Mortgage glossary
We’ve put together a handy glossary to explain some of the terms you may see either before or after you get a mortgage. 
This refers to the money loaned to the buyer by the lender.
A means of expressing, as a percentage, the yearly interest rate and other charges applied to a mortgage or other type of loan.
Where a customer has fallen behind on their payments, the lender will try and arrange with them to pay an additional amount each month to catch up. The lender should assess how much is affordable to ensure that they are treating the customer fairly.
A mortgage account is said to be in arrears if the regular contractually required payments to the lender are missed and become overdue.
Type of tenancy agreement usually for an initial 6 or 12 months. At the end of this period, the tenancy can either continue or the landlord can give notice to evict the tenant. This is the main type of agreement accepted for Buy to Let applications.
The full amount owed at any given period of time throughout the duration of the mortgage, comprised of the remainder to be paid and any accrued interest.

The Bank of England’s official borrowing rate, which plays a significant role in determining the level of interest charged by lenders.

Checks made against an individual usually carried out by a solicitor, which will confirm if the person is bankrupt or in the process of going through bankruptcy proceedings.
A person engaged by an applicant to discuss and provide them with financial advice. 
Insurance which covers damage to the internal and external structures of the property but does not cover contents. Buildings Insurance must be taken out as soon as contracts are exchanged.
An investment mortgage. The property is rented out and the rent received used to pay the mortgage.
Legal document completed by the solicitor confirming all formalities have been satisfied prior to completion. 
The final legal transfer of ownership when the buyer pays the required funds to purchase the property.

Refers to the legal work done for the transfer of the legal title of a property from one person to another.

When a client defaults on a loan/credit agreement and is taken to court by the creditor, a CCJ is registered against the client if it is proved that the money is owed.
The applicants name and address is fed into a credit agency database in order that a search can be done to see whether any CCJ, defaults, credit agreements are registered against the applicant. The search will also indicate who is registered at the property for voting purposes.
A debt management plan is an informal repayment arrangement usually made through a debt management firm between applicants and anyone you owe money to and for what are classed as non-priority debts, such as credit cards, loans and other credit agreements, such as a mobile phone contract.
An application agreed subject to reference checks and usually a valuation report.
If an applicant does not pay a financial commitment, the Company can record this as a default once they are at least three months behind.
Balance being put towards the purchase price of the property by the applicant, which makes up the difference between the mortgage and purchase price.
A charge payable when a mortgage is paid early. This is often applied to contracts where the interest rate is fixed, capped or discounted.

The difference between the value of the property and the amount of any loan secured against it.

Work required on the property before the mortgage loan can be issued.

In England and Wales, exchange of contracts is the point at which the contract governing the sale of the property becomes legally binding. Prior to exchange, either party can pull out of the transaction. After exchange, the buyer should take out appropriate buildings insurance. Please note, different rules are applicable in Scotland.
Financial Conduct Authority. The independent body that regulates mortgage lenders and other financial services companies.
The initial mortgage payment, which is commonly higher than regular monthly payments as interest from the day money was released to complete the transaction is included, in addition to the first monthly payment. 
The freeholder of a property is the outright owner and also owns the land the property is built on.
When the seller, having already accepted an offer but before contracts are exchanged, accepts another, higher offer from someone else.
If you own a long lease on a property in England and Wales, ground rent is often payable to the freeholder (a company or individual which owns the land the property is built on). This is often a fairly low sum and is stipulated in the contract.
A Government led scheme designed to help people buy a new build property.
Also known as a HomeBuyer Report, this is a fairly inexpensive survey suitable for properties in a reasonable condition. The survey is less extensive than a building survey, but it will help identify any structural issues such as subsidence or damp. 
A house in multiple occupation (HMO) is a property rented out by at least 3 people who are not from 1 ‘household’ (for example a family) but share facilities like the bathroom and kitchen. It’s sometimes called a ‘house share’.
If you want to rent out your property as a house in multiple occupation in England or Wales you must contact your council to check if you need a licence.
You must have a licence if you’re renting out a large HMO in England or Wales. Your property is defined as a large HMO if all of the following apply:
  • it is rented to 5 or more people who form more than 1 household
  • some or all tenants share a toilet, bathroom or kitchen facilities
  • at least 1 tenant pays rent (or their employer pays it for them)
This is a type of mortgage that allows you to pay just the interest charged each month for the term of the loan. You don’t have to repay the amount you’ve borrowed until the end of the term.

Will explain the key features of your mortgage and will tell you what your initial monthly payments would be, based on the information you provide during your quote.

Note: New Mortgages Conduct of Business (MCOB) rules require your Mortgage Lender to issue a European Standardised Information Sheet (ESIS). This is a mandatory product disclosure document that is replacing the KFI.

Issued by the Land Registry to the owner of the registered land, these certificates act as proof of ownership prior to the introduction of the Land Registration Act 2002. Since 2003, the Land Registry no longer issues land certificates and all existing certificates have no legal significance.
A fee paid to the Land Registry to register ownership of a property.
Fixed or variable rates that you choose when you apply are only available for a certain period of time and you must be able to start your mortgage before this date.
A leaseholder rents a property from the freeholder for a fixed period of time. This can be years, decades or even centuries. The leaseholder does not own the land that the property is built on. A legal agreement would be in place between the Leaseholder and the landlord (sometimes known as the freeholder) called a ‘lease’ – which sets out how long you will own the property for.
The bank, building society or mortgage company, which lends you the money to purchase your property.
The person who leases or lets a property to another; a landlord.

