Glossary of Terms

APR

Stands for Annual Percentage Rate. The rate of interest charged on a loan taking into account the total interest payable and other charges such as brokers' fees/legal fees.

ADVERSE

The term used to describe cases where the borrower has a poor credit record due to CCJs, bankruptcies, IVAs or similar.

BANK BASE RATE

This is the benchmark from which lenders calculate their rates. The base rate will change depending on decisions of the Monetary Policy Commission at the Bank of England, who decide on the rate each month.

BRIDGING FINANCE

Bridging Finance is a short term loan, usually only over 12 months at most.  It is used when funds are required quickly, yet only for a limited period of time.  For example, when a purchaser wishes to secure a new property even though the sale of their existing property has not completed or there is insufficient time to set up a term loan such as a mortgage.

CAPITAL

As far as bridging is concerned, this term describes the total amount that is being borrowed, excluding any interest that may be accrued on the sum.

COLLATERAL SECURITY

The extra security a borrower provides as a guarantee of their intention to repay a loan, generally in the form of property. This may allow 100% of funding on the primary property.

CONVEYANCER

A person, used as an alternative to a solicitor, to carry out the legal work involved in buying and/or selling a property

DISBURSEMENTS

Disbursements are the expenses incurred by the solicitor on behalf of the purchaser. These include: search fees, Land Registry fees etc.

EARLY REPAYMENT CHARGE

A charge payable on some loans and mortgages if they are repaid early. This is not usually applicable to bridging finance, since both lender and borrower are aware that the loan is only for a short period.

EQUITY

When a property is worth more than the loans secured on it then difference between the two sums is 'equity'.

ERV

This stands for Estimated Rental Value: the estimated achievable rent if a rent review or new letting of a property were to take place immediately.

EXCHANGE OF CONTRACTS

Agreement signed by property purchaser and vendor legally committing themselves to the transaction. This binds the person buying the property to completing the purchase within a given time limit.

FIRST CHARGE

The first loan to be secured on a piece of property or land, usually a mortgage.

FIXED RATE

The rate is fixed for a specific period at the outset and is not affected by changes to the Bank Base Rate.

FREEHOLD

Freehold is where a property or piece of land is owned outright rather than leased.

LEASEHOLD

A property that is rented for a fixed term.

LENDER

The company that provides you with the money for a loan or mortgage.

LTV

" Loan To Value". This is the size of the loan/mortgage outstanding as a percentage of the value of the property or price being paid for the property, for example, a property valued at £50,000 with a mortgage of £45,000 would have an LTV of 90%.

NEGATIVE EQUITY

The situation where the amount owed on a mortgage is more than the value of the property.

PROCESSING

The administration and paperwork involved in taking a loan from application stage to receipt of funds.

REMORTGAGE LOAN

Taken out by a borrower to replace a mortgage secured on the same property, in order to free up capital. Often taken out with a different lender to achieve a better interest rate. A bridging loan can often be used whilst the re-mortgaging process is carried out.

SECOND CHARGE

A second lender takes a charge over the property to secure a loan behind the first mortgage, which remains outstanding.

 SECURITY

When a loan is taken out it can be 'secured' on a property. The borrower agrees that in the event of default on repayments, the lender can rely on the property to support any loan facility. Where property is offered as security, lenders are generally prepared to offer more flexible terms and lower interest rates.

SECURITY ADDRESS

When taking out a loan or mortgage, the security address is the address of the property that is being offered as security for the loan.

 SELF CERTIFICATION

This allows a loan applicant to personally confirm how much he or she earns without the need to request accounts etc

SETTLEMENT FIGURE

The sum quoted in order for a loan to be fully repaid on a specified date.

 STAMP DUTY

A tax paid on the purchase of properties costing more than £125,000.

 STATUS

The credit-worthiness of a potential borrower.

 STRUCTURAL SURVEY

A detailed survey of the structure of a building carried out by a Structural Engineer or Chartered Building Surveyor.

 TERM PERIOD

Term of a loan expressed in months or years.

 TITLE DEEDS DOCUMENT

Details all past and present ownership of a property and institutions that have registered a charge against the property. Held by the first mortgagee lender while their loan is in existence.

UNDERWRITING

The process by which the ability of a prospective borrower to repay a loan is assessed. The process takes into account various factors including employment history, financial status, previous credit history and current earnings.

 VALUATION INSPECTION

The inspection of a property to determine its value for mortgage or loan purposes.

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