| Authority
to Inspect The Register |
Document
from registered proprietor of land allowing another party, such
as the purchasers' solicitor, to be given information from the
register of a property.
|
| Apportionment |
The
division of liability for property tax, water charges etc between
the buyer and seller of a property.
|
| Agricultural
Restriction |
A
Freehold covenant restricting the occupancy of a property to those
engaged in agriculture.
|
| APR |
Annual
percentage rate. A term defined in consumer credit legislation with
the intention of providing a standard basis for comparing different
forms of credit. It has had limited success and can be confusing.
For example, case law has established that a lender can quote a
mortgage APR based on a short-term fixed rate without including
in the calculation the fact that, at the end of the fixed rate period,
the rate will change. The allowable assumption is that the rate
will continue throughout the mortgage term. The calculation must
however include the 'total charge for credit' which includes such
things as arrangement fees, valuation fees etc and so does have
some merit. The concept is overdue for overhaul and redefinition.
|
| Auction |
Public
sale of a property to the highest bidder. The purchaser must immediately
sign a binding contract and should ensure that all valuations, searches
etc are carried out prior to the sale.
|
| Assignment |
Document
transferring rights of ownership from one person to another, such
as an endowment policy to the building society in connection with
a mortgage. Can also be the document transferring the lease on a
property.
|
| Additional
Security Fee |
An
Additional Security Fee (Mortgage Indemnity Guarantee policy) is
paid to take out an insurance policy designed to indemnify the mortgagee
(lender) against loss in the event of default on the mortgage repayment.
It is normally taken out by the lender at the start of the mortgage
and the mortgagor (borrower) is made to pay the premium! The premium
is normally calculated as a percentage (5.8% is typical) of that
part of the loan above a certain percentage of the property value,
normally 70 - 75%. It is charged as a lump sum to the borrower and
can usually be added to the mortgage advance. It should be understood
that such policies are for the protection of the lender and NOT
the borrower.
|
|
B |
 |
| BSA |
Building
Societies Association. Represents interests of member societies.
Address 3 Savile Row, London W1X 1AF.
|
| Building
Society |
Mutual
organisation specialising in lending money to individuals to purchase
or remortgage residential properties. Most of this money comes from
individual saving members who are paid interest. A proportion of
building society funds is also raised on the commercial money markets.
Since the early eighties there has been a progressive relaxation
of the rules governing the allowable sources of building society
funds for lending to allow societies to compete more effectively
with banks and there is now no restrictions as between the allowable
proportions of 'retail' and 'wholesale funding'.
|
| Building
Societies Commission |
Regulatory
organisation for Building Societies. Reporting to Treasury Ministers.
|
| Bridging
Loan |
Short
term loan to facilitate the purchase of one property prior to the
sale of another releasing funds that are required for the purchase.
Professional advice should always be taken prior to considering
any bridging finance as it can be a solution which is worse than
the problem.
|
| Bankers
Draft |
A
cheque drawn on the Bank itself against deposit of cash. Normally
required in property transactions.
|
| Capped
Rate |
An
interest rate charged on a mortgage where there is a guarantee from
the mortgagee that the rate will not exceed a certain amount usually
for a set period of 1 - 5 years but which will reduce if the standard
variable rate falls below the capped rate.
|
| Chief
Rent |
A
rent payable by the owner of a freehold property similar to the
ground rent payable by a leaseholder. Normally only found in the
North of England. Can be bought out by freeholder.
|
| Contract |
Legally
binding agreement for sale. In two identical parts, one signed by
seller and one by purchaser. When the two parts are exchanged (exchange
of contracts) both parties are committed to the transaction.
|
| CML |
Council
of Mortgage Lenders
|
| Covenant |
A
promise contained in a deed.
|
| Conveyance |
The
deed by which freehold, unregistered title changes hands. If the
property is leasehold and unregistered it is called an assignment.
