5 top tips to improve your credit score

by Willowgate Finance | May 19, 2017 | Mortgage & Protection

5 Top Tips to Improve your Credit Score

1 CHECK ALL YOUR CREDIT FILES

You have 3 credit files. One with Experian, Equifax and Call Credit. You can download a copy of your statutory credit report at www.equifax.co.uk, www.experian.co.uk and www.transunion.co.uk for free.

Check each credit file to ensure your personal data is accurate –

Make sure your name, and any names you’ve been known by (such as your maiden name) is correctly spelt

Ensure your correct date of birth is shown

Check that your address history is accurate. I have seen many a file with an address on it that the individual has never lived at.

Check that each account shown is yours.

Check that the data reported, i.e. payments made on time or missed/late payments, is correct.

If your name, date of birth or address history is incorrect, contact the Credit Reference Agency (CRA), or all 3 of them if it is wrong on all of them, and ask them to update the file.

If there are accounts that do not belong to you showing on your file, contact the CRA for advice on how to remove them. You may have to contact the lender or institution direct to have the file amended/removed.

If the accounts are correct, but the payment history is not, contact the credit provider direct and ask them to update their records with all 3 CRAs.

2 ELECTORAL ROLL

Check your credit files to make sure that you are showing as being on the electoral roll at your current address. If not, contact your local council and register. You can do this over the phone or online at www.aboutmyvote.co.uk If you were on the electoral roll at previous addresses, and this isn’t showing, contact the council and ask them to amend their records with all 3 Credit Reference Agencies.

You should do this as a priority as councils can take up to 3 months to update the Credit Reference Agencies.

Being on the electoral roll is more than just allowing you to vote in local and general elections. In the digital age it used used by lenders and institutions to check and verify your identity. Register even if you are not a UK citizen and can’t vote in UK elections, it is not only law but a vital part of your credit rating.

I wrote briefly about your credit score HERE. All lenders have their own scoring methods, and apportion importance to different factors on your credit file, in line with their lending criteria. It’s like passing a test, you need to get a certain amount of points to pass their credit score to allow them to lend to you, or to provide you with their service.

One item they all have in common is being able to verify your identity via the electoral roll, and it is worth a few points. As an example – a lender could have a scoring system out of 1000, and being on the electoral roll could be worth 200 points. It’s that important.

If all other data on your credit file is positive, it could be the difference between being accepted or declined for a mortgage, loan/credit card or other service.

3 BUDGET

Budget and prioritise.

Make a list of all of your outgoings. Make sure you check your bank statement thoroughly and include all the direct debits you have set up. It’s also not a bad idea to do some housekeeping, and cancel any old direct debit instructions that are no longer relevant.

If you are paid monthly, make sure all of your credit commitments and contractual living expenses are paid immediately after pay day by direct debit. Change your direct debits if they are not all set up to go out straight away. If you are paying some bills manually each month, contact the company to set up payment by direct debit or set up a standing order. Even the most organised person can get sidetracked and forget a bill due, especially if they are sick or go on holiday.

Now what’s left in your account after your bills are paid is what you have to spend on food, petrol etc. and other discretionary spending, and you can be safe in the knowledge that you won’t bounce a direct debit (and incur a charge by your bank), or forget to pay a bill on time which would result in negative record on your credit file.

If you want to be super organised, you can now divide your discretionary spending into how ever many weeks are left till pay day, and make sure you don’t overspend – leaving yourself short of cash before you are next due to be paid.

If you are paid weekly, it’s best to stagger your direct debits over the month after each pay day, rather than have them all come out of your account on the same day – unless you have built up a reserve of funds to allow you to pay all your bills at the same time, and have some left over for day to day living costs until next pay day.

Option 1 – If your bills are £1000 per month, work out roughly £250 worth of direct debits to come out of your account each week and change the dates of the direct debits/standing orders with the lender or provider.

Option 2 – Have your rent/mortgage payment debited one week, and split all your other bills into 3 and set up weekly direct debits/standing orders for them so that they are staggered over the month. As an example, if after your rent/mortgage payment the rest of your bills come to £600, set up roughly £200 direct debits/standing orders per week.

This should ensure that you never miss a payment or have a direct debit rejected, and that you have enough money for day to day living expenses. Bonus – it’ll mean that you have consistency and aren’t either living in feast or famine.

