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Glossary of Financial Terms

Glossary of Financial Terms

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This details how much a loan or mortgage will cost you, including the monthly repayments, the total amount that will be repaid over the term of the loan together with any charges or fees.

Redemption / Redeeming your Mortgage
This means paying off the mortgage in full, either when you move house or at the end of a mortgage term.

Redundancy Insurance
This is a type of insurance that pays your monthly repayments for a limited time in the event of accident, illness or unemployment.

This is rearranging borrowing with a different lender to obtain better terms or to raise more capital.

Regular Earned Income
This is income which is not guaranteed but does form a regular part of an employee’s salary.

Regulated Loan
This is a loan under £25,000, that’s regulated under the terms of the Consumer Credit Act.

A remortgage is a new mortgage loan that’s agreed without actually moving. The existing mortgage is paid off and a new loan for a higher amount, taken out. This can either be with the existing lender or a new one. Surplus funds from new loan can be used for improvements or debt consolidation.

Remortgage with Outstanding Discount
This is a property bought under a Right to Buy scheme that the owner now wants to remortgage, but where there is an outstanding discount remaining.

Rent / Rental Income
This is the income you earn from a renting out a property.

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Repayment Mortgage
With a repayment mortgage, part of each monthly repayment goes towards repaying the loan itself, whilst the rest is made up of the interest due on the outstanding amount. When all of the repayments are made, you are guaranteed to repay the entire mortgage off at the end of the term – unlike an endowment mortgage.

Right to Buy
Under Government legislation, council tenants have a right to buy their council property.

Schedule D
This is the schedule of taxation that applies to self-employed people. Employees are subject to Schedule ‘E’ taxation.

Second Charge
This is a legal charge on a property that ranks behind a ‘first charge’. A second charge is usually used to secure additional borrowing, such as a second mortgage or a secured loan.

Second Mortgage
A second loan on a property which ranks after the first charge mortgage.

Security Address
This is the address of the property that is being offered as security against a mortgage or secured loan.

Secured Loan
A personal loan that is secured against a property, in the same way as a mortgage or remortgage. If there is a mortgage already, the lender takes what is known as a ‘second charge’ on the property.

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A self-build property is one that is built by the borrower themselves – it is not an existing property. Self Build Mortgages are usually advanced in stage payments and are subject to strict limits on Loan to Value.

Self Assessment
Each year, self-employed people (and those subject to the highest rates of income tax) are required to complete their own tax return – a process known as Self Assessment. When the return has been made to the Inland Revenue, the amount of tax due can be calculated.

Self-declaration of Income Self Certification / Self Certified Mortgage
If you are self-employed and you cannot prove a regular income, it’s still possible to get a mortgage by applying for a Self Certified Mortgage. With this, you simply confirm on the application form (or ‘self certify’) your income. Because of the additional risk, Self Certified Mortgages usually have higher rates of interest.

Sitting Tenant
This is someone who has a legal right of occupation, even when a property changes ownership. They also have a right to apply to their local authority to set a fair rent.

Sole Occupancy
This is a property occupied by the borrower. There are no tennants.

Special Status or Non Status
This is someone who is unable to provide all the necessary documentation relating to income and credit history.

Stamp Duty
This is a tax imposed by the Government on all house sales over a certain threshold.

Start-up Business
This is a brand new business with little or no trading history.

This is the credit-worthiness of a borrower.

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Structural Survey
This is the same as a Full Structural Survey.

Sum Assured
This is the maximum amount payable under a policy of insurance.

Tax Free Cash Sum
Under the terms of personal pension legislation, it’s possible to withdraw a lump sum from your pension fund as cash, free of income tax. This money can be used to help repay an interest-only mortgage.

This is someone who rents a property from a person or company (a landlord).

Tenancy Agreement
This is a document which sets out the terms of a tenancy. It states the rights of both the tenant and the landlord in respect of the property and the period of the lease. The most common form of Tenancy Agreement is an ‘Assured Shorthold Tenancy’, which allows a landlord to reclaim possession of the property at the end of the tenancy period.

Tracker Mortgage
This is a mortgage with a rate of interest linked directly to the movement of the Bank of England Base Rate.

Total Amount Payable (TAP)
This is the total amount payable to a lender throughout the period of the mortgage, including all interest payments and charges.

Typical APR
This is an example rate of interest, designed to give borrowers an indication of the total cost of borrowing.

This is the process a lender goes through to assess a mortgage application, taking into account the information given to them by the borrower and the credit reference they obtain.

Unemployed Insurance
This is an insurance policy that helps meet the mortgage repayments should the borrower have an accident suffer long-term illness or be made redundant.

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This is a property that is owned outright without a mortgage or any other legal charge over it.

Unsecured Loan
This is a personal loan that is not secured against a property.

This is an inspection of a property, carried out on behalf of a lender. It assertains the current market value of the property in its current condition.

Valuation Fee
The fee payable to a lender to arrange for a valuation of the property. This is normally paid when you send in your application. When the valuation has been carried out, this fee is not refundable – even if you do not proceed with the mortgage.

Variable Rate
This is a rate of interest that will vary according to market conditions.

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