Online Diary

A

Arrears

If you go into arrears it means that you have ‘defaulted’ at least once on your mortgage repayments. You will owe a sum of money ‘in arrears’ to your lender. If you find yourself in this situation you should contact your mortgage lender to seek help as soon as possible.

B

Bank of England Base Rate

The official bank rate (also called the Bank of England base rate or BOEBR) is the interest rate that the Bank of England charges Banks for secured overnight lending. It is the British Government’s key interest rate for enacting monetary policy

Buy to let

A buy to let property is purchased with the sole intention of renting it out to a tenant as an investment. Some mortgage lenders offer special ‘buy to let’ mortgage deals for this purpose.

C

Capital

The amount you have borrowed on the mortgage, on which interest will be charged.

D

Defaulting

If you cannot meet your minimum required monthly mortgage repayment and go into arrears on your mortgage, this is known as ‘defaulting’. If this happens you should speak to your mortgage lender about how to remedy the situation and there are also Government schemes designed to help people whose homes are at risk from repossession.

G

Guarantor

A guarantor can guarantee the mortgage repayments for you if the lender determines you are at high risk of not making the payments.

Gifted Deposit

Where the deposit you’re using to purchase your property is not from your own sources but given to you by a relative or friend.

D

Defaulting

If you cannot meet your minimum required monthly mortgage repayment and go into arrears on your mortgage, this is known as ‘defaulting’. If this happens you should speak to your mortgage lender about how to remedy the situation and there are also Government schemes designed to help people whose homes are at risk from repossession.

I

Index linked

Where the level of cover provided under a policy increases over time – this is often used to ‘inflation proof’ cover and often linked to the Retail Price Index.

Interest

The money you are charged for borrowing.

J

Joint Life

Where a life insurance policy is covering two individuals.

Joint Life 1st Death

The sum assured is paid on the death of whichever of the two lives dies first. In this case, the two lives assured are normally also joint policy holders, and the sum assured would be paid direct to the policy holder.

L

Land Registry Fee

A fee paid to the Land Registry to register ownership of a property.

Life assured

The person on whose life or death the payment of the sum assured depends. The life assured is not always the same person as the policy holder.

M

Mortgage deed

The legal agreement which gives the lender a legal right to the property.

Mortgage offer

The formal offer of a mortgage from a lender called a Mortgage Offer.

O

Offset mortgages

Your main current account, savings account or both are linked to your mortgage. Each month, the amount in these accounts is offset against your outstanding mortgage before working out the interest you owe. You are unlikely to earn interest on your savings which are offset against your mortgage.

P

Policy holder

The policy holder is the owner of the policy and responsible for paying the premiums. The sum assured will be paid to the policy holder unless other arrangements are made.

Portability

Your mortgage broker or lender will be able to tell you if your mortgage is portable or not. A portable mortgage may enable you to transfer borrowing from one property to another, sometimes to avoid additional fees or keep a specific discounted rate.

R

Redemption

Paying off a mortgage.

Renewable premiums

Where the premium is subject to review and potential increases over the term of the policy.

Renewable Term Assurance

A term assurance of life assurance policy that contains an option, which can be exercised at the end of term, to renew the policy for the same sum assured without further medical evidence.

Reservation fees

This is a ‘front end’ charge levied by several home lenders. The idea is you’re asked to pay the fee (typically £100 to £300) to secure the funds you are intending to borrow. It is sometimes described as an administration or booking fee.

S

Shared ownership

Shared ownership schemes are designed to allow people who would otherwise be unable to get a foot on the property ladder to do so. The home buyer will enter into an agreement, usually with a local housing association, which sees them take out a mortgage on a share of the property and pay rent on the remainder. The portion that is owned will vary depending on the circumstances.

Subprime/non-conforming

A sub-prime mortgage, also known as a non-conforming mortgage, is geared towards those with a less than perfect credit history. This could be bankruptcy or county court judgements (CCJs), or you could have fallen into arrears in the past. These products, because of their circumstances, have higher rates, but mean that those who couldn’t otherwise obtain finance for their property purchase can do so. It is now much harder to get a mortgage if you have had credit problems than before the credit crunch.

Subject to survey and contract

Wording included in any agreement before the exchange of contracts. This wording allows the seller or buyer to withdraw from the property sale.

T

Terminal illness cover

An option included in life assurance policies whereby the life company will pay out if the policy holder is terminally ill – this should not be confused with Critical Illness Cover (CIC).

Tracker rates

Tracker rates are usually linked to the Bank of England base rate, which means they’ll change in line with changes to the base rate.

Trust

If a policy is written in trust, then you can help determine who should benefit from the policy when it is eventually paid.

U

Underwriter

The role of the underwriter is to look at individuals based on knowledge of that individual – e.g. medical history, hereditary illnesses, occupation, sporting activities. For the life assurance, they will assess the risk and decide whether to offer cover and if so at what price. For mortgages they will decide whether to lend.

Utmost good faith

Is a minimum standard that requires both the parties (life company and life assured) to act honestly towards each other and to not mislead or refrain from providing critical information to the other.

W

Waiver of premium (WOP)

Is an additional option that can be taken out with most forms for protection. The insurance company will pay the premiums due on a life assurance policy if the policy holder is unable to do so because they are unable to work due to accident or illness. The insurance company will pay the premiums for you until you are able to return to work.

Will

If you do not make a will then you will die Intestate and will lose control over the proceeds of your estate.