Mortgage Terminology M-Z

There is a wide range of standard and industry jargon underpinning the mortgage and house buying process. The purpose of this series of articles is to try and provide an understanding of what it all  means.

So what follows will be an A-Z, or glossary of terms.
This will be spread across several posts for ease of access
This first section goes from M-Z

Maintenance Charge
Depending on the type of property This charge is stipulated in the contract with the landlord to the covers costs of maintaining a the property. iI includes things like keeping the garden and communal areas and outside of the property in good order.

MIRAS
Mortgage Interest Relief At Source. This was a tax incentive for people to buy their properties. It was available on loans up to £30.000 and was deducted from the interest payments. It was available in two formats. For married couples it was £30.000, yet for unmarried couples it was available as £30.000 per individual. Allowing tax relief up to £60.000. This was eventually capped to £30.000 for all mortgage buying. The entire scheme was phased out in April 2000 by the Government.

Mortgage
Term used to define the loan attached to buying a property.

Mortgage Deed
This document defines the terms conditions under
which the mortgage is granted

Mortgage Indemnity Premium
This is essentially a single charge on what the lender deems as high risk borrowing. They can be either added to, or deducted from the loan at offer depending on the lender. They work as follows based on loan to valuation. The loan to valuation is a percentage of the loan offered. Against the valuation or purchase price.
Valuation £100.000
Loan Required £50.000
Percentage loan £50.000
In general an indemnity guarantee will be charged where the lending exceeds 75% of the valuation. So based on the example above. Loans above £75.000 will incur an indemnity premium. Costs and applications for these vary between lenders

Mortgage Offer
A notification from the lender offering funding which sets out the terms under which the offer is made.

Mortgage Payment Protection Insurance
Essentially an insurance policy covering mortgage payments in the event of sickness or unemployment.

Mortgage Term
Period over which mortgage is to be repaid.

Mortgagee
The mortgage lender

Mortgagor
The borrower

Negative Equity
Occurs where property prices have dropped and the mortgage
held against a property is higher than the current market value.

Negative Gearing
Term used to describe a situation where a property is being rented out and the amount of rent being brought in is less than the cost of the current mortgage associated with that property.

Non-Conforming
Term used to refer to people with a poor credit history. Those issued with county court judgments (CCJ’s), bankruptcy, mortgage arrears, Individual Voluntary Agreements (IVA’s) and credit card or other borrowing arrears or defaults.

Offer
Simply a monetary offer for a property. In many cases the subject of negotiation

Offset Mortgage
This is a flexible mortgage option that allows savings to be used as a form of credit. This is considered when calculating the interest due on the mortgage.account.
It works thus, money in a savings or current account
Savings = £15.000
is set against the mortgage balance.
Mortgage = £100.000
Interest is calculated and charged on the difference only.
Interest amount = £85.000

Open Market Value
Open Market Value is the value a property can achieve in the open market when there is both a willing buyer and willing seller.

Overpayment
Where an additional payment is made which is over and above the agreed amount. An effective method for repaying a mortgage early. However some lenders charge fees for early repayment.

Per Calendar Month
Term used in rental agreements for payments.

Pension Mortgage
Simply where a personal pension is used as a repayment vehicle for an interest only mortgage. This method has many
pros and cons associated with it.

Peppercorn
RentTerm used to describe an often trivial ground rent.

Personal Equity Plan (PEP)
These were tax efficient investments that where available in the 1980’s and 1990’s. Often used as a repayment vehicle with an interest only mortgage.

Portable Mortgage
In theory this is a scheme whereby the borrower can move their mortgage from one property to another without penalty, within a pre-defined time period, using the original lender. However over recent years with tighter lending regulations this is becoming harder to do without going through rigorous checks by the lender.

Preliminary Enquiries
These are set of conditions raised by solicitors on the sale/purchase of a property. Usually settled in advance of an agreed sale to avoid any delays once a property is under offer.