LIBOR is a rate of interest (the London Inter-Bank Offered Rate) which is often used as a bench mark for pricing financial products. It is commonly the rate that financial institutions use when lending to each other and is determined by the level of wholesale market rates. LIBOR is expected to have ceased to be available for use by mortgage lenders by December 2021. Before this date we will replace LIBOR with the Kensington Standard Rate (KSR), which will be set by reference to the Bank of England base rate (BBR). KSR will never be lower than BBR (or 0%, whichever is greater), nor more than 1% above BBR at each date on which it is set. At the point of replacement, the KSR will be no higher than the variable rate currently applicable to your mortgage. We will tell customers the incoming KSR rate at least 1 month before we make the change and will ensure they are treated fairly in connection with this change. 

Commonly confused with life insurance (which has a fixed term), life assurance is a type of insurance policy in which a lump sum is payable upon death. Life assurance is often taken out with a mortgage to insure against the borrower’s death before the loan is repaid.
The ratio of a loan to the value of an asset purchased.
A series of queries submitted to the local authority in which the property is located.  The questions will cover matters relating to road schemes and ownership, planning permissions affecting the property and local conservation issues among others. A local authority search is always required if you are taking out a mortgage.

A mortgage is a loan taken out to buy property or land. The loan is ‘secured’ against the value of the property until it’s paid off. If the borrower fails to repay the lender on the agreed terms, the property can be repossessed by the lender to cover their costs.

A mortgage adviser often works for a bank or other financial institution. Their job is to advise the customer on their available mortgage options and optimal mortgage strategy. They may also be able to negotiate with the bank on the borrower’s behalf.
A mortgage broker is a professional intermediary who sits between the lender and the borrower. Brokers often work for themselves, rather than a financial institution. They receive a commission from lenders when they connect them with a suitably matched customer.
Legal document which the applicant signs to agree to the mortgage being secured against their property. The Deed is then normally registered with HM Land Registry to record the Company’s charge over the property.
Insurance covering the cost of your mortgage payments in the event that sickness, unemployment or an accident which may prevent you from working and paying your mortgage. Most MPPI policies will only pay out for a maximum of 12 months.
The term over which you agree to repay the loan.
The entity in whose favour a Mortgage is granted by a Mortgagor. 
The entity who grants a mortgage in favour of a Mortgagee.
MUBs are where there are several separate properties in one block, e.g. a block of 4 individual flats, and the lender’s security is the freehold of the entire property/all 4 flats. Lending in each case is based upon the rental value of the entire property.
A ten year warranty issued by the National House Building Council for newly built properties.
The property is worth less than the mortgage balance currently outstanding.
Document issued by the lender confirming the loan has been approved and offering the applicant a mortgage.  The document must be issued in a standard format to comply with the FCA regulations. It will include such information as the loan amount, interest rate, monthly payments etc.
Remortgaging is the process of repaying one mortgage by taking out another secured on the same property. This is often done to take advantage of a new lender offering a more attractive rate and terms.
A type of mortgage where you make a monthly payment to cover both interest and the money borrowed. At the end of the mortgage term, the mortgage is completely paid off.
Repossession is a last resort legal process where a mortgage lender takes ownership of a property. Repossession only occurs in instances where there are a number of missed mortgage payments and the borrower is unable to rectify the situation through a new payment plan.
Mortgage where the applicant will be occupying the property as their main residence.
On a fixed or discounted or other short term rate, this will be the rate that the mortgage will revert to after the initial period.
Where the local council allows a tenant to purchase the property they are currently occupying at a discounted purchase price.
The property is used as security for a second mortgage. This mortgage will rank behind the main mortgage in order of priority.
Tax imposed by the Government on house purchases. The purchaser will have to pay a certain percentage of the purchase price upon completion.
The legal documents which provide proof of ownership of a property.
Top-slicing is where a buy to lender may offer a customer a higher loan amount than they would otherwise qualify for based upon the rental value of the property, by using some of their personal income in the affordability calculation.

A document used in conveyancing in England and Wales to transfer a property from the legal owner to another party. The transfer deed must not be confused with the title deed which is a document providing proof of legal ownership.

Inspection of the property by an expert, to help the lender determine whether it is worth the money that the buyer wishes to borrow.
The person(s) you are buying your new home from.

Please be aware mortgages are secured against your home and your home may be repossessed if you do not keep up repayments on your mortgage. 

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Kensington and Kensington Mortgages are trading names of Kensington Mortgage Company Limited (registered in England & Wales No. 3049877), which has its registered office address at: Ascot House, Maidenhead Office Park, Maidenhead SL6 3QQ.

Kensington Mortgage Company Limited is authorised and regulated by the Financial Conduct Authority (Firm Reference No. 310336). Some investment mortgage contracts are not regulated by the Financial Conduct Authority.