed to a person, company or institution
Debt Consolidation The combing of two or more outstanding loans into one lower rate loan, which invariably means extending the time scale of the repayment. The new loan repays off all the old loans. See also IVA
Deeds A formal written document that states who owns a property and enables transfer of ownership from seller to buyer (vendor to purchaser). A lender will record details of the mortgage on the deeds, which means they can take ownership of the property if the borrower defaults on the loan payments.
Deposit The amount of the borrower's own money used to buy a property. It's the difference between the purchase price of a property and the amount being borrowed.
Disbursements Legal fees and admin costs that a solicitor or licensed conveyancer pays on behalf of their client, for example on searches, stamp duty, land registry charges, CHAPS fees etc., which are then added to the client's bill.
Discounted Rate A guaranteed reduction in the interest rate for a limited period of time.
Discounted Period The length of time a Discounted Rate is payable on the mortgage. Range from a matter of months to several years.
Diversification Wise investors follow this principle: they spread their risk among many different types of investment - don't put all your eggs in one basket. A properly balanced portfolio will contain elements of share, deposit-based and property investments. Fund performance and objective achievement are not guaranteed.
Draw Down Facility A pre-arranged facility which allows the borrow to draw down funds in stages as and when required to purchase or develop a property, or to draw additional funds under an existing mortgage agreement.
DSS See - Housing Benefit
Early Redemption Penalty A fee charged by a lender if all or part of a mortgage is paid off early, before the expiry of a Fixed, Discounted or Capped Rate mortgage period. The penalty usually equals several months' interest, or is a percentage of the total loan amount. Sometimes called an Early Redemption Fee or Prepayment Penalty.
Emergency Repair Insurance

This type of coverage will provide assistance for the landlord and the tenant in the event of an emergency at the property such as: Failure of the electricity supply, Failure of the cooking facilities, Lost keys, Plumbing problems, Leaking roofs or guttering, Security of doors and windows. It should be stressed that all of these policies cover EMERGENCY ASSISTANCE not a repair service through lack of routine maintenance.

Endowment Policy The is an interest only mortgage linked to an investment product, where the investment returns are meant to pay off the capital at the end of the mortgage term and lease some surplus capital as well. In fact these products became unpopular when lower stock market returns meant that many will not produce enough of a return to pay off the capital owed at the end of the term.
Endowment Mortgage An investment product assigned to an interest only mortgage where the proceeds are used to pay off the capital at the end of the mortgage term.
Environmental Search

An Environmental Search may be necessary to ascertain whether the property you are intending to purchase may potentially be affected by factors such as flooding, contamination, subsidence or landslip. The search provides information on these factors together with information regarding air quality, landfill sites, waste sites or contaminated sites near the property.