Premium
The monthly amount paid on an insurance policy.

Principle
The sum of the loan on which interest is calculated.

Private Residence Relief
A tax relief relating to your principal home.

Probate
Legal term used to define the work done on a deceased persons estate where a will has been made out

Public Liability Insurance
Insurance which covers injury or death to anyone on or
around the property.

Redemption
When a mortgage if fully repaid.

References
These are obtained by a lender prior to offering funding for any mortgage or by agents prior to letting a property for rent. They are simply requests for information to check a prospective borrower/tenants suitability. They usually include credit checks,, employment and bank references etc

Registered Land
This is land (including any property on it) which is registered
at the Land Registry.

Release Clause
Another term for a break clause used in short term tenancy agreements. Where the tenant and landlord agree an option for a time period at the end of the tenancy. Allowing either party to renew or end the tenancy. Usually a period of two months after the tenancy expiry date.

Rental Agreement
This document contains all the details and terms and conditions of the tenancy. An AST is a form of tenancy agreement.
It is a legally binding document.

Repayment Mortgage
The capital and Interest elements of the mortgage are paid back to the lender.

Repossession
When the mortgage lender takes possession of a property due to excessive arrears on a mortgage account. The borrower will be evicted from the property.

Retention
These usually result when a survey is carried out and the surveyor has recommended remedial works be carried out prior to offer. A price is usually quoted, and this amount of money that is held back from the initial loan. It will not be paid out by the lender until specific repairs or improvements have been carried out by the purchaser.

Reversion
This is a special type of property purchase. The buyer reaches an agreement with the vendor that the vendor can continue to live in the property for a specified time, normally until they die or some other significant agreed event happens.

Right Of Way
An individuals legal right to use any particular part of a property so as to gain access to their own property.

Right to Buy
This is when a tenant living in a council-housing association or other social housing owned property, can purchase the property at a discount. These discounts vary on the type of property and the length of time the tenant has been in social housing.

Sale and Rent Back
When the vendor sells their property, and rents it from the new owner

Searches
Searches are carried out by solicitors to find out whether there are any unwanted/adverse effects in relation to a particular property. They will cover both existing issues as well as planned onces.

Self Build
This is when you build the property yourself.

Self Build Mortgage
This is a mortgage that is taken on to build a property. The loan amount is generally paid out in stages as the building is progressing.

Self Certification Mortgage
Used to be known as a NON STATUS mortgage. It is where a lender does not require proof of income. The borrower is essentially confirming they have the income to manage the loan and the ability to repay the mortgage. These are subject to very specific terms and conditions. Rates tend to be higher than standard mortgage schemes and in most cases a larger deposit will be required.

Sellers Pack
See Home Information Pack

Services/Utilities
Gas, electric, water and council tax. All payable by the
tenants/private home owners

Shared Ownership
A scheme operated by Councils/Housing Associations
where the borrower buys and owns part of a property.
They pay a mortgage on the percentage they own. Eg 75%. the borrower pays rent to the Housing Association on the remaining 25%.
The borrower would normally have the right to purchase a higher percentage of the property in the future.

Sitting Tenant
This is when someone occupies a property as a tenant but
has not signed an AST and so therefore cannot be asked to leave.
Sole AgentWhen a seller chooses only one agent or service to sell their home.

Sole Selling Rights
Where one agent has complete control over the sale of a particular property.

Solicitor
Legal Professional who acts on behalf of the buyer or seller
in the purchase of a house. The solicitor will check the
legal position of the house, carry out Local Authority Searches,
Land Registry Searches check monies are in place and oversee the exchange and completion of contracts between the two parties.

Split Loan
A split loan is a mortgage that can be taken partly on a capital
and interest basis and partly on an interest only basis.

Stamp Duty
A tax levied by the government on house sales. Paid by the solicitor on completion. It works on a sliding scale subject to the sale price

Standard Variable Rate
The default variable rate the Lender offers to borrowers on
their standard residential mortgages. It is also normally the rate that mortgage is reverted back to at the end of any special discount period.