If the title is registered the deed is called a transfer.
|
| Centralised
Lender |
Term
used to describe a mortgage lender who does not rely on a branch
network for distribution. Originally applied to specialist lenders
who entered the mortgage market in the mid-late eighties (National
Home Loans, The Mortgage Corporation, First Mortgage Securities,
Mortgage Express and many others). This followed some de-regulation,
which made the securitisation of mortgage loans a viable and potentially
profitable option for lenders. (See SECURITISATION). Several building
societies now have "centralised lending" operations which operate
quite separately from their branch networks and rely exclusively
on mortgages from intermediary sources.
|
| Charge |
Any
right or interest, especially a mortgage, to which a freehold or
leasehold property may be held.
|
| Chattels |
Moveable
items such as furniture or personal possessions.
|
| Charge
Certificate |
The
certificate issued by HM Land Registry to the mortgagee of a property
with registered title. Contains three parts - charges register,
property register and proprietorship register. Contains details
of restrictions, mortgages and other interests. Where there is no
mortgage it is called the Land Certificate and issued to the registered
proprietor.
|
| Discount
Rate |
An
interest rate which is set at a set margin below standard variable
rate usually for a period of 1 - 5 years. Used as an incentive to
attract potential new borrowers.
|
| Deed |
A
legal document which is 'signed, sealed and delivered' not just
signed. This has special significance in law. Title to both freehold
and leasehold property can only be transferred by deed.
|
| Easement |
A
right, such as a right of way, which the owner of one property has
over an adjoining property.
|
| Exchange
Of Contracts |
The
point at which the agreement between a buyer and seller of a property
to transfer title to the property becomes binding in law.
|
| Engrossment |
The
actual deed for signing. Prepared from the approved draft document.
|
| Endowment
Policy |
A
hybrid life insurance policy comprising life insurance and investment.
In the context of mortgages, such policies are designed: to repay
a mortgage in the event of the death of a borrower, and to repay
the mortgage at the end of the mortgage term, whichever happens
first. They are either "With Profits" or "Unit linked" It is rare
for an endowment contract to GUARANTEE to repay a mortgage (ie mature
for the full amount of the mortgage). Where there is a guarantee,
you will pay extra for it. However, in setting endowment premiums,
Life companies normally assume investment returns about mid-way
between the maximum and minimum amounts that they are allowed by
statute to use in illustrating their policies.
|
| Endowment
Mortgage |
Misleading
term. It refers to an INTEREST-ONLY mortgage where an endowment
policy is earmarked to repay the capital at the end of the mortgage
term. The same applies to "PENSION & ISA mortgages". Different
lenders take varying degrees of interest in the endowment policy
itself. The trend is for lenders NOT to take assignments on the
policies, but to treat borrowers as responsible adults who will
make adequate provision to repay the mortgage at the end of the
mortgage term.
|
| Fixed
Interest Rate |
An
interest rate that does not vary with rates generally. In the UK
most fixed mortgage rates are fixed for a period of 1 - 10 years,
Unlike in the USA where the norm is for the rate to be fixed for
the entire mortgage term.
|
| Freehold |
Absolute
ownership of a property as opposed to Leasehold.
|
| Fixtures |
Articles
such as radiators and light fittings attached to the house itself
and deemed to be part of it. Included in the sale unless specifically
excluded in the contract (as opposed to chattels).
|
| Form
53 |
The
form on which a mortgagee of registered title acknowledges that
the mortgage has been paid off. The discharge of a registered charge.
|
| Flying
Freehold |
A
term used to describe that part of a freehold property that is built
above a land which is not part of the property freehold, eg a bedroom
built over a common access passageway. Can cause problems with mortgages.
|
| Guarantee |
To
repay a mortgage (i.e. mature for the full amount of the mortgage).
Where there is a guarantee, you will pay extra for it. However,
in setting endowment premiums, Life companies normally assume investment
returns about mid-way between the maximum and minimum amounts that
they are allowed by statute to use in illustrating their policies.
|
| Ground
Rent |
The
rent paid to the landlord 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.
|
| Interest-Only
Mortgage |
A
mortgage where the lender requires only payment of interest during
the term.
|
| Indemnity
Policy (MIG Policy). |
A
Mortgage Indemnity Guarantee policy is an insurance policy designed
to indemnify the mortgagee (lender) against loss in the event of
default on the mortgage repayment. It is normally taken out by the
lender at the start of the mortgage and the mortgagor (borrower)
is made to pay the premium! The premium is normally calculated as
a percentage (5.8% is typical) of that part of the loan above a
certain percentage of the property value, normally 70 - 75%. It
is charged as a lump sum to the borrower and can usually be added
to the mortgage advance. It should be understood that such policies
are for the protection of the lender and NOT the borrower.
