In the event of an accident, sickness or involuntary unemployment befalling a borrower, this insurance will cover their mortgage repayments. Some Lenders attach mandatory insurance cover to their most attractive rates, although this is increasingly uncommon. Also known as: Mortgage Payment Protection Insurance (MPPI).

See Higher Lending Charge.

This is an umbrella term used of applicants with poor credit history. This may include mortgage arrears, defaults, County Court Judgements (CCJs), bankruptcy, Individual Voluntary Agreements (IVAs) and house repossession. Borrowers with elements of adverse credit are offered higher rates than standard Full Status applicants are, usually with terms and conditions relating to the extent of their adverse credit history. Often, adverse credit mortgages are Libor-linked rates.

The APR is a rate calculated using a generic formula applicable to all Lenders, which includes all the costs associated with a mortgage. This allows for easy comparisons to be made between the different mortgage products offered by each Lender.

This fee may be charged on specific products and is either payable in advance, added to the loan or deducted from the advance on completion. It covers the administrative expenses incurred whilst processing an application.

Every month the Monetary Policy Committee sets the Bank of England Base Rate, to which all mortgage rates are linked either directly, as Tracker mortgages, or indirectly, in all other cases.

This fee may be charged on specific products and is either payable in advance, added to the loan or deducted from the advance on completion. It is normally payable in order to reserve funds when a product is likely to sell out quickly.

This insurance covers damage to the mortgaged property and/or its contents in a variety of specified scenarios. It is compulsory for all Lenders, and if the Lender's own insurance is not taken they will often charge an administration fee. Some Lenders attach mandatory insurance cover to their most attractive rates, although this is increasingly uncommon.

This is a mortgage for property that will be let by the borrower to other tenants. When Lenders calculate how large a loan the borrower can afford to repay on BTL they do so primarily on the basis of projected rental income, rather than salary income multiples.

With this method the monthly mortgage repayments pay off both the initial loan amount and the interest that is charged upon it. At the end of the loan term the entire debt will be repaid. Also known as: Repayment mortgage.

This is the regularity with which a Lender calculates the outstanding balance on mortgages, and hence the size of monthly repayments. It is usually annually, monthly or daily. With Capital and Interest mortgages this can be important; an annual interest calculation means that the borrower will pay interest on capital repayments that have been made in the course of that year. In contrast a daily or monthly interest calculation means that the balance, and consequently the interest charged, will reduce with every capital repayment made.

The lender will guarantee that your rate of interest will not rise above a set interest rate. However, if the normal interest rates fall, the rate of interest, the lender charges you, may also fall.

This is a mortgage that is guaranteed not to rise above a specific rate (the 'cap') within a set period. Unless this is combined with another rate, such as a Discount or Tracker, the Lender's SVR will be charged if it is lower than the capped rate; if it rises above this ceiling the rate charged will remain at the capped level. There are often early repayment charges applicable if the loan is repaid within the capped period.

This is a mortgage in which the Lender refunds a sum of money, either as a percentage of the loan or a flat figure, to the borrower upon completion. With this type of offer the borrower will typically be tied to the Lender's SVR by early repayment charges necessitating repayment of the cashback if the loan is repaid within a set period.

This is the moment when a transfer of property has legally taken place, after all legal documentation has been completed and funds have been transferred from the buyer's solicitor to the seller's solicitor.

See Buildings and Contents Insurance.

This is the legal process whereby ownership of a property is transferred.

This is a fully Flexible mortgage combined with a current account. Money in the current account is automatically set against the mortgage balance and interest is only charged on the outstanding amount, meaning interest payments are reduced.

The lender can guarantee a discounted amount of anything, but normally up to five per cent, off your interest rate. This means the interest you pay will still vary up or down but at a lower rate than the general interest rate. Normally, this is for a set number of years. Once this period has expired, your mortgage will revert to the normal variable interest rate.

This is a variable mortgage that is discounted from a Lender's SVR by a set percentage within a set period. There are often early repayment charges applicable if the loan is repaid within the discounted period.

This is a variable mortgage that is discounted from the Bank of England's Base Rate by a set percentage within a set period. There are often early repayment charges applicable if the loan is repaid within the discounted period.

See Early Repayment Charge (ERC).

This is a penalty charged on traditional (i.e. non-Flexible) mortgages when the loan is repaid in full within a set period. Usually it applies on a pro rata basis when capital repayments are made outside of the agreed monthly payments. Many Early Repayment Charge periods are linked to those of offers, such as Capped, Discounted or Fixed rate periods. However, some mortgage rate have extended Early Repayment Charges which tie-in borrowers even while they are paying the Lender's SVR. Also known as: Early Redemption Penalty (ERP); Redemption Penalty.