Equity In housing terminology, it is the difference in the market value of the property at any one time and the amount outstanding on any loan secured against it.
Escalation A process where a pension plan contributions automatically increase each year to off-set the effects of inflation.
Estate Agency Fees The amount an estate agent charges the Vendor (seller) of the property. Normally a percentage of the sale price.
Excess The initial amount of an insurance claim that the insured will have to pay him or herself..
Exchange of Contracts (Not in Scotland) A stage in the buying/selling process when the deposit is paid over and the sale of the property on the terms agreed becomes legally binding.
Existing Liabilities The borrow individual's existing financial commitments which lenders take into account when assessing ability to make future mortgage repayments. This will include existing loans and credit card payments, hire purchase and rental agreements, maintenance payments etc.
Exit Fee Fees charged by lenders when you pay off your mortgage or other form of financing.
Extended Cover An insurance policy extended to cover things over and above the basic policy. For example, valuable items such as computers, photographic equipment, paintings can be specially covered. There will be an additional cost which will be added to the annual premium.
Feuhold (Scotland) Similar to freehold in England and Wales. A Feudal Superior however has an superior interest in the title of the property and can impose certain restrictions. See Conveyancing
First Charge A contractual document recording a lender's or another party's rights to the title of a property in priority to any other party (e.g., 2nd Charge) if the conditions of the legal charge are not met.
First Time Buyer (FTB) A buyer who has not owned a property before. Buyers with no property to sell may be deemed FTBs even if they have previously owned, or in the case of joint applicants, where one only has not owned before.
Fixed Rate Mortgage A mortgage where the interest charge rate is fixed for an agreed period  - usually a number of years or until a fixed date in the future. The mortgage then usually reverts to the lender's variable rate.
Fixtures (and Fittings) Items attached to and therefore forming part of the property. Fixtures & fittings are usually valued with the property, and for insurance, whereas contents are not. e.g., fitted wardrobes, kitchens, bathrooms etc.
Flexible Drawdown Where loan moneys can be drawn down flexibly, i.e. as and when required - perhaps for a development project or refurbishment.
Flexible Mortgage A mortgage which allows underpayments and overpayments and in some cases payment holidays on a mortgage without any penalty.
Foreign Currency Mortgage A mortgage taken out in a currency other than the currency of the country where the property is located. For example, a British investor may borrow in Sterling to by a property in Spain
Freehold Where the owner of a property has legal title to both the building and the land on which it is built. In Scotland this is known as Feuhold. See Conveyancing
Freeholder The person who owns the Freehold (as opposed to just the leasehold) of a property. See Conveyancing
Full Status - Mortgage A mortgage where the lender requires proof of income and credit references in order to verify the applicant's ability to meet the mortgage repayments.
Full Structural Survey A detailed examination of a property's structural condition usually by a Chartered Building Surveyor (RICS member) or other qualified person. A structural survey report will normally provide a full and detailed description of the structure, list all the defects and alert the recipient if a specialist report is needed, e.g. drainage, damp, wood or subsidence. Also called a Buildings Survey or Full Structural Survey, and is more detailed than a Home Buyer's Report.
Further Advance An additional loan which is added to and combined with an existing mortgage.
Gazumping Where a seller has accepted an offer but then takes a higher one. An Estate Agent is legally bound to pass on all offers to their client in writing.
Gazundering Gazumping in reverse. Where the buyer is in a stronger position than the seller (buyer's market) and threatens, just before contracts are exchanged, to pull out of a deal unless the price is reduced.
Gearing A term used to describe the level of debt (sometimes called loan to value ratio LTV) compared with equity capital, and usually it is expressed as a percentage. So a property with gearing of 90 per cent has levels of debt which are 90 per cent of its equity capital. Obviously, the higher the gearing percentage of a borrow, the higher the risk of being unable to meet mortgage re-payments. See Investment
Gross Annual Income The annual (Yearly) income before taxes are deducted.
Growth Strategy Is one that seeks to maximise growth in capital value of a property investment without necessarily having to generate any minimum level of income. An extreme example is where the house is bought purely as an investment and left vacant. See Investment
Ground Rent An annual charge payable by property leaseholders to the freeholder.
Guarantor A person who has voluntarily agreed to be legally liable for the repayment of rent or a mortgage if a tenant or borrower fails meet repayments. A guarantor is sometimes required by a lender or landlord to support a borrower with insufficient income to qualify otherwise.
Guide Price

A guide price gives an indication of the price that the property is expected to sell for at auction and what the vendor is hoping to achieve. Guide prices are for information only and shouldn’t be relied on as an indication of reserve price, or representing professional valuations for any purpose. Purchasers are deemed to have relied on their own knowledge or obtained the independent, professional advice of others.