4 NOT ALL CREDIT IS BAD CREDIT

This really is a topic worthy of its own post. I’ll get working on that!

As well as being on the electoral roll, most lenders – mortgage in particular – like to see at least 2 active accounts on your credit file. This could be made up of any of the following –

Current account

Mobile phone contract

Landline/broadband account

TV satellite or cable (Sky)

Utilities – gas & electric and water

Mortgage

Credit Cards

Loans or HP agreements

If you don’t have a personal current account, consider applying for one as a priority and start having your salary/wages paid into your own account.

If you’ve got a pay as you go phone, consider doing a check to see if it would be cheaper and better for you to change to a contract, especially if you use your phone a lot. It’s easy to lose sight of how much you’re actually topping up each month if you top up weekly.

One way to build your credit history and thereby your credit score, is to show that you are able to pay back your credit commitments, by having a credit card. First make sure you’re on the electoral roll and have had a bank account for a minimum of 6 months, and then you can apply for a credit card.

All of the credit reference agencies will allow you to check who is likely to give you a credit card, without impacting on your credit score (called a soft footprint), so do use the facility and apply with a lender who is likely to accept you.

5 AVOID PAY DAY LOANS, DEFAULTS AND CCJs LIKE THE PLAGUE

PAY DAY LOANS

For mortgages in particular, pay day loans can have a heavy impact on mortgage lending. I’ve noticed many lenders have changed their lending criteria recently to show more scrutiny to anyone who has taken out a pay day loan in the last 12, sometimes even 24 months. It can be seen as evidence to suggest you are not able to get to the end of the month on your income, and as such a big risk that you will not be able to pay your mortgage.

Some lenders would even accept a default or a CCJ on your credit file, but they may decline the mortgage if there are recent pay day loans.

If you have taken out pay day loans in the past, ensure they are fully repaid and try no to use them any further. Follow the steps above to set up a budget and prioritise your money so that you are not left short of cash in the run up to pay day.

DEFAULTS AND CCJs

Once you have a CCJ or a Default it will stay on your credit file for 6 years, from the date it was registered. There’s not much you can do if you already have them (unless the lender has made a mistake), other than to ensure they are satisfied (paid off in full) as soon as possible. The good news is that as time passes they begin to have less impact on your chances of obtaining a mortgage or other credit, if you are now looking after your credit history and paying your bills on time.

You can’t undo the blip, but you can start to make things better moving forward by taking control of your finances, and eventually the data will stop showing on your credit file and you will be super credit worthy!

If you are experiencing financial difficulty and are unable to pay your commitments, it is vital to seek help immediately. Don’t bury your head in the sand and ignore the letters. All credit providers have to treat those facing financial hardship in a sympathetic manner, and they have to give you the opportunity to bring your account up to date, even if it means setting up an arrangement to pay the arrears back over a period of time.

The only way they can register your account as defaulted, and then take you to court to have a judgement issued, is if you stop communicating with them and don’t make any effort to come to an arrangement.

A missed payment or even arrears or an “arrangement to pay” is better than a default or CCJ on your credit file. So don’t let it get to that stage. If you feel unable to discuss the matter with the lender you can ask for help from organisations such as Citizen’s Advice Bureau, who should be able to negotiate with them on your behalf.

BONUS – GET ADVICE IF YOU ARE LOOKING TO GET A MORTGAGE

I’m not saying this because I’m a mortgage broker and make my living off giving advice and arranging mortgages. I genuinely believe that it is in your best interest to seek advice and discuss your credit file when trying to obtain a mortgage. Even if you have an excellent credit rating, but if you have any kind of negative data on your credit file, from 1 missed payment in 6 years to defaults and CCJs.

I am often contacted by clients who have already had a mortgage refused due to a credit file entry, and at this stage there will more than likely be a search registered by the lender on their credit file. Too many searches by lenders on your credit file is another factor that is taken into consideration in credit scoring algorithms.

As a mortgage broker I am experienced in placing mortgages with the right lender, and I will analyse the data on your credit file and match you to a lender who is likely to accept, you based on their criteria.

