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Glossary of Terms

A  B  C  D  E  F  G  H  I  J  K  L  M  N  O  P  Q  R  S  T  U  V  W  X  Y  Z 

A

APR (Annual Percentage Rate)
‘Annual Percentage Rate’ is the interest rate quoted by lenders which helps you compare the cost of different mortgage deals. It takes into account the amount of interest to be paid, the length of term of the mortgage, and certain other charges such as any arrangement fee.


Asset finance
Finance lent to companies by specialist providers which enables them to purchase business assets. The finance provider will normally require security to be taken over the asset with loan repayments spread over the normal life of the asset.


Assured Shorthold Tenancy (see also Tenancy)
Under section 20 of the Housing Act 1988 this is an assured tenancy, which is fixed in term for between six months and not more than twelve months. It is not terminable by the landlord within the first six months unless appropriate notices have been served.


Assured tenancy
A type of residential tenancy, where the tenant has the right to remain in the property as long as the terms of the tenancy agreement are not broken.


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B

BACS
The Bankers Automated Clearing System (BACS) is an electronic payment scheme widely used for transferring money from one financial institution to another.


Bedsit
A form of rented accomodation consisting of a single room and shared bathroom.


Bridging finance
A loan for a short-term period taken out until long-term finance can be arranged, often used in property development projects at the end of a construction loan period before permanent financing can be arranged.


Buy-to-let mortgage finder
This is Landlord Centre's free online buy-to-let mortgage system which enables you to search the market place for a suitable buy-to-let mortgage.

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C

Capped rate
A capped rate mortgage is a mixture of a fixed rate and a variable rate, where the interest rate is guaranteed not to rise above a set level within the capped rate period. If the variable mortgage rate is below the capped rate then the variable rate is charged. Capped rates often give the 'best of both worlds' as the interest rate can fall but will not rise above the capped rate. However, the level at which the cap is fixed is usually higher than for a fixed rate mortgage for a comparable period of time.


Completion
On property purchases, completion is the date when a property is legally transferred to the buyer and the balance of the purchase price is handed over to the seller’s solicitor. When remortgaging, completion is the commencement of the new mortgage (also referred to as 'drawdown').


Completion fee
A fee charged by the mortgage lender to the mortgage borrower at the point that the legal documentation is finalised and funds have been transferred.


Conveyancer
A qualified individual such as a solicitor or licensed conveyancer who deals with the legal aspects of buying and/or selling a property.


Credit reference agency
A company which collects information about consumers from a variety of sources, which it uses to provide credit information to third parties, such as lenders, to assist them in assessing the creditworthiness of an individual.

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D

Disbursements
Fees paid by the solicitor to third parties on a purchaser/seller’s behalf such as Stamp Duty, Land Registry Fees, search fees etc.


Discounted rate
Interest is charged at a variable rate that applies to the mortgage, less a discount for a set period. The variable interest rate, and the monthly payment, will vary - up or down - whenever the standard variable rate changes, but will remain below the variable rate by the amount of the discount during the discounted rate period.


DSS tenants
DSS stands for Department of Social Security. DSS tenants are tenants who are in receipt of housing benefits from the government via the local council.

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E

Early Repayment Charge (ERC)
A charge applied to repay anything in excess of the monthly mortgage payment within a specified period, normally shown as a number of month’s interest payments or percentage of the amount being repaid.


Energy Performance Certificate (EPC)
An EPC is required for all homes whenever built, rented or sold. The certificate records how energy efficient a property is as a building and provides A-G ratings.


Equity
Owner’s financial stake in a property. It is the difference between the value of the property and the amount of any loans taken out against the property.


Exchange of contracts
The point at which the contract signed by the buyer is exchanged for the contract signed by the seller and the deposit is paid by the buyer to the seller’s solicitor. At this point, both parties are legally bound to the transaction and a completion date is agreed.


Ex-pat
A person who does not live in their own country.

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F

Fixed interest rate
An interest rate guaranteed not to fluctuate over a specified period of time.


Flying freehold
Where a part of one freehold property is built over part of another, so that it does not touch the ground e.g. a bedroom built over a common access passageway.


Foreign national
A person who is a citizen of a different country from the one they reside in.


Freehold
A method by which land or property is owned, which provides rights of ownership for an unlimited length of time.

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G

Ground rent
The rent paid to a landowner by a leaseholder, in respect of a leasehold property. Set when the lease is first granted and may contain provisions for rent increases during the term.

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H

Homebuyers report
A survey carried out by a professional surveyor on behalf of a property purchaser. It is more detailed than a basic valuation but not as comprehensive as a building survey.


Home Information Packs (HIPs)
A scheme where the seller of a property must produce a pack containing information about their property, before placing it on the market.


Home inspector
An individual employed to produce Home Condition Reports and Energy Performance Certificates.

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I

Incentive
A feature of a mortgage product which is designed to attract customers, such as a free valuation or a cashback amount.


Industrial investment
An investment in the industrial sector.


Interest rate
The cost of borrowing money usually set as a percentage of the money borrowed.


Interest only mortgage
The borrower only pays the interest to the lender throughout the mortgage term and the mortgage balance doesn’t reduce.


Inventory
A list which details the contents of a leasehold property and describes the condition of the furnishings, decorations, and contents at the start and end of a tenancy. This enables any change to be documented and arrangements to be made to return the property to its condition at the start of the tenancy.

Invoice discounting
The provision of finance to a company using its outstanding invoices as security.

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J

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K

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L

Lease
Legal document by which the freeholder or landlord of a property lets the premises – or part of it – to another party for a specific length of time, after which point the right to occupy may revert to the freeholder or superior leaseholder.


