Mortgage & Protection Glossary

There is lots of jargon across the mortgage and protection industry, our glossary helps you understand terminology and what it all means.

Term

Definition

Accident

An event or incident that happens unexpectedly or without fault often resulting in damage or injury.

Accidental damage cover

This is a value-added benefit of an insurance policy to cover against accidents.

Agreement in Principle

An informal indication of borrowing on a mortgage from a lender, often following completing a credit score on the applicant (see decision in principle for different term with same meaning).

APR (Annual rate percentage)

This is the total cost of your mortgage including fees over the entire mortgage term, similar to APRC but not factoring into rates changes.

APRC (Annual rate percentage charge)

This is the total cost of your mortgage including fees over the entire mortgage term factoring into rates are likely to change.

Assurance

This is providing cover on something that is certain to happen.

AS (Accident & Sickness)

In the event of a curve ball being thrown at your life and you find yourself struggling to pay your mortgage or bills, this cover aims to provide you with a short-term level of cover or income in the event of you having an accident or falling ill.

Bank of England

The Bank of England (BoE) is the UK’s central bank and they have the role of making sure that our financial markets remain stable

Bank of England Base Rate

This is the base rate set by the Bank of England and the interest rate charged to banks and lenders, this rate will have an influence on what rates banks and lenders charge to consumers

Beneficiary

This is a person or enitity designed to recieve benefis or monies, normally from a financial plan or policy upon death of the person or enity providing the benefits

Bridging Loan

This is a person or entity designed to receive benefits or monies, normally from a financial plan or policy upon death of the person or entity providing the benefits

Capital & Interest Mortgage

The borrower makes monthly repayments to the lender where the repayments include both interest charges and capital. (see repayment mortgage for different term with same meaning)

Claim

A request for the insurance company to receive payment or replacement for good or services you are covered for

Completion

This is the legal transaction that occurs on purchasing of a property

Conveyancer

A conveyancer manages the title of the property at the point of the transfer of ownership, their role is to ensure the customer understands their legal obligations

Country Court Judgement (CCJ)

A CCJ (Country Court Judgement) is where someone is taking legal action via a court order when the person(s) owing them money have not responded to requests for the debt to be settled.

Credit Score

A credit score is what some lenders or credit reference agencies to rate a customer credit worniess. This can be impacted by a number of factors e.g. credit conduct, electoral roll

Critical Illness Policy

Decision in Principle

An informal indication of borrowing on a mortgage from a lender, often following completing a credit score on the applicant (see agreement in principle for different term with same meaning)

Death in service

Death of an employee that holds a company pension, whilst still employed at the company

Deferred Period

A deferred period is the length of time you are unable to work before the policy starts to pay out. As an example, a policy with a four-week deferred period will kick into effect once the policy holder has been unable to work for four weeks. Deferred periods can range from day one up to a full year.

Default

A default is where the credit provider has cancelled your account due to a failure of payments, This is normally actioned after 3-6 months of missed payments but will depend on the lender terms and whether you have engaged the lender to discuss repaying the owed monies.

Deposit

This is the amount of money used towards purchasing a property or other transaction supported by a mortgage or loan

Early Repayment Charge (ERC)

An ERC is the penalty to exit a mortgage within the initial set interest rate

Endowment

This is a life insurance policy that will pay out in the event of death, the customer will pay into the plan each month for a set period of time and is often unit-linked or with profits so anticipates to mature over the term. These were often used alongside an interest-only mortgage but have come less common.

Equity

This is the difference between the value of the asset or property against the loan or funds secured against it.

Equity Release

An equity release mortgage is a way of unlocking some of the capital you own within your home, effectively pulling the capital out as a cash withdrawal

ESIS

A document produced by a lender to explain the key features and charges of a mortgage

Excess

This is the amount paid by the customer or person making a claim towards the cost of goods or replacements covered under the policy

Execution-Only

This is a level of service where the customer instructs an adviser to complete a transaction or application without advice

Family Income Benefit

Similar to a life insurance policy but rather than pay-out a lump-sum it normally pays out a regular income (monthly or yearly) until the end of the policy term

Fixed Rate

A borrower is able to ‘lock’ into a fixed interest payment for a specific term (usually 2-5 years).

Freehold

Freehold is where the owner owns the property as well as the land the property is built on. As the owner of a freehold property you are responsible for maintaining the land.

Gearing

Using mortgage funds secured against property or investment to obtain more assets or property

Guaranteed Insurability Options (GIO)

These are the limits a policy provider will allow you to increase the amount of cover without the need for further medical underwriting

Guaranteed Premiums

These are premiums that will not change during the term of the policy regardless of interest or cost of living increases.

Higher Lending Charge

A charge by a lender, charged when a loan exceed a certain loan to value due to increased risk of a higher loan to value mortgage

Income Protection

Income protection provides a regular monthly income in the event of you being unable to work due to accident, injury or illness and continues until you are able to return to paid work or you retire.

