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Mortgage Jargon Explained

A

Advance

Mortgage Loan.

Advice

A recommendation about the most suitable mortgage for you made by an adviser who is regulated by the Financial Conduct Authority (FCA).

Annual Percentage Rate (APR)

The overall cost of a mortgage, including the interest and fees.

Approved in Principle / Agreement in Principle

A certificate some lenders will give you showing the amount they will probably be prepared to lend you. This is not a guarantee but can be helpful when registering with estate agents.

APR

Annual Percentage Rate, the total cost of a loan, including all costs, interest charges and arrangement fees, shown as a percentage rate and easily comparable with mortgage interest rates.

B

Balance Outstanding

The amount of loan owed at a particular time

Base Rate

The interest rate set by the Bank of England is known as the Base Rate. This can change at any time. [View Base Rate Changes]

Beneficiary

The individual(s) designated to receive the benefits from a policy.

Bridging Loan

A temporary loan advanced to help buy a new property before the existing one has been sold.

Buildings Insurance

Insurance against the cost of repair or rebuilding a property from scratch following structural damage, for example by flood, fire or storm.

C

Cashback

Some lenders offer "cashback" on completion of your house purchase. This could be a fixed lump sum, or an agreed percentage of the mortgage loan. Remember to check whether there will be conditions attached.

Critical Illness Cover

Pays out a lump sum if you are diagnosed with a specified critical illness.

Typical illnesses include:

  • Alzheimer’s Disease (before age 60)
  • Benign Brain Tumour
  • Blindness
  • Cancer
  • Coma
  • HIV - caught in the UK from a blood transfusion, physical assault or at work
  • Heart Attack
  • Kidney Failure
  • Loss of sight
  • Major Organ Transplant
  • Motor Neurone Disease
  • Multiple Sclerosis
  • Parkinson’s Disease
  • Stroke
  • Third Degree Burns
  • Total Permanent Disability

D

Death in service

Life insurance an employer provides that may be linked to a pension scheme. As cover ceases should you change jobs this is not normally suitable for mortgage protection.

Decreasing term assurance

This provides a lump sum in the event of death during the policy term. The amount of cover (sum assured) decreases over the term of the plan. This type of cover is usually used as the basis of a Mortgage Life Insurance plan to protect the declining balance of loan.

Deferred period

A period of time that has to pass before benefit from a policy is claimed. Typically Income Protection policies will have a choice of deferred periods to suit any benefit you may be eligible for from your employer.

Discounted Variable Rate Mortgage

A set percentage discount below your lender's Standard Variable Rate for a predetermined length of time. Your monthly payments can still go up and down with this type of rate.

E

Early Repayment Charge

It's important to remember that if you repay your mortgage early it can mean you end up paying an additional payment depending on the type of mortgage you have.

Early Repayment Charge

A charge made by the lender if the borrower terminates a mortgage in advance of the terms of the particular mortgage. Normally occurs when the borrower has benefited from reduced payments or cash back in the early period of a mortgage.

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