I have, in the past, advised clients to wait just 3 months before applying for a mortgage, because they had historical adverse credit which would then be longer than 3 years old and therefore would be ignored by a high street lender and they would pass their credit score – this despite the fact that I could have arranged a mortgage immediately for them, albeit at a much higher interest rate with an adverse lender. This saved them quite a bit of money on their monthly repayments in the end.

Most mortgage brokers, myself included, offer free no obligation appointments – face to face or over the phone. It’s so worthwhile to make contact. It won’t cost you anything and I’ll say it again … get the advice!

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Not all Buy to Let Mortgages are regulated by the Financial Conduct Authority

Willowgate Finance Ltd is an Appointed Representative of Stonebridge Mortgage Solutions Ltd, which is authorised and regulated by the Financial Conduct Authority. Registered Office: Willowgate Finance Ltd | 2 Daniels Gate | Spalding | PE11 3QY. Registered Company Number: 12291842 Registered in England & Wales.

There may be a fee for arranging your mortgage. Typically the fee is £495, however the precise amount will depend on your circumstances and the level of work involved.

There is no charge for the initial consultation.

There is no fee for arranging your insurance policies.

What is your credit file? Know the basics!

by Willowgate Finance | Apr 15, 2017 | Mortgage & Protection

Your Credit Report – The Basics

WHAT IS A CREDIT FILE?

Your credit file is a document which contains a collection of data about you. It includes basic identifying information, such as your name and any previous names you’ve been known by, your date of birth and your address history.

It also contains information about any financial accounts you may have, such as your current account, loans, credit cards, mobile phone contracts and more – and how you conduct those accounts. Your credit report will show whether you’ve paid a debt on time each month, and also negative data such as missed/late payments on an account, accounts you have defaulted on, any County Court Judgments registered against you, along with bankruptcies and repossessions.

It will also contain the names of anyone with whom you are financially associated. If you have a joint account, joint loan or joint mortgage with someone, their name will be linked to your credit file.

All this information combined is what determines your credit rating.

You have 3 credit files, one with each of the major credit reference agencies – Experian, Equifax and Credit Karma (TransUnion).

Sometimes all 3 credit files will be identical, however sometimes one will contain information that the others don’t. This is because some lenders don’t report their data to all 3 agencies.

WHO HAS A CREDIT FILE?

Everyone in the UK over the age of 18 has a credit file.

WHY DO YOU HAVE A CREDIT FILE?

When you apply for any type of financial product, such as a loan, credit card, car finance or mortgage, the lender/financial institution will check your credit file to see whether you are likely to make the repayments on time each month, based on your past performance.

Simply put, they check to see whether you are a good or bad risk.

If your credit file contains minimal information or negative data you may be refused the credit facility.

HOW LONG IS DATA HELD?

Your credit file contains information on your accounts, and how you conducted them, for 6 years. A payment due 1st April 2020, and whether it was paid on time or not, will show on your file until May 2026.

A default or CCJ will stay on your file for 6 years from the date the default or CCJ is registered, regardless of when the account was first opened or whether you subsequently repaid the outstanding amount.

The same goes for any bankruptcy or repossession.

CREDIT SCORE vs CREDIT FILE

You only have 3 credit files, and other than ensuring the data is correct, there is nothing you can do to change those files.

Your credit score on the other hand is as varied as the weather. You only have to check your credit score with the 3 credit reference agencies to see the difference. You could be 999/1000 with Experian but score a 483/700 with Credit Karma and a different figure with Equifax altogether.

Each and every lender or institution has their own credit scoring system too, an algorithm they have designed based on the factors they feel are important, to set the threshold of who they will and won’t lend to.

What matters is the credit scoring system of the lender or institution you want to lend you money or provide you with a service.

Click on the picture below to get a copy of your Check My File report, which shows the information held with all 4 credit reference agencies.

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YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Not all Buy to Let Mortgages are regulated by the Financial Conduct Authority

There may be a fee for arranging your mortgage. Typically the fee is £495, however the precise amount will depend on your circumstances and the level of work involved.

There is no charge for the initial consultation.

There is no fee for arranging your insurance policies.

Life Insurance and the use of Trusts

by Willowgate Finance | Jul 26, 2016 | Mortgage & Protection

To Trust or not to Trust?

why you should consider writing your life insurance in trust

Life insurance is, for most people, a mundane topic. It’s one of those necessary expenses if you’ve got a mortgage, or anyone who is financially dependent on you, but talking about it is never going to be top of the list of dinner conversations. Not for me though. It’s a topic very close to my heart.

