Breaking down technical terms

Jargon Buster

We know that there’s lots of product-specific terms and acronyms, which you may bump in to along your mortgage and protection journey. So we’ve pulled together this handy Jargon Buster, that you can refer to whenever you need!

Mortgage acronyms

14 terms

Acronym	Definition
AIP	Agreement in Principle (also known as a Decision in Principle): is a certificate from the lender confirming how much they may be willing to lend
APR	Annual percentage rate (current interest rate)
APRC	Annual percentage rate of charge: This is the fixed rate and today’s variable rate, averaged over the mortgage term, to give you the APRC rate
AVM	Automated valuation model: An auto-generated valuation takes place with the lender
BOE	Bank of England – The bank that sets the base rates

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Mortgage Terms

33 terms

Term	Definition
Adverse credit	This refers to things such as late or missed payments, defaults, county court judgements, Bankruptcy, involuntary arrangements, arrangements to pay, debt management plans and even payday loans taken in the last 3 years.
Arrangement fee	This is a fee that the lender charges, either added to the mortgage or paid upfront. It usually means you obtain a lower interest rate than their no-fee products
Buy to let	A type of mortgage for both first time landlords and existing landlords. Some mortgages do not require proof of income as they can be classed as self-funding, provided the rental income is sufficient.
Capitol and Interest	(Also known as repayment) Paying the interest as well as the mortgage balance.
Cash-back	Some lenders will offer cash-back on completion. Traditionally paid to your solicitor on completion, however some lenders will pay this directly to the homeowner’s bank account using the pre-agreed direct debit details. (Payment within 30 days of completion)

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Types of house purchasing schemes

4 terms

Term	Definition
RTB	Right to buy scheme: After a period of time you can buy your council home at a discounted rate. The discount depends on the length of time you have lived there and other T&C’s may apply. You can enquire further with your local council housing office
Shared ownership	You buy a percentage of the home usually between 25% - 75%. The remaining share is owned by a housing association. Along with the monthly mortgage payment you will usually have a rent payment on the part you don’t own, service charge and management charge. On very rare occasions (depending on the housing association) there may be no rent on the part you do not own, but you still pay the service and management charges. You can buy a share that is affordable to you and have the option to buy further shares in the future usually up to 100% ownership. However, in some areas where there is limited affordable housing there may be a cap on this, typically around 80% to keep affordable housing in the area
Discounted market sale	You purchase a house at a discounted rate to the current market value (usually 20%) but this can vary and is only offered in some areas by local councils. When selling in the future you have to sell on at the same discounted rate. Typically you will not pay any rent on the discounted part
First home scheme	This scheme is for local first time buyers who cannot afford to buy on the open market. The discount is usually between 30-50% of the full market value

All schemes have different T&C’s it is important you fully look into these before buying to ensure you choose the right scheme for you – contact us for further information and advice.

Protection Terms

6 terms

Term	Definition
Life insurance	A lump sum paid out upon death
Critical illness cover	A lump sum will be paid out upon being diagnosed with a specified critical illness. This varies by lender, illnesses include (and are not limited to); cancer, heart attack, stroke, motor neurone disease
Income Protection	If a doctor declares you unfit to work, Income Protection pays out around 60-65% of your gross annual income on a monthly basis until you can return to work.
Family Income Benefit	This replaces the deceased partner’s income for a set period of time. This is typically an annual lump sum or monthly payment. This can help the beneficiary and dependants maintain their lifestyle, should something happen to either parent.
Accident and sickness cover	If you have an accident or become sick and are unable to work, this cover will pay out a set monthly amount (typically to cover the mortgage payment only)

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Acronym

Definition

AIP

Agreement in Principle (also known as a Decision in Principle): is a certificate from the lender confirming how much they may be willing to lend

APR

Annual percentage rate (current interest rate)

APRC

Annual percentage rate of charge: This is the fixed rate and today’s variable rate, averaged over the mortgage term, to give you the APRC rate

AVM

Automated valuation model: An auto-generated valuation takes place with the lender

BOE

Bank of England – The bank that sets the base rates

Term

Definition

Adverse credit

This refers to things such as late or missed payments, defaults, county court judgements, Bankruptcy, involuntary arrangements, arrangements to pay, debt management plans and even payday loans taken in the last 3 years.

Arrangement fee

This is a fee that the lender charges, either added to the mortgage or paid upfront. It usually means you obtain a lower interest rate than their no-fee products

Buy to let

A type of mortgage for both first time landlords and existing landlords. Some mortgages do not require proof of income as they can be classed as self-funding, provided the rental income is sufficient.

Capitol and Interest

(Also known as repayment) Paying the interest as well as the mortgage balance.

Cash-back

Some lenders will offer cash-back on completion. Traditionally paid to your solicitor on completion, however some lenders will pay this directly to the homeowner’s bank account using the pre-agreed direct debit details. (Payment within 30 days of completion)

Term

Definition

RTB

Right to buy scheme: After a period of time you can buy your council home at a discounted rate. The discount depends on the length of time you have lived there and other T&C’s may apply. You can enquire further with your local council housing office

Shared ownership

You buy a percentage of the home usually between 25% - 75%. The remaining share is owned by a housing association. Along with the monthly mortgage payment you will usually have a rent payment on the part you don’t own, service charge and management charge. On very rare occasions (depending on the housing association) there may be no rent on the part you do not own, but you still pay the service and management charges. You can buy a share that is affordable to you and have the option to buy further shares in the future usually up to 100% ownership. However, in some areas where there is limited affordable housing there may be a cap on this, typically around 80% to keep affordable housing in the area

Discounted market sale

You purchase a house at a discounted rate to the current market value (usually 20%) but this can vary and is only offered in some areas by local councils. When selling in the future you have to sell on at the same discounted rate. Typically you will not pay any rent on the discounted part

First home scheme

This scheme is for local first time buyers who cannot afford to buy on the open market. The discount is usually between 30-50% of the full market value

Term

Definition

Life insurance

A lump sum paid out upon death

Critical illness cover

A lump sum will be paid out upon being diagnosed with a specified critical illness. This varies by lender, illnesses include (and are not limited to); cancer, heart attack, stroke, motor neurone disease

Income Protection

If a doctor declares you unfit to work, Income Protection pays out around 60-65% of your gross annual income on a monthly basis until you can return to work.

Family Income Benefit

This replaces the deceased partner’s income for a set period of time. This is typically an annual lump sum or monthly payment. This can help the beneficiary and dependants maintain their lifestyle, should something happen to either parent.

Accident and sickness cover

If you have an accident or become sick and are unable to work, this cover will pay out a set monthly amount (typically to cover the mortgage payment only)