Heave Heave is the opposite of subsidence. The foundations are disturbed by the earth swelling usually due to increased levels of moisture.
High Loan To Value Fee An additional fee sometimes charged by a lender where the mortgage is above a specified percentage of the property value (usually a maximum of 75%-80%). This is also variously known as High Percentage Loan Fee; Additional Security Fee; Mortgage Indemnity Premium or Protection (MIP); Mortgage Indemnity Guarantee (MIG); Mortgage Indemnity Fee; Mortgage Guarantee Insurance (MGI)See Investment 
High Percentage Loan Fee See - High Loan to Value Fee.
HMRC Her Majesty's Revenue and Customs, know as The Inland Revenue prior to the merger with HM Customs and Excise.
Home Buyer's Report A surveyor's report on the condition of a property. A Home Buyers Report will provide more detail than a Valuation Report but less detail than a Full Structural Survey. See also Valuation and Structural Survey.
Home Buyer's Valuation Fee A fee payable to a Surveyor for producing a Home Buyer's Report.
IFA See - Independent Financial Adviser.
Illustration A calculation of the monthly payments to be made under a particular loan arrangement, together with the costs to set it up. Usually shows the monthly payments for the first five years, and the cost of all fees associated with that mortgage product. See also Quotation.
Impaired Credit Someone with a poor credit history owing to late credit card, mortgage or rent payments, or someone with County Court Judgements (CCJs), IVA or bankruptcy. Impaired credit mortgages are specialist loans for those whose credit problems disqualify them from using mainstream lenders' standard products. Also known as adverse credit loans. See Credit Check
Income The amount of money a person earns, on a regular basis, from employment, rental income, pensions or any other sources.
Income Multiplier A factor (multiplier) by which a lender will multiply one or more applicants' annual income to determine the maximum amount of any mortgage loan.
Income Reference A Written reference from an employer confirming an applicant's stated earnings. The self-employed may be asked to confirm income through an accountant's letter or by providing audited accounts for a specified period.
Income Strategy I one that is seeking to achieve a minimum or high level of income from the investment to fund day-to-day spending (usually used by retired people).
Indemnity An agreement by one party (usually an insurer) that he will pay to another the amount of liability which may be suffered by the second party.
Independent Financial Adviser (IFA) An person who is qualified to give financial advice and who operates independently of any financial product provider company. Give impartial advice on financial investments, tax planning and on the benefits of financial products such as investments and loans, insurance, pensions and mortgages.
Index Tracker Tracker mortgages link the interest rate to a benchmark, such as Bank of England base rate or other index. The rate actually paid moves up and down in line with the benchmark rate or index.
Individual Savings Account (ISA) Mortgage An interest only mortgage where the borrower intends to repay the mortgage using some or all of the proceeds from an Individual Savings Account.
Insurance Guarantee Premium See - High Loan To Value Fee.
In the Room A bid at auction from someone actually in the room (not by phone.)
Interest Only Mortgage A mortgage requiring only the interest amount to be repaid during the term of the loan, the amount borrowed being repaid at the end of the term (usually from some form of parallel investment such as an endowment or pension policy). See also - Pension Mortgage, Endowment Mortgage, ISA Mortgage.
Introductory Rate A lower introductory interest rate applied to some mortgages for a limited period of time only. At the end of the introductory period the interest rate will increase.
Investment Home Loan (IHL) See - Buy-To-Let Mortgage.
Individual Voluntary Arrangement (IVA) A formal agreement between a debtor and their creditors to come to an arrangement. A number of organisations exist which negotiate arrangements on behalf of debtors to reduced payments towards the total debt in order to pay off a percentage of what is owed. Generally after 5 years the debt is settled.
Joint Income The total amount of income (before tax) of two people who apply jointly for a mortgage and intending to share the responsibility for repayments.
Jump Bid Making a bid at auction that is higher than that the auctioneer has just asked for.
Land Registry Fee This is a fee paid by the buyer's solicitor or licensed conveyancer to the Land Registry to record a change in the registered ownership of a property.
Landlord's Reference A reference provided to a lender by an applicant's current or previous landlord stating the applicant's rent payment record and his or her ability to meet regular rent payments on time.
Lease The legal document detailing the agreement between the freeholder and those who occupy the property for a specified period of time and at an agreed price or rental. Sets out the roles, responsibilities and obligations of the landlord and the tenant.
Leasehold Property (Long-Leasehold or Common hold - not Scotland) A property such as a flat, apartment or maisonette - which is leased from the freeholder landlord for an extended period of time (usually something like 20 to 120 years) When you buy a leasehold property essentially you are buying nothing more than the right to occupy a building for a given length of time.You will have to pay ground rent and maintenance in addition to a one-off payment that buys ownership of the lease until it is sold or runs out. The amount of alterations you can make to the property varies accordance with the lease and you may well have other conditions imposed upon you by the landlord.
Leaseholder Someone who owns the lease on a property (as opposed to the freehold).
Legal Charge A document recording the mortgage lender's (or a debtor's) contractual rights to the title of a property if the conditions of the legal charge are not met.
Legal Fee Charges made by a professional: solicitor, licensed conveyancer or surveyor for carrying out work in connection with a property purchase or re-mortgage.
Legal Pack

When selling property at auction the vendor's solicitors prepare a legal pack containing copies of all the legal papers that you and your solicitor are likely to need to make an informed decision about your lot. The pack should include (where applicable) copies of: special conditions of sale, title deeds, leases, office copy entries, searches, replies to pre-contract enquiries. All legal packs will be available for inspection at the auction room. You must be aware that you buy subject to all documentation and terms of contract whether or not you have read them.