Standing Order
A method of payment via a bank

Structural Survey
A report constructed by the surveyor detailing firstly,
whether the house is structurally sound and secondly, listing the major/minor defects,
(including the necessary work which needs to be done).

Studio flat/apartment
This is a flat or an apartment with the bedroom/living room all in one. It will normally have either a separate kitchen or a kitchen in the corner of the main room. It will still have a separate bathroom and toilet

Subject To Contract
This is a term that is associated with an agreement to purchase a property before exchange of contracts. At this stage either party is still free to pull out of the transaction.

Superior Landlord
The superior landlord is the landlord who the ownership of a property might revert to at some stage for example; a flat with a 99 year lease.

Superior Lease or Head Lease
This is often applicable to a flat that is rented out. There will be a freeholder, a leaseholder who has a superior or head lease and then they may grant a lease generally as an AST to a tenant to actually occupies the property though they must comply with the terms of both their lease and the Head Lease.

Survey
There are generally have three tiers of report available: Valuation, Home Buyers and Full Structural.

The valuation survey is a report that is produced to
determine the value of the property.

The Home buyers report includes a valuation. But also
determines if the property is structurally
sound and whether the lenders money will be secure

The full structural survey also provides a valuation. But gives a much more detailed assessment. of the structural condition of the property
These reports are done by a qualified surveyor upon inspection of the property.

Surveyor
The person who carries out a survey of a property, examining the structure and general state of the house.

Tax Relief
See MIRAS. Tax relief available on interest payments on the first
£30,000 of a mortgage loan. Phased out in April 2000 by the Government.

Tenancy Agreement
This is the document that contains all the details and terms and conditions of the tenancy. It is also known as a rental agreement. An AST is a form of tenancy agreement. It is a legally binding document.

Tenant
A tenant is a person or persons (can be a company or organization) who is entitled to occupy a property under the terms and conditions of a tenancy agreement.

Tenants in Common
This is when two or more people are co-owners of a property. When one dies, their share of the property automatically passes to the other/others.

Tender – For Sale by Tender
This is when an asking price is not stated but offers are invited in writing. There will be a set time and date for the offers to be opened and it will usually be in the presence of the vendor’s solicitor. Normally an acceptance of an offer by the vendor constitutes an immediate agreement subject to contract.

Tenure
This is relating to whether a property is freehold or leasehold, it denotes the type of ownership a property has.

Term
The period that the mortgage will last for.

Term Assurance
This is a policy/insurance that repays the mortgage in the event of the insured person’s death.

Title
The legal right to ownership of a property.

Title Absolute
This is the highest form of tenure available. (see Tenure)

Title Abstract
This is a summary of the title documentation that is used in the conveyancing of unregistered properties to prove that the vendor has the right to sell that particular property.

Title Deeds
These are legal documents that describe the rights and the liabilities that are attached to a property and they also prove ownership of a property.

Title Report
A report from the land registry that confirms that the title of a property is acceptable. This is a vital certificate that a lender must have before they will issue any funding for mortgage purposes.

Tracker Mortgage
This is a mortgage that moves in line with the Bank of England base rate and for a set period of time.

Under Offer
This is when a vendor has accepted an offer for the property but contracts have not been exchanged on it yet. At this stage either part can still withdraw from the sale/purchase of the property.

Vacant Possession
This is when the property is vacant. The previous occupants of the property must vacate the property before the new owners move in.

Valuation
The process of evaluating a property to determine its market value.

Valuation Survey
The process used to ascertain the value and condition of a property. A survey carried out by the lender to ensure that the house's value is not less than the proposed loan.

Vendor
Term used to describe the person selling a property.

Vendor Deposit
Generally used by developers when selling properties in new and prime developments. They offer to pay the full or a large part of the initial deposit Used as an incentive to encourage buyers.