Leasehold
A method of owning property or land where the holder of the leasehold title has the right to hold or use the property or land for a fixed period of time set out in a lease.


Lending criteria
A set of rules and guidelines that lenders apply when assessing the suitability of an application for a mortgage/loan.


Light industrial
Consumer-orientated industries such as the manufacturers of clothes, shoes, furniture, consumer electronics and household items.


Loan to value (LTV)
This is the amount you want to borrow as a percentage of the purchase price or valuation (whichever is lower). Generally, the lower the loan to value, the safer the lender will view the loan, and the more likely they are to offer a better deal.


Local Authority search
An investigation undertaken by a purchasing solicitor where a search of local authority and other agencies (e.g. transport or water companies) is carried out to identify any proposed plans for development or enforcement, which may affect the property or its immediate surroundings.


London Inter-Bank Offered Rate (LIBOR)
The interest rate available between banking institutions to borrow money. Quoted daily for terms between 1 month and 5 years. Some mortgage rates are linked to 3 month LIBOR.

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M

Mortgage
A sum of money advanced by a lender, usually a bank or building society, to assist in the purchase of a property. The loan is secured against the property and is usually taken out over a number of years.


Mortgagee
The borrower in a mortgage agreement.


Mortgage offer
A formal document drawn up by a mortgage lender detailing the terms on which the loan is agreed.


Mortgagor
The lender in a mortgage agreement.


Mortgage term
The period of time over which mortgage repayments are made.


Mortgage valuation
The most basic form of survey and the minimum required by lenders to decide the suitability of the property as security for their loan. Although the borrower will normally receive a copy of this report, it should not be relied upon as a comprehensive report on the condition of the property. A more detailed report (either a Home Buyer's Report or Structural Survey) should be purchased by the buyer when considering the purchase of a property.

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N

National House Builders Certificate (NHBC)
A form of warranty available on some newly built properties where any defects occurring during a specified period of time (usually ten years from the date of construction) are the responsibility of the builder and not the owner.

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O

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P

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Q

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R

Regulated tenancies
The letting of a dwelling by a non resident private landlord, usually at a registered fair rent, from which the landlord cannot evict the tenant without a possession order from a court.


Remortgaging
The process of paying off one mortgage with the proceeds from a new mortgage using the same property as security.


Rental coverage
Usually represented as a percentage and calculated by using the existing or anticipated rental income from a property divided by the interest due per annum.


Repayment method
The method chosen to repay the loan amount. Normally either interest only or repayment can be selected.


Repayment mortgage
A mortgage which involves the repayment of both capital and interest in monthly instalments within a specified term of years.


Repossession
Occurs when a mortgage company obtains a court order to take possession of a property due to non-payment of the mortgage, or non compliance with the mortgage terms and conditions.


Retention
A sum of money held back by the lender until such time as repairs or remedial works have been satisfactorily carried out to the property on which they have provided a mortgage.


Reversion rate
The interest rate a loan will change to at the end of the initial fixed or discounted interest rate. The offer letter will indicate the length of time a fixed or discounted rate will last together with the new rate that will apply at the end of the incentive period.

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S

Search
Numerous searches concerning the property and its locality are made by the buyer’s solicitor during the purchase process; these include a Local Authority search, Land Registry search, Coal Mining search, Water search, Commons Registration search, Bankruptcy search etc. The buyer’s solicitor will decide which searches are appropriate according to the location/age of the property concerned.


Securitisation
Securitisation is a financial technique that pools assets together and, in effect, turns them into a tradable security. Financial institutions and businesses of all kinds use securitisation to immediately realise the value of a cash-producing asset.


Security
Property which is pledged as collateral for a loan.


Standard variable rate (SVR)
A variable rate determined entirely at each lender's discretion, unless it is linked to LIBOR or the Bank of England base rate. The SVR is often the reverting rate at the end of any special offer period, such as a capped, discounted or fixed rate.


Statutory periodic tenancies
A tenancy that arises when the fixed terms of Assured and Assured Shorthold tenancies come to an end but the tenant stays on with the landlord's consent. The terms of the tenancy remain the same.


Structural survey
A detailed survey of the structure of a building carried out by a Structural Engineer or Chartered Building Surveyor.


Studio flat
A self-contained apartment which combines a bedroom, living room and kitchen in a single unit and has a separate bathroom.

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T

Tenancy
An arrangement where the owner (landlord) allows another person (tenant) to take exclusive possession of land in return for rent, either for an agreed period or on a periodic basis until formally terminated.


Tenancy agreement
Legal agreement designed to protect the rights of both tenant and landlord, setting out the terms under which the rental of a property has been agreed.


Tenant
The person who has temporary use and possession of a property owned by another person; the landlord. The duration and terms of a tenancy are usually fixed by a lease or tenancy agreement.


Tenant assessment
A service which provides information to a landlord about a prospective tenant such as credit and employment history. The tenant assessment can help a landlord to decide whether the person would be a suitable tenant.


Tenure
Describes the manner in which the property is held by the owner ie either Freehold or Leasehold.


Term
The length of time the mortgage advance is borrowed over. At the end of this period the loan must be repaid.


Tracker rate
Tracker rates vary in line with changes to the Bank of England base rate or LIBOR. During the tracker rate period, any changes to the Bank of England base rate or LIBOR are passed on to the applicant in full.

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U

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V

Valuation
An inspection of the property to decide its acceptability to the lender as security against the mortgage loan.


Vendor
Term used to describe the owner of a property which is being sold.

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W

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X

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Y

Yield
Rental income received from a property, calculated as a percentage of its value.

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Z

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