Index-Linked

A policy linked to RPI and cover adjusted accordingly (see RPI)

Insurance

This is providing cover on something that might happen

Interest Rate

This is the amount due back against the amount borrowed

Interest-Only

The borrower only pays the interest on the balance they have outstanding each month. None of the capital is repaid. At the end of the mortgage term the initial amount borrowed will still be outstanding.

Land Registry (HM Land Registry)

Her Majesty Land Registry is a department of the goverment to register land and property

Lapse

Where a premium on a policy has not been paid, this can often put the cover of the claimant at risk should premiums be outstanding at the point of a claim

Leasehold

If you are purchasing or own a leasehold property this effectively means you own the property but you do not own the land the property is built upon. Often there will be a ground rent charge payable annually to the ‘freeholder’, to maintain the land the property is built on.

Loan to Value

This is the amount of the mortgage percentage, vs the property value

Mortgage

A mortgage is a loan taken from a lender (a bank or building society) to purchase or remortgage a property.

Mortgage Term

This is the duration of the mortgage ie. when the full balance is repaid or due to be repaid

Negative Equity

The term negative equity is used to describe a property that has more finance outstanding than its sale value

New for Old

This type of insurance will pay-out for replacement of lost or damage goods. Essentially allows you to replace the goods quickly.

Office of National Statistics

A department reporting to UK Parliament and role is to collate and publish statistics relating to economy and society across UK

Offset Mortgage

A mortgage where your savings are 'offset' against your mortgage. On offset mortgages, the interest is paid is net of the savings being used to offset

Permanent Health Insurance

A benefit often offered by employers to pay-out an income tho those unable to work due to being permanently disabled

Porting

Porting a mortgage is transferring the balance of mortgage and rate over to the new property. The mortgage loan is still repaid but a new mortgage on the same terms taken on the new property.

Premium

The amount paid to insurance company in exchange for cover

Prudential Regulation Authority (PRA)

The PRA regulates banks, building societies, credit unions, insurers and major investment firms within the financial services industry, The firms which, if they were to fail, could cause problems in the market. Their role is to make sure that these firms have processes in place and the liquidity required to remain solvent.

Remortgage

Transferring a mortgage to another lender, normally to switch rates or raise capital

Repayment Mortgage

The borrower makes monthly repayments to the lender where the repayments include both interest charges and capital. (see capital & interest mortgage for different term with same meaning)

Repayment Vehicle

A repayment vehicle is a investment or strategy used to clear an interest-only mortgage at the end of the term

RPI (Retail Price Index)

RPI is a measure of change in costs for goods or services. This is measured by Office of National Statistics

Self-Build Mortgage

A mortgage released in stages to support the building a home

Shared Ownership

Shared ownership is a scheme backed by government and local authorities to help more people onto the housing ladder. You purchase a ‘share’ of the home with a deposit and mortgage, you then pay ‘rent’ on the percentage share you do not own. The shared aspect does not relate to sharing a home or buying with a party; it's owning a percentage share of the property.

Soft Credit Check

This is a check carried out by credit providers to provisionally assess the credit worniess of a borrower, this check is a 'light' check that will not impact the customers credit score. Normally when applying for credit as a full application a hard credit check is carried out

Stamp Duty

Stamp duty is a land tax payable to HMRC for the transfer of ownership of a property or land

Standard Variable Rate (SVR)

This is a rate set by a lender, this is normally the rate a customer would revert to after their initial period of interest ie. a fixed rate mortgage would often revert to a standard variable rate mortgage

Survey

A survey is a report carried out by a Qualified surveyor to assess the construction and state of repair on a property. There are different levels from basic, homebuyer and full structural surveys.

Terminal Illness

Life cover pays out a lump sum in the event of death within the policy term.

TPD (Total Permanent Disability)

Due to sickness or injury, someone is unable to work in their own occupation or other occupation they would be suitable trained to carry-out

Tracker Rate

This is a rate often directly aligned to BoE, similar to a variable rate

Treating Customers Fairly (TCF)

Treating customers fairly is a requirement for all regulated firms, no matter their size or the nature of the activities they undertake.

Trust

A legal arrangement of managing assets or monies in the benefit of one or more people

Underwriting (Credit)

An assessment carried by a credit provider on the viability of lending money to an applicant, normally by assessing credit and income information

Underwriting (Medical)

An assessment by an insurance provider on the health and medical details of an application

Variable Rate

This is a rate set by a lender or can be aligned with BoE that is often called a tracker rate

Waiver of Premium

In the event of you being unable to work due to accident, injury or illness, you may struggle to keep up your repayments on your policy and therefore compromise your cover. Waiver of premium ‘waives’ any premiums during the period you are unable to work to ensure you are still covered.