Legal protection Insurance Legal Protection Insurance covers your property against risks such as the legal costs that may arise if your tenants breach the terms of their tenancy agreement with you by providing cover for legal expenses and disbursements. Sometimes combined with Rent Guarantee Insurance.
Lender A bank, building society, mortgage company, or other institution making a loan.
Lender's Fee A fee or fees charged by the lender which may include: Arrangement Fee; Administration Fee; Booking Fee; Completion Fee; Valuation Fee etc.
LIBOR-Linked Mortgage London Inter-Bank Offered Rate - LIBOR - the rate at which leading banks lend to each another. This rate is sometimes used as an alternative to the base rate in setting the benchmark for a tracker mortgage. There are separate LIBOR rates used for different periods up to one year, but usually 1 or 3 months LIBOR is used in setting mortgage rates.
Licensed Conveyancer A qualified Conveyancer who undertakes the legal work associated with buying, selling and re-mortgaging property. May solicitor or may not be a solicitor. See Conveyancing
Lien A legal claim against a property. Liens typically include a tax lien or judgment lien. See Conveyancing
Life Expectancy The average length of time a person can be expected to live from any given age. For example, currently (2008) a man aged 60, on average, can be expected to live for a further 25 years.
Life Insurance A policy paying out a cash sum on the death of the policyholder.
Loan Consolidation See - Debt Consolidation.
Loan to Value (LTV) The amount of a loan expressed as a percentage of the value of the property. For example, a mortgage of 90,000 on a property valued at 100,000 would be shown as 90% LTV.  Most lenders have a maximum loan-to-value (LTV) ratio for their products of around 90%. What this means is that to finance your property purchase, you can obtain a loan for up to 90% of the value of the property. 
LTV See - Loan To Value (LTV) Ratio and Gearing. See Investment
MIP Mortgage Insurance Premium.
MGI Mortgage Guarantee Insurance.
MIG Mortgage Indemnity Guarantee.
Memorandum of Contract ( Sale) The Memorandum of Sale is a record of the terms by which the purchaser has bought at auction at the fall of the gavel. It’s usually printed in the Auction Catalogue and usually details the lot number, the property, the price, the deposit, the name of the purchaser and any other charges.
Mortgage A mortgage is a loan secured against a property (real estate) which the borrower can own. The mortgage incorporates a document recording the lender's legal rights to the title of the property if the conditions of the legal charge are not met. See Mortgages
Mortgagee The mortgage lender. Company which lends money secured on property. See Investment
Mortgage Code Arbitration Scheme An arbitration (ADR) scheme to deal with disputes between borrowers and lenders (who are members of the scheme) to be resolved without going to court.
Mortgage Deed A legal document which records the existence of a mortgage on a property.
Mortgage Indemnity Guarantee (MIG) Premium An insurance premium payment sometimes demanded by a lender before they will lend, especially where the LTV is high. It protects the lender from problems should the borrower default on the loan and have the property repossessed. Where the sale proceeds do not cover the outstanding debt the insurer will settle with the lender and then pursue the borrower for the money.
Mortgage Subsidy Where an employers contributes (subsidises) the cost of a mortgage by paying towards an employee's mortgage.
Mortgage Term The period (Years/Months) over which a mortgage will be repaid.
Mortgagor (Mortgagors) An individual or individuals (joint) taking out the mortgage.
National Land Information Service

The National Land & Property Information Service (NLIS) provides electronic local authority property searches across England and Wales via a number of channels. Proposed roads, supermarkets, residents' parking schemes, planning issues, rights of way etc. will be revealed online within minutes whereas this often took local authorities weeks to produce. www.nlis.org.uk