A repayment vehicle associated with Interest Only mortgages.

Your monthly repayments on an endowment mortgage are split two ways. One part of your payment goes to your lender and the other goes to an investment fund (normally managed by another company). Your monthly repayment to your lender only pays off the interest charged on your mortgage, not any of the capital. This means, that at the end of the period of your mortgage, you still owe the mortgage company the same amount as you initially borrowed. Your monthly payment to the investment fund, normally linked to units, builds up an amount, which will be used to pay off your mortgage at the end of the term. The amount of money returned from your investment fund depends on how your policy has performed over the years. There is no guarantee that there will be enough to pay off your mortgage. However, they are designed so that you may actually receive a cash lump sum in addition to being able to repay your mortgage, or you may be able to repay your mortgage early, saving you interest payments.

This is the stage in England, Wales and Northern Ireland that the deposit money is paid and both parties are legally bound to fulfil the agreed conditions of sale and purchase.

This is a mortgage only available to intermediaries through a specific packager, in conjunction with a Lender who provides the funding.

The lender will guarantee you a set rate of interest on your loan, normally for a specified number of years. Once this period has expired, your interest rate will revert to the normal variable interest rate.

This is a mortgage that is charged at a fixed rate within a set period. There are often early repayment charges applicable if the loan is repaid within the fixed period.

As its name suggests, this is a type of mortgage that offers considerably more flexibility than traditional mortgages. Although specific details vary between Lenders, the core features of Flexible mortgages are:

- daily or monthly capital rest

- ability to make overpayments at any point of the loan term without an early repayment charge

In addition, many Flexible mortgages allow borrowers to:

- defer payment by taking payment holidays

- drawback overpayments

- drawdown further advances

- underpay without penalty (often only to the amount of any previous overpayments)

A flexible mortgage allows you to make additional or lump sum payments in excess of your scheduled amount, enabling you to pay off your mortgage early. By reducing the capital amount of your mortgage in this way, you are also reducing your monthly interest payments. You may take this money back at any stage or use it to take a repayment "holiday".

The buyer of a Freehold property owns both the property and the land it stands on indefinitely. See also Leasehold.

This term describes borrowers with a good credit history who are not self-certifying their income.

This is when a prospective purchaser has an offer for a property accepted, before another potential buyer puts in a higher offer for the same property.

This is a premium charged by Lenders in order to indemnify themselves, and NOT the borrower, against any financial shortfall they may incur in the event of repossessing a property which must then be sold at a loss. It is applicable if the amount required is higher than a certain percentage of the property value, usually 75% LTV; often the Lender will pay the cost of this insurance themselves between 75% and 90% LTV. The charge may either be added to the loan or deducted from the advance on completion. Also known as: Additional Security Fee; Indemnity; Mortgage Indemnity Guarantee (MIG).

See Valuation Fee.

These are the multiples that Lenders apply to borrowers' income in order to determine the maximum loan they will offer them.

See Higher Lending Charge.

A repayment vehicle associated with Interest Only mortgages.

With this method the initial loan amount remains the same throughout the term of the loan, while the monthly mortgage repayments only pay off the interest being charged on this amount. For this reason, Interest Only mortgages are tied to investment in one of a number of different repayment vehicles, which, ideally, should cover the initial loan amount at the end of the loan term. These repayment vehicles include endowment policies, personal pensions, ISAs etc.

Over the course of your mortgage, the interest rate you will pay on your loan will vary. This means your monthly repayments will also vary. It is important to allow for this when calculating the amount you can afford to borrow. Amongst other factors, the rate of interest is affected by the performance of the economy and therefore difficult to predict. For this reason, lenders have introduced a number of different schemes, some of which offer some guarantees to the amount of interest you will pay.

See Procuration Fees.

ISA stands for Individual Savings Account. These are schemes which allow individuals to invest in shares and bonds up to a certain amount without paying tax on the profits. An ISA mortgage works in the same way as an endowment mortgage, see above. The main difference between the two, is that your investment fund is based purely on shares and bonds rather than units.

The buyer of a Leasehold property owns the property for a set number of years, but doesn't own the land on which it stands. See also Freehold.

This is a mortgage where the borrower's current property is let to other tenants and the rental income is used to cover the mortgage repayments on a new property, bought as the borrower's main residence. When Lenders calculate how large a loan the borrower can afford to repay on LTB they do so primarily on the basis of projected rental income, rather than salary income multiples.