In 2002 I was about to embark on my first job in financial services, when my brother was diagnosed with Acute Lymphoblastic Leukemia. While I was sat in my induction course my brother was in hospital, where he would remain for many months, and when the topic of insurance – and especially life & critical illness cover – was discussed, I took note because it was now personal. Since then I’ve always been passionate about ensuring my clients are fully informed on all the options available to them.

When it comes to planning your family’s financial future it is vital to take all the steps possible to protect their standard of living. Arranging your life insurance in the right way, to ensure maximum benefit for your loved ones, is important. One option, which is greatly underused, when taking out life insurance is to put the policy in Trust.

What is a policy written in trust?

A trust is a simple legal arrangement that allows you to gift your life insurance policy to someone else, e.g. your spouse/partner. It is a great way to ensure that your life insurance is not considered to be part of your estate when you die, thus avoiding probate and potential inheritance tax, and that the proceeds are used exactly as you intended.

The main benefits of writing life insurance in trust –

CONTROL

You specify who your beneficiaries are and who you trust to act on your wishes.

If you are not married or in a civil partnership, and do not have a will, the government will distribute your estate using the laws of intestacy. This could have financial implications on your partner, especially if you have a mortgage and dependents.

An example of the risk – if you have a joint mortgage and die, unless your life policy is set up correctly, your partner may not benefit from your life insurance as the intestacy laws will look for immediate family, and they may not be able to pay off the mortgage.

If you are married or in a civil partnership and do not have a will, again the government will use the laws of intestacy to distribute your estate. The financial implications on your spouse and any dependents could be significant, not least because of the length of time it would take for the legal process to conclude and probate to be granted.

If you have a mortgage, the lender will still expect payments to be made and the household bills will still need to be paid. This could severely impact your family if there is a delay in the life insurance paying out.

Click on the link for more information how intestacy could affect you and your loved ones.

What happens if you die without a will

It is important to have a will in place, and something that I always recommend, however many people just don’t get around to doing it. Taking out life insurance and writing it in trust is one way of ensuring that your policy pays out to your intended beneficiaries, in a timely manner.

Wills can be contested.

We’ve all read the newspaper articles where even though a valid will existed, it has subsequently been contested causing long delays in finalising probate and incurring financial cost to all parties.

Writing your life insurance in trust could mitigate these risks. A policy written in trust does not usually form part of your estate and therefore married/civil partnership or not, a valid will or not, the proceeds will pay to your beneficiaries as you have set out in the trust documents.

INHERITANCE TAX

A policy not held in trust will form part of your estate, meaning that it could be subject to inheritance tax – 40% of any part of your estate over £325,000 (as at October 2015). Using a trust should mean that the money paid out from your life insurance will not be part of your estate, increasing the amount of money passed on to your loved ones.

The link below gives more information on how inheritance tax could affect you and your loved ones.

More information on Inheritance Tax

FASTER PAYMENT OF THE MONEY

You don’t need probate to be granted in order for the policy to pay out. Using a trust should help ensure that the money paid out from your life insurance can be paid to the people of your choice quicker. Probate can take a long time, even when there is a will. In cases of intestacy, it can drag on for a lot longer.

However, if the policy is put into trust, then it can potentially pay out long before probate is granted, normally within weeks, as the insurance company usually just require a death certificate before paying out.

The period following the death of a loved one is stressful and painful enough, without having to worry about where the money is coming from.

Who is involved?

There are three key roles in a trust.

The SETTLOR (or settlors) – The settlor is the person who is giving away their life insurance policy. If it is a joint policy, then both policy holders are automatically joint settlors. The settlor chooses the trustees and the beneficiaries and completes the trust forms to set up the trust.

The TRUSTEES – The trustees are the people you choose (i.e. sibling/friend) to look after the trust, make any future claims, and arrange for the money to be paid to your beneficiaries in line with your instructions. As the settlor you are automatically a trustee. Once the policy is put in trust the trustees take legal ownership of the trust fund from you and must then act in the best interest of the all the beneficiaries at all times, and can only do what is allowed in the trust deed.