Negative Equity A property is in negative equity when it is worth less than the mortgage secured on it.
Net Profit A self-employed business person's or a company's income after all taxes and expenses have been deducted.
New-Build A planned or recently built property that has never previously been occupied.
New For Old An insurance practice of reimbursing the claimant for the full replacement value of an item, not its current market value. This though will not apply to all items covered by a contents policy, so you should check the exclusions.
Non-Status Mortgage This is where a borrower's income is not disclosed and/or they have some adverse credit.
Off Plan (Investment) When a property is sold at the planning (drawings) stage and is yet to be built. Builders will sometimes sell properties "off plan", particularly in a development's early stages, at discount prices to reduce their financial risk in a large development project. See Investment
Offer Letter A formal offer letter confirming the grant of a mortgage by the lender stating the terms under which it agrees to lend money to an applicant.
Off Set Mortgage Offsetting is a way of managing money using a current account or savings account - see Current Account Mortgage.
Off the Wall If auction bidding has stopped more than one increment below the reserve, the auctioneer can take a bid "off the wall" or "off the chandelier" on behalf of the vendor up to one bid below the reserve.
Other Income Nay other regular income in addition to basic salary.
Other Outgoings A general "catch-all" phrase to cover all types of expenditure other than those mentioned specifically.
Outstanding Amount Amount still owing. Hence outstanding loan amount is the amount still owed to the mortgage lender.
Overpayments Increased or additional mortgage payments made by the borrower usually with the intention of paying off the mortgage early. Sometimes known as Excess Payments.
Paddle System The paddle system is one method used at property auctions to register prospective bidders. Each bidder is given a numbered bidding paddle.
Part and Part Mortgage A hybrid type mortgage being in effect a combination of Repayment (Capital & Interest) and Interest Only mortgage.
Payment Holiday A period of time (usually one or two months only) when the borrower does not have to make mortgage payments. Usually applies with flexible mortgages where overpayments have been made.
Payment Protection Insurance As - Accident, Sickness & Unemployment Insurance (ASU)
Penalties See - Early Redemption Penalty.
Pension Mortgage An interest only mortgage, similar to an endowment mortgage, where the borrower plans to use some or all of the cash lump sum from a pension policy to pay off the capital at the end of the term.
Percentage Advance See - Loan to Value (LTV)
Portable Mortgage A mortgage that can be transferred to another property.
Pre-Auction Sales Negotiating and buying the property before the auction.
Premium In the context of insurance, a premium is the regular sum paid to the insurers to keep the cover in force.
Private Treaty The sale of a property at a price agreed to by the seller and the buyer or their agents.
Previews or Exhibitions A viewing of the property held in advance of an auction. Pre-auction viewings are open to the public and may be attended at no charge.
Previous Lender's Reference A document provided by a mortgage company (lender) stating a borrower's previous repayment history.
Principal The amount of the loan on which interest is calculated.
Principal and Interest Mortgage See - Repayment Mortgage.
Promissory Note A document which forms a legal contract where the borrower promises to pay off the loan. The promissory note details the terms and conditions applying: when payments become due, how payments are made, interest rate and the consequences of late or missed payments. 
Proxy Bid The auctioneers can undertake bidding on behalf of buyers unable to attend the auction in person. The buyers must contact the auction house prior to the auction to obtain an official, proxy bidding form. This must then be returned to the auction house with a deposit cheque within the time specified by the auctioneers. The buyer writes the maximum amount they will bid up to on the form and the auctioneers will bid on behalf of the buyer, up to, but not beyond, the stated price.
Quotation A formal quotation document showing the monthly cost of a proposed mortgage deal including fees added to the loan, based on the information supplied. The quotation will also show all the related expenses for a particular mortgage, such as estimated solicitor fees, search fees, surveyor's costs etc.
Rate The interest rate charged by the mortgage lender.
Rate Cap A ceiling applied to a Capped-Rate Mortgage meaning the interest rate cannot increase above this. 
Rate Lock An agreement between the borrower and lender or broker that the loan deal must be closed within a certain period of time (for example, 30 or 60 days), in which case the interest rate will be fixed (locked) at an agreed-upon rate. This agreement must be in writing or it will be unenforceable.
Redemption The process of paying off a mortgage in full. This occurs at the end of the mortgage term, when changing lenders (re-mortgaging), or when moving house and taking out a new mortgage with a different lender.
Redemption Amount The amount of money required to repay the mortgage off in full.
Redemption Charges Fees charged by the lender when a borrower pays off a mortgage at the end of the term covering administration costs. The is may include the Early Redemption Penalty.
Redemption Penalty See Early Redemption Penalty.
Registered Land Land whose title is registered at HM Land Registry and usually guaranteed by it.
Regulated Mortgage Contract The Financial Services Authority (FSA) has a very strict definition of the mortgages that it actually regulates. Some loans, including buy-to-let mortgages and equity release home reversion schemes are not covered by the FSA's regulation regime, though equity release lifetime mortgages are to be regulated.
Regional Lenders These tend to be smaller local building societies who lend only within a regional location. Some lenders do not lend in Scotland or Northern Ireland because they do not have a branch presence in these countries.
Re-mortgaging Changing mortgage lenders without selling the property or moving house, using the proceeds from the new mortgage to repay the old one and sometimes at the same time extracting some equity.
Rent Guarantee Insurance