|
| Interest |
Charge
made for lending money. Usually set at a percentage of the sum borrowed
but with many different bases of calculation. The norm in mortgage
lending is for interest to be calculated annually as a percentage
of the outstanding capital balance.
|
| Joint
Tenants |
Owners
of a property hold it jointly in such a way that when one dies it
automatically passes to the survivor. This is in contrast to property
held by 'tenants in common'.
|
| Leasehold |
Ownership
of property for a fixed term granted by lease. The lease sets out
details of rents and obligations such as repairs etc. In contrast
to Freehold where ownership is absolute.
|
| Law
Society |
Professional
body representing solicitors. Also maintains professional discipline
over solicitors. In the event of any query can be contacted on 0207
242 1222.
|
| Legal
Charge |
A
mortgage.
|
| Landlord |
The
person entitled to receive the (ground) rent from the property leased.
|
| Land
Registry |
Government
Department responsible for maintaining and updating the register
of all properties in England & Wales with registered titles.
|
| Low-Cost
Endowment |
Term
originally used to describe a particular kind of with profits endowment
policy designed to protect and repay an interest only mortgage.
The basic sum assured is set well below the mortgage amount, at
a level such that, on allowable assumptions of overall growth, bonus
additions will increase the basic sum assured to equal or exceed
the mortgage amount at maturity. Additional life insurance is added
whilst the basic sum assured + bonuses remains below the amount
borrowed to fully protect the mortgage. The term now also applies
to unit linked policies where the total premiums over the term of
the policy are less than the amount borrowed i.e. a positive investment
return is needed to make the maturity value equal or exceed the
amount borrowed.
|
| Local
Search |
Application
to Local Authority for information about a particular property and
it's area. Should reveal whether the property is affected by road
building or outstanding matters such as sanitary notices.
|
| LIBOR |
London
Inter-bank Offered Rate. The interest rate available between banking
institutions to borrow money. Quoted daily for terms between 1 month
and 5 years. Many securitised mortgages are linked to 3 month LIBOR.
|
| MIG |
Mortgage
Indemnity Guarantee see INDEMNITY POLICY or ADDITIONAL SECURITY
FEE
|
| Mortgage
Protection Policy |
A
life insurance policy designed to repay the loan in the event of
the death of the borrower(s) during the mortgage term. Normally
describes a pure life insurance policy with a decreasing sum assured
and designed to protect a repayment type mortgage. (As distinct
from an endowment policy which is designed to both protect an interest-only
mortgage throughout its term AND repay it at the end of the term).
|
| Mortgagor |
The
party who borrows money on mortgage. The Borrower.
|
| Mortgagee |
The
party (such as the building society) who lends money on mortgage.
The Lender.
|
| Mortgage |
Deed
pledging freehold or leasehold property as security for a loan (also
called legal charge). Gives the lender certain rights, particularly
to sell the property if repayments are not maintained.
|
| Mortgage
Offer |
See
OFFER
|
| MIRAS |
Mortgage
Interest Relief at Source. Until 6.4.2000 all mortgages granted
for the purpose of purchasing a main residence were normally eligible
for mortgage interest relief at source (MIRAS), for the first £30,000
of the loan. This benefit was withdrawn completely from 6.4.2000.
(See also TAX RELIEF)
|
| NHBC
Certificate |
National
House Builders Council Certificate. A certificate of sound construction
issued at the time of construction of most private new domestic
properties. Gives substantial protection against building faults
for 10 years.
|
| |
| Offer
Of Mortgage |
The
document issued by the lender to a prospective borrower following
approval of the mortgage application. The document sets out the
conditions of the mortgage in considerable detail and should be
studied carefully. Offers are normally valid for a period of 3 -
6 months. You should however note that a mortgage offer is not irrevocable.
In other words, it can be withdrawn if there are material changes
to applicants' circumstances before the loan is completed. If the
loan does complete then both borrower and lender are bound by the
conditions and terms outlined in the offer.
|
| Office
Copy |
Copy
of an official document by the department (usually the land registry)
holding the original.
|
| Private
Treaty |
A
contract for sale not made at a public auction.
|
| Pension
Mortgage |
See
Endowment Mortgage. Prospective tax-free cash from a pension arrangement
is earmarked to repay the mortgage capital.
|
| Payment
Protection |
An
insurance policy designed to cover mortgage payments in the event
of a borrower being unable to work through accident, sickness or
redundancy. Becoming a much more important consideration now that
DSS support for distressed mortgage payers has been drastically
reduced.
|
| Remortgage |
Replacement
of an existing mortgage with a new one without change of ownership
of property.
|
| Registered
Title |
Title
or ownership of property which has been registered at HM Land Registry.