The BENEFICIARIES – These are the people (or person) who you want to receive the proceeds of the life insurance policy.

How do trusts work?

Setting up a trust means that you give your life insurance policy to the trustees who then legally own your policy and look after it for the benefit of your beneficiaries. You will still be responsible for paying the premiums. They make the claim on your policy should you die and ensure the money goes to your beneficiaries as you intended.

Depending on the type of trust you set up, it can provide lots of flexibility to change who will benefit and when, so that your changing circumstances – such as having more children or grandchildren – can be taken in to account.

Who can set up a trust?

Most life policies can be put in trust, so anyone who owns a policy can set one up.

What do they cost?

Most life insurance companies provide this service for FREE. It is a simple process. In just a few steps you can ensure that your life insurance is put in trust, so it goes to who you intended, faster, and without a lengthy legal process.

How to set up a trust?

Setting up a trust is simple. If you are taking out a new insurance policy, the trust forms can be completed at the same time as the application. As a broker I help my clients during the entire process to ensure all the paperwork is completed correctly as well as explaining to the trustees their role and future responsibilities.

If you have an existing policy, you may be able to put it in trust by obtaining the paperwork from your current provider.

What are the disadvantages?

Once the trust has been created it cannot usually be cancelled before it has serviced its purpose and the policy cannot be cancelled without the permission of the trustees.

As with all insurance policies conditions and exclusions will apply.

complete the form below For more information or a Free life insurance quotation

The Buying Process

by Willowgate Finance | May 27, 2015 | Mortgage & Protection

The Buying Process

STEP BY STEP PROCESS TO BUYING YOUR HOME

Buying your first home is one of the biggest financial commitments you will make in your life. Whilst it is a very exciting time, it can be daunting with the volume of information available and it’s hard to know where to start. It’s no wonder it’s ranked as one of the most stressful experiences you can go through. We have outlined the main steps of the buying process below, to help break it down for you.

At Willowgate Finance we will help you through every step of the way, always providing valuable and useful information that will make the whole experience far less overwhelming.

Step 1 – Establish your maximum borrowing amount and get an idea on costings

This is usually the first question we get asked – “How much can I borrow?” The answer depends on a number of factors, such as income, outgoings including any credit commitments and how much of a deposit you have available. Each lender also has their own unique affordability calculator and the results can vary widely between them.

You can contact us for a FREE, no obligation, chat to go through your details and establish your potential maximum borrowing amount, so you know the price range of the houses you should be looking at. This is the first step of the buying process.

In this meeting we will:

complete a detailed review to get to know your situation so that we can ensure our advice is tailored to your unique circumstances.
advise on how much you could potentially borrow.
explain the different mortgage types available, such as fixed rates versus tracker/discount rates and indicative costs.
go through the various mortgage schemes that are available, including the Help to Buy Equity Loan Scheme and Shared Ownership Scheme.
advise on the potential costs involved in purchasing your home; including conveyancing/solicitors, valuation/surveys, arrangement fees, stamp duty & deposits – and when these become due.
discuss the appropriate mortgage and personal protection that is needed to ensure your home and lifestyle is fully protected.

You will now have a good idea of your borrowing potential and can now start looking for your new home.

Step 2 – Obtain an Agreement in Principle

An Agreement in Principle (AIP), which is also known as a Mortgage in Principle or Decision in Principle, is a letter or certificate from a lender stating that ‘in principle’, i.e. as long as all the information that has been provided on the application – such as your income/outgoings – is accurate and can be verified, they will be prepared to lend you a certain amount of money (usually the maximum amount they would offer – although you do not have to borrow the full amount). They will also perform a credit check at this point.

Some estate agents will require you to have an AIP before they even arrange a viewing on a property, and some won’t forward an offer to the seller unless you have one. In many cases they won’t confirm the sale is agreed, and take the property off the market, without site of an AIP and proof of deposit.

Having established your circumstances in our first appointment, we can help you obtain an AIP after searching the whole of the mortgage market to establish the most suitable lender and mortgage product for you.

Step 3 – Apply for a mortgage and instruct solicitors

Once you’ve found your perfect home and had your offer accepted, it’s time to submit the full mortgage application and all the supporting documents, such as bank statements and payslips, to the lender for assessment. We can get all the paperwork ready and submit the application for you. Our process includes:

checking that the mortgage we recommended at the AIP stage is still most suitable mortgage scheme as rates change often.
obtaining payment for the upfront fees i.e. mortgage valuation.
completing all the paperwork and collating all documents to submit fully packaged to the lender to ensure maximum chance of success.