This is a variable mortgage that is either above or below the London Inter-Bank Offered Rate by a set percentage within a set period. The Libor rate is set independently every 3 months. It is often associated with Lenders that offer loans to borrowers with elements of adverse credit.

See Term Assurance.

This is a percentage figure of the loan amount in relation to the property value. For instance a £100,000 property bought with a mortgage of £70,000 has an LTV of 70%. The higher the LTV, the higher the interest rate charged will be; above certain LTVs a Higher Lending Charge comes into effect.

A mortgage is a means by which a "borrower" receives a loan from a "lender", normally a building society or bank, in order to purchase a property. The loan is repaid over a set number of years (often 25 years but this might vary) in monthly instalments. The purchased property acts as security for the loan. If the purchaser fails to make their repayments, then the lender would be entitled to repossess the property.

See Higher Lending Charge.

See Accident, Sickness and Unemployment Insurance (ASU).

See Adverse Credit.

This is a fully Flexible mortgage which allows a borrower to keep balances (such as mortga debt, savings account and current account) in separate accounts, but, for the purposes of interest calculation, all balances are aggregated. Money in savings or current accounts is set against the mortgage balance and interest is only charged on the outstanding amount, meaning interest payments are reduced.

This is when an unscheduled capital repayment is made or when monthly payments are increased, in order that the mortgage is repaid before the end of the mortgage term, saving considerable sums in interest. Many traditional (i.e. non-Flexible) mortgages include early repayment charges if overpayments are made within a set period. In contrast, Flexible mortgages allow unlimited overpayments without penalty and, increasingly, mortgages are semi-Flexible, allowing borrowers to overpay a certain percentage of their loan each year without incurring early repayment charges.

A repayment vehicle associated with Interest Only mortgages.

When you retire, you are currently allowed to take a proportion of your pension as a tax free sum. A pension mortgage works in the same way a as pep or endowment mortgage (see above). The difference between them, is that a pension mortgage is linked to your pension, using this tax free sum to pay off your mortgage. This mortgage enables you to take advantage of the pension tax benefits.

A repayment vehicle associated with Interest Only mortgages.

A portable mortgage is one that can be transferred to another property without penalty if the borrower moves house within an early repayment charge period. The new interest rate that the Lender will be prepared to offer depends on whether the loan amount increases or decreases. If the latter, early repayment charges may apply.

This is commission paid by Lenders to intermediaries for introducing business to them. If the intermediary receives more than £250 they are obliged under the Mortgage Code to disclose to the borrower the exact amount they received. Also known as: Introducer Fee.

The rate of interest is an amount of money, included in your monthly mortgage repayments, giving the lender a financial return on their loan.

See Early Repayment Charge (ERC).

See Capital and Interest mortgages.

This is a straight forward loan. Each month you make repayments to the lender. These repayments will be made up of an amount to pay off the capital of the loan and an amount to pay for the interest charged on the total of the loan.

This is when a tenant living in a council-owned property purchases it at a discount, the size of which depends on the length of their tenancy.

This is a mortgage for property under construction. The loan is paid out in stages as the property is completed, in order to ensure the LTV does not rise too high at any point.

This is a mortgage where a borrower states their income and signs a confirmation of their ability to repay a loan, without having to provide evidence such as accounts, payslips or bank statements. Consequently, S/C rates are often higher than standard Full Status mortgages.

This is a scheme operated by a Housing Association where the borrower owns part of a property, and pays the mortgage on this, while a Housing Association owns the rest of the property, and the borrower pays rent on this.

This is a mortgage that is taken partly on a Capital and Interest basis and partly on an Interest Only basis.

This is a government tax charged on properties with a purchase price in excess of £60,000. Properties are charged 1% from £60,000 to £250,000, 3% from £250,000 to £500,000 and 4% above £500,000. It is not payable on remortgages.

This is a variable rate determined entirely at each Lender's discretion. Unless linked to Libor or the Bank of England Base Rate, the SVR is the reverting rate at the end of any special offer period, such as a Capped, Discounted or Fixed rate.

This insurance repays the mortgage in the event of the insured person's death. Also known as: Life Policy.

This is a variable mortgage that is either above or below the Bank of England's Base Rate by a set percentage within a set period.

Whether purchasing or remortgaging the Lender undertakes a valuation of the property to ensure it provides adequate security. The charge is borne by the borrower and increases exponentially with the valuation/purchase price. There are 3 levels of valuation: in order of increasing detail these are Basic, Homebuyers' Report, and Structural survey. The more stringent the valuation, the higher the fee.

The interest rate on your mortgage will vary, unrestricted, up and down over the period of your loan dependant on the performance of the economy.