As a tax deductible premium for residential property, this will guarantee you receive rent regardless of your tenant. If you have a mortgage on the property or have calculated your rental income verses your outgoings this will ensure you do receive rent. Most policies will also include legal expenses cover. You will receive rent and the legal fees to obtain vacant possession will be covered.

Rental Yield This is what a landlord can expect to receive in gross rent, in one year, expressed as a percentage of the purchase price of the property, ignoring any running expenses. For example, a buy-to-let investor's house is worth 100,000 - and tenants pays 10,000 a year in rent. The rental yield on the property would be 10 per cent. return (10,000) divided by his investment (100,000) multiplied by 100 (= percentage).  See Investment
Repayment Method There are two main repayment methods - Interest Only and Repayment Mortgage.
Repayment Mortgage This type of mortgage is where part of the actual loan amount (the Capital) plus the interest on the outstanding loan, is repaid each month. Unlike the Interest only Mortgage the amount borrowed is gradually reducing. Providing payments are met in full each month the mortgage will be fully paid at the exact end of the term. Sometimes called a Capital & Interest Mortgage.
Repayment Period The length of time (years/months) in which the borrower agrees to pay back the full amount of the mortgage. This is also known as the Term.
Repayment Vehicle The means by which a loan's capital is repaid on an interest only mortgage - endowment policies, ISAs, and personal pensions.
Reserve A reserve price is the lowest price the vendor will accept at auction. This is agreed between the vendor and the Auctioneer. Most properties entered into the auction have a reserve price. This is confidential and not disclosed to any interested parties.
Residential Investment See - Buy-To-Let. See Investment and Buy to Let
Retention The lender my hold back or 'retain' part of the agreed mortgage loan amount until certain conditions have been met: the completion of repairs or improvements or, for development projects, the reaching key stages in the building project.
RICS (Royal Institution of Chartered Surveyors) Royal Institution of Chartered Surveyors is the professional body which governs surveyors in the United Kingdom and in many other countries.
Right-To-Buy The right of a tenant in a local authority (Council) owned property to buy the property, usually at a discount, depending on length of tenancy.
Second Charge A formal document recording a lender's or another party's contractual rights to the title of a property where the conditions of a legal charge are not met.
Searches Checks and investigations carried out by a Solicitor or Conveyancer with local authorities, utilities providers, mining companies, search specialists and other organisations to ensure there are no planning proposals or other issues which may now or in the future affect the value of the property. See Conveyancing
Self-Build Mortgage A special type of mortgage designed for self-builders. It is a mortgage taken out on a property under construction. The loan is normally paid out in stages so that the value of the loan does not at any stage exceed the value of the property.
Self-Certification The process of certifying income to the lender by signed letter or declaration from the applicant instead the lender supplying references or an audit from an accountant. Usually for the self-employed where proof of income is otherwise not possible. See Self Certify
Settlement The equivalent of Completion or Legal Completion in Scotland
Shared Equity Allows a borrower to purchase a new property in partnership with the builder. The builder may allows the borrower to purchase, for example, 90% of the property now and pay off the balance in 5 years time. The builder registers a second charge on the property until the debt is paid. The 10% owing maybe interest free or it could be rolled-up and added to the debt. There could be serious consequences if the borrower is unable to pay off the debt at the end of the term.
Stamp Duty (Stamp Taxes, Stamp Duty Land Tax) Tax paid by the buyer when purchasing a property. Stamp Taxes vary depending on the value of the property and any area exemptions. The rates are set annually in the Budget. See Taxation
Standard Construction A  term used to signify that the building which is the subject of a loan application is not of an unusual construction type for the country concerned but is constructed using entirely standard techniques such as bricks or stone and mortar, tiled roof and cavity walls.