It is also time to instruct a solicitor to handle the legal arrangements to purchase the property, which is separate from obtaining a mortgage. We can help you find one if you haven’t already.

Step 4 – Mortgage valuation & searches applied for

Once the lender receives the full mortgage application and documents, they will instruct a valuation on the property to make sure it is worth the purchase price agreed and a good security for them to lend money on.

A basic mortgage valuation is required in all circumstances. You may wish to obtain a more in depth report on the property for your own peace of mind, such as a Homebuyers Report or Building Survey.

At the same time, the legal conveyancing should be started by your solicitor. They will receive the draft contracts from the seller’s solicitor to allow them to start their work, applying for local searches and checking the property Title at the Land Registry.

Step 5 – Mortgage offer issued

Once the lender has assessed all the supporting documents and are satisfied you can afford the mortgage, and the valuation has come back as satisfactory, they should now issue you with a binding mortgage offer.

It’s time to have a little celebration at this point!

Step 6 – Exchange of contracts and set completion date

Once all the conveyancing work has been completed – searches returned, replies to enquiries received and contracts signed – you are now ready to Exchange Contracts. Your solicitor will require you to have sent them the deposit monies and the balance of their fees and other costs, such as Stamp Duty Land Tax, prior to Exchange of Contracts.

All insurances will need to be started from this date.

Step 7 – Move in

Completion! Your solicitor will advise you once this has happened, and you can get the keys to your new home!

Congratulations!

JARGON BUSTER

Jargon Buster

by Willowgate Finance | May 27, 2015 | Mortgage & Protection

Jargon Buster

ON THIS PAGE YOU’LL FIND SIMPLE DEFINITIONS FOR MORTGAGE AND INSURANCE INDUSTRY JARGON

Affordability Check
A calculation carried out by a lender to determine the actual amount you can borrow. Depends on personal circumstances such as income and expenditure. The actual amount that you could potentially borrow differs between lenders.

APR (Annual Percentage Rate)
APR is a standard calculation in the mortgage industry and allows mortgages from all lenders to be compared. It is the true cost of the mortgage over the full term set out as a yearly rate, including all fees, terms and interest.

The calculation assumes that you maintain the mortgage for the full term (for example 25 years).

Arrangement Fee
It is very likely you will be charged an arrangement fee by the mortgage lender when taking out a mortgage, however we will be able to talk you through the conditions that apply. In some cases this fee can be added to the mortgage loan amount.

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.

ASU – Accident, Sickness & Unemployment cover
An annually renewable policy providing short term cover if you are unable to work due to sickness, injury or redundancy. Similar to, but not to be confused with Income Protection as it does not pay out for as long or pay out as much.

Bank of England Base Rate
The rate set by the Bank of England, which is reflected in the interest rates charged by lenders.

Building Insurance
Insurance against the cost of rebuilding a property following structural damage, for example by flood, fire or storm.

Building Survey
An extensive survey, carried out by a qualified surveyor, to spot faults and potential problems in the property you are buying.

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.

Buy To Let Mortgage
The main difference with a buy to let mortgage is that the lender takes into account the rent you will earn from the property as the primary source of income. Some may also take the landlord’s personal income into account.

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

Capped Rates
With a capped rate, you will pay a variable interest rate but your payments won’t go above a certain amount for a set period of time.

Cash Back Mortgages
Cash back mortgages generally pay out a cash lump sum to the mortgage loan borrower upon the completion of the mortgage.

CIC or Critical Illness Cover
Will pay the policy holder a lump sum on diagnosis of a range of specified illness (refer to specific policy terms and conditions for further details) – the illness may vary but generally include the major illnesses like cancer, heart attack and stroke.

Completion
When you become the legal owner of the property.

Completion Fees
Some lenders charge completion fees in additional to an application fee, although these fees are less common. Completion fees are usually charged on the day that the mortgage completes.

Consent to Let
A request to let out a property on which a residential mortgage is currently held.

Conveyancing
The legal work involved in selling and buying property.

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.