When registered ownership is guaranteed by the state.
|
| Rack
Rent |
A
rent representing the full letting value of a property. In contrast
to a ground rent that is smaller as a capital sum has been paid
for the lease.
|
| Restrictive
Covenants |
Obligations
imposed on the owner of freehold property in the deeds. To prevent
certain actions such as opening a business or adding to the buildings.
|
| Repayment
Mortgage |
A
mortgage where the capital is repaid gradually over the term of
the mortgage. Monthly payments comprise both the interest due on
the outstanding capital balance AND an additional sum applied to
reducing the capital balance.
|
| Second
Mortgage |
Term
used to describe a loan secured on a property but whose legal charge
ranks second to the 'first' mortgage. Sometimes called a 'Secured
Loan'. eg a loan from a bank for improvements.
|
| Solicitors
Undertaking |
A
personal guarantee by the solicitor that something will be done,
such as repayment of a mortgage or production of deeds.
|
| Stamp
Duty |
Government
tax on transfers of property in excess of £60,000. Duty is stepped
in line with the property purchase price. 1% of the full purchase
price between £60,001 and £250,000 2.5% of the full purchase price
between £250,001 and £500,000 3.5% on the full purchase price above
£500,000. Not payable on remortgages.
|
| Standard
Variable Rate (SVR) |
The
normal variable rate charged by a mortgagee. The rate will vary
as interest rates generally vary. In particular, Building Societies
need to set the SVR at a level sufficient to allow them to both
attract savers and cover administration and marketing overheads.
|
| Securitisation |
Technical
terms describing the process of bundling a group of mortgages together
such that they can be treated, for funding purposes, as a single
entity and made available to prospective investors in mortgage debt.
Through the late eighties UK mortgage debt was seen as a relatively
attractive investment by many institutions, pension funds etc. Securitisation
allowed both existing and new lenders to raise money in the money
markets, lend it to domestic property purchasers and then sell the
resulting group of mortgages on to other institutions. This is also
known as "off balance sheet lending" since the debt does not form
part of the lender's assets. This does not affect the terms and
conditions of the original mortgage offer in any way.
|
| Search |
An
enquiry for information that is held by an official body such as
the Land Registry or Local Authority.
|
| Secured
Loan |
See
SECOND MORTGAGE
|
| Title
Deeds |
Deeds
and documents proving ownership of freehold or leasehold property
(generally the charge or land certificate).
|
| Transfer |
Document
transferring ownership of freehold or leasehold property that is
registered at HM Land Registry.
|
| Tenants
In Common |
Joint
ownership of a property in such a way that when one dies, but ownership
does not pass automatically to the survivors. The deceased's share
of the property passes to their estate.
|
| Trustee |
The
person who has legal ownership of a property but is holding it for
the benefit of someone else the beneficiary.
|
| Tax
Relief |
Also
known as Mortgage Interest Relief at Source. Until 6.4.2000 all
mortgages granted for the purpose of purchasing a main residence
were normally eligible for mortgage interest tax relief at source
(MIRAS), for the first £30,000 of the loan. This benefit was withdrawn
completely from 6.4.2000. (See also MIRAS)
|
| Unit
Linked |
A
term used in connection with regular investment into insurance funds
and describing a type of endowment or pension policy. In the context
of endowment policies, premiums are used to purchase units in one
or more funds. A small proportion of these units is encashed each
month (or period) and used to provide life insurance (and possibly
other protection); the remainder participate in the investment performance
of the fund(s).
|
| Valuation |
Report
of a chartered or suitably qualified surveyor on the market value,
condition and reinstatement value of a property proposed as security
for a mortgage advance.
|
| With
Profits |
A
term used to describe a certain type of endowment or pension policy.
The premiums for such policies secure a "basic sum assured" and
the policyholder participates in the profits of the insurance company
by having reversionary bonuses added to the basic sum assured each
year. Once added such bonuses cannot be taken away. At maturity
the policy pays out the basic sum assured plus accumulated bonuses
which normally also include a "Terminal" or "Capital" bonus.
|
|
