Finance Jargon Buster

Cash-back – A type of mortgage where you will receive a cash lump sum at the commencement of your mortgage. The amount will vary depending on the scheme offered.

CCJ – County Court Judgement. A decision made in the County Court, usually for the non-payment of a debt which is registered on your credit file. Once the debt is paid (“satisfied”), and a satisfaction certificate obtained, it is also noted on your credit file.

Completion – The day you become the new owner and can move in to your property.

Contracts – The legal documents under which the buyer and seller of the property agree the terms.

Conveyancing – The process of transferring ownership of the property.

Credit search – The search your lender will carry out to determine your credit payment history.

Credit scoring – A process used by some, but not all, lenders to determine whether you are a good credit risk.

Critical illness cover – A plan, normally with benefit to cover the mortgage amount on diagnosis of a critical illness specified in the terms and conditions and you are eligible to claim.

Deposit – The amount of money you put towards the purchase of the property.

Disbursements – Costs which you will have to pay for things such as land registry, search fees etc. which are in addition to the fee payable to your solicitor.

Discount Rate – For an agreed limited fixed period, the lender will apply a discount off their standard variable rate. Generally, the shorter the discount period, the larger the discount.

Early Repayment Charge – A financial penalty for repaying part or all of the mortgage before an agreed date. It is often applied to fixed, discounted, tracker, capped and cash-back mortgages. Quite simply, the lender agrees to offer what it believes is an exceptional package of benefits, providing the borrower agrees to keep the mortgage with them for an agreed length of time.

Endowment – A savings plan with built-in life assurance which on maturity can help repay an “interest-only” mortgage.

Exchange of contracts – The date at which both parties confirm the purchase/sale of the property through solicitors. The purchase is then legally binding. The buyer is responsible for the new property’s buildings insurance.

Extended tie-ins – This is where the early repayment charge applies even after the scheme date has finished. It means, in effect, that the lender, in exchange for what it believes is an exceptional scheme, requires the borrower to keep the mortgage with them after the scheme has ended, for a set period of time.

Fixed rate – The interest rate is set for an agreed period of time.

Flexible mortgages – A relatively new mortgage type that will allow flexibility of repayments. Options may include the ability to overpay, underpay or take payment holidays. Where the lender calculates interest on a daily basis any over-payments have an immediate effect on the outstanding mortgage balance.

Gazumping – This is where the seller accepts an offer and agrees the sale only to accept a higher offer from another party before exchange of contracts has taken place.

Homebuyer’s report – A Homebuyers Report, or a homebuyers survey, is a surveyors assessment of the state of repair and condition of the property. The report will summarise the findings and make recommendations for further investigations or remedial work if required. Any issues or concerns from the report can be discussed directly with the surveyor.

Higher Lending Charge – This insurance covers the lender if the property is repossessed and the subsequent sale proceeds do not repay the outstanding mortgage debt and costs in full. The Higher Lending Charge protects the lender, not the purchaser who would still be responsible for the shortfall.

Income multipliers – Determines, in most cases but not always, how much you can borrow. A typical calculation is four times the gross salary of the first applicant plus one times the second, or four times the joint salaries, if this produces more. Some lenders will even consider going to five times salary in some instances depending on credit scoring and other financial commitments.

Income reference – The lender will usually request written confirmation of income from your employer.

ISA – Individual Savings Account. A tax efficient savings plan which can be used to help repay an “interest-only” mortgage. Tax assumptions are those currently applicable and are subject to statutory change.

Leasehold – A form of land tenure where a person has rights over a piece of land for a specific period. Most residential leases have long terms and are usually set initially at 99 years or 999 years.

Licensed conveyancer – An alternative to using a solicitor. They specialise in property ownership transfer.

Life assurance – A policy taken out by most borrowers to help repay the outstanding mortgage debt in the event of death.