Standard Variable Rate The default interest rate charged by lenders which is usually aligned with the Bank of England Base Rate. It will rise and fall roughly in-line with the Bank of England Base Rate and is normally applied at the end of a 'special rate' period, such as a fixed, capped or discounted rate.
Stepped Rate Mortgage A mortgage where the interest rate charged rises in stages or "steps" over time.
Structural Survey A detailed examination of a property's structural condition usually by a Chartered Building Surveyor (RICS member) or other qualified person. A structural survey report will normally provide a full and detailed description of the structure, list all the defects and alert the recipient if a specialist report is needed, e.g. drainage, damp, wood or subsidence. Also called a Buildings Survey or Full Structural Survey, and is more detailed than a Home Buyer's Report.
Surrender The process of cashing in an unwanted endowment policy with the insurer who sold it. Doing this often produces a poor return for the money invested particularly in the early years of a policy.
Survey See - Home Buyer's Report, and Structural Survey.
Survey Fee A fee charged by a surveyor to carry out a Home Buyer's Report or a Full Structural Survey on the property. This could also include the lender's Valuation Fee if the same surveyor does both.
Surveyor A person professionally qualified to estimate the value of property and carry out building and structural surveys. Usually a member of RICS - The Royal Institution of Chartered Surveyors.
Term See - Mortgage Term
Tracker Tracker mortgages link the interest rate to a benchmark, such as Bank of England base rate or other index. The rate actually paid moves up and down in line with the benchmark rate or index.
Tie in Term or Period The period of time needed to remain on certain mortgage terms to avoid an early repayment charge.
Title deeds/title documents The legal documents which provide proof of ownership of a property.
Transfer deed The form which provides details of the transfer of ownership to be entered on the Land Registry register.
Underpayment This is where the borrower pays to the mortgage company an amount that is less than the amount required for that particular month. This could have serious consequences for the borrower.
Vacant Possession A property which is not occupied or subject to any tenancy. The previous occupants must vacate the property before move in. This includes any tenants.
Valuation A Valuation Report is commissioned by the lender stating the current value of the property and its basic condition, location, area, etc. This is not a Survey. See Home Buyer's Report and Structural Survey. See Investment
Valuation Fee A fee paid to the lender for the cost of the Valuation.
Valuation Report See Valuation.
Value (Market Value) The price that a property under normal circumstances and with a willing buyer and seller would be expected to sell for given the prevailing market conditions. Normally determined by an estate agent or valuing surveyor familiar with the local property market and comparable recent sales. See Investment
Variable Rate Mortgage A mortgage that does not have a fixed rate of interest. The interest rate will rise and fall following closely changes to the Bank of England Base Rate.
Vendor The person selling a property.
Voids

A letting void is a period when the property is not tenanted and therefore the landlord is not receiving rental income. During any such periods not only is the landlord not receiving an income but also costs will increase. In addition to insurance and mortgage payments that he may have to make, he may incur costs in respect to increased insurance charges, connected utilities and will be responsible for Council Tax and Leasehold Ground Rent and Maintenance charges. There are two void periods that an investor must take into account: The period between completion of the purchase of the property and the first tenant moving in. Given the time taken to re-fit the property for tenancy. The period between a present tenant moving out and a new tenant moving in. Typically, the property industry allows a period of one month per annum for voids.

Yield The straightforward yield measure on an investment property is the income (rent) as a percentage of the capital value. In property terms, the yield is the percentage return on the value of the property after expenses (net income - but excluding all finance/loan costs), but before tax. Finance costs are not included to give a comparison between property investments: different properties may have different loans so comparing apples with apples.  See Investment

Information here is general only & believed to be correct, though we cannot guarantee it, nor do we accept any liability if you act or fail to act on this information. Always seek professional advice before making decisions. Investments can go down in value as well as up over  time.