Jargon Buster
The list below will help you understand
commonly used financial words and phrases - jargon!
APR
Annual Percentage Rate of charge. This is the true rate of interest that is
charged on a loan, it takes into account the total cost of interest and any
other charges e.g. brokers fees/legal fees.
Assurance - Life
A specific type of life insurance policy that can be linked with a mortgage
or loan.
Broker - Mortgage/Finance
An intermediary who finds and places customers who need a loan or mortgage
with the lender most suitable to provide it. The broker normally carries
out all administration and paperwork to do with processing the loan.
Cashback
Type of loan where the borrower is given back a sum of money (usually a percentage
of the loan). Commonly used by lenders as an incentive to promote their products.
CCJ
County Court Judgement. A court order against a debtor to pay money owed.
Discounted Rate
A discounted rate gives you a reduction of, for example, 2% off the standard
variable rate (SVR) for a specific period. So, during this period should
the SVR rise and fall, you will still qualify for the discount and therefore
pay a lower rate.
Fixed Rate
The rate is fixed for a specific number of years, so you know exactly what
your payments will be over that period. Following this period, the rate will
usually return to the lender's standard variable rate.
IFA
Independent Financial Advisor.
Insurance Term
A life insurance policy that is often linked with a mortgage or loan. The premium
goes towards insuring your life, and will pay off the loan in the event of
your death.
Interest Only Loan
The monthly repayment covers only the interest element of the loan leaving
the capital outstanding at the end of the loan terms.
Lender
The actual company that provides the finance to meet with a request for a loan
or mortgage.
Loan - Secured
The equity in the property is used as security against the loan not being repaid.
LTV
Loan To Value. This is the size of the loan or mortgage as a percentage of
the value of the property or price being paid for the property e.g. A property
valued at £60,000 with a mortgage of £54,000 would have an LTV
of 90%.
Negative Equity
A situation where the amount owed on a mortgage exceeds the value of the property.
Rate - Capped
Usually a rate for a set number of months/years where the interest rate can
go up and down but there is a maximum (capped) interest rate which it can
not go above.
Rate - Variable
A rate of interest which may vary up or down during the period of a loan.
Security Address
When taking a secured loan or mortgage, the security address is the address
of the property which is being offered as collateral for the loan.
Self - Certified
Lenders that operate this type of scheme allow the applicant to confirm how
much they earn by "Self-certifying" their income.
Status
The credit-worthiness or otherwise of a potential borrower.
Structural Survey
A detailed survey of the structure of a building carried out by a Structural
Engineer or Chartered Building Surveyor.
Term
Period of a loan expressed in months or years.
Underwriting
The process by which the ability of a prospective borrower to repay a loan
is assessed (this is also the name of the department that undertakes this
work). The process takes into account various factors including employment
history, financial status, previous credit history and current earnings.
Valuation
A brief inspection of a property for mortgage purposes confirming the suitability
of a property to secure money against and its value. |