Deposit
This is the amount you are required to pay towards the cost of the property yourself. Typically the more deposit you are able to put down the lower the mortgage interest rate is likely to be, and typically there will be a wider range of mortgage deals to choose from.

Disbursements
The fees you pay to your conveyancer or solicitor. These cover items such as searches, Stamp Duty Land Tax and Land Registry fees.

Discounted Rate Mortgage
A discounted rate deal is one where the interest rate you are charged is a set amount less than your mortgage lender’s standard variable rate (SVR). For example, if the lender has an SVR of 5.5% and the discount is 1% then you will actually end up paying 4.5%.

DTA or Decreasing Term Assurance
A form of life assurance where the sum assured reduces over the term of the policy – often used to protect a repayment (capital and interest) mortgage.

Early Repayment Charge
The charge some lenders make if a mortgage is paid off early or before the end of the special rate term.

Equity
The total value of your property less the amount of the mortgage and any other secured loans you have.

Estate Agency Fees
These will differ by agent, some will charge upfront fees and some may charge fees at the completion of the sale. The cost is likely to be based on a percentage of the property sale price, so it is best to get a quote before proceeding. It is best that you speak directly with your chosen estate agent to find out what costs apply in your case.

Exchange of Contracts
The point where the property sale or purchase becomes legally binding.

External Inspection Valuation
This is a very simple valuation where the surveyor will estimate the value of the property by viewing it from the road.

Final Repayment Charge
This charge can be applied when your mortgage is repaid in full.

Fixed Rates
Gives you the security that your monthly payments are the same each month, for the duration of the fixed rate period. With this type of mortgage, you pay a fixed rate of interest for a set period typically over 2, 3 or 5 years, so you know exactly what you’ll be paying each month even if interest rates change.

Flexible Mortgages
You can vary the amount you pay each month and take payment holidays in some circumstances. It may help to reduce your mortgage with lump sum payments without incurring an early repayment charge.

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

Higher Lender Charge
Not all lenders charge these, but if you borrow a high percentage e.g. if you borrow more than 75% of the price of the property, you may have to pay this type of fee in addition to the arrangement fee.

Homebuy Schemes
These are government schemes designed to help existing tenants and key workers (nurses, teachers and social tenants) to get onto the property ladder.

Homebuyer Survey
A detailed valuation that contains a report on the condition of the property, highlighting potential defects.

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-Only Mortgage
With this type of mortgage you are only paying interest each month. This means that although your payments will be lower the amount you borrow will still be outstanding at the end of the mortgage term. You’ll need to make alternative arrangements to pay off the mortgage capital to avoid the property having to be sold, such as taking out an ISA.

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.

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

Lease
A legal contract which gives the ownership of a leasehold property to the buyer for a fixed period of time.

Lender
Provides the loan to buy the 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.

LTA or Level Term Assurance
A form of life assurance where the sum assured under the policy remains constant over the policy term.

Mortgage
A loan to buy a property. The property acts as security for the loan and so can be repossessed and sold if the mortgage repayments are not made.

Mortgage Application Fees
Fees charged by the lender to organise the mortgage for you. These are not usually refunded if you then do not go ahead with the mortgage. Some lenders will only charge such fees for specific mortgage deals.

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

Mortgage Term
The length of time over which the mortgage will be repaid.

MPPI or Mortgage Payment Protection Insurance
Fundamentally the same thing as ASU (Accident, Sickness and Unemployment cover).

Offer of Advance
The formal offer of a mortgage from a lender.

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.

On Risk
The point at which your policy starts.

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/fixed rate.

Provider
The company providing the cover i.e. life assurance or buildings and contents.

Redemption
Paying off a mortgage.

Remortgage
If you are looking to change your mortgage to a different deal, but you’re not looking to move home then you are ‘remortgaging’.

Renewable Premiums
Where the premium is subject to review and potential increase over the term of the policy.

Renewable Term Assurance
A term assurance or 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.

Repayment Mortgage
With this type of mortgage (also known as capital and interest) you repay part of the amount borrowed together with the interest being charged each month. In the earlier years, the majority of your monthly repayment is made up of interest, however towards the latter part of your mortgage term the situation is reversed with the majority of your monthly payment reducing the amount borrowed.

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.

Self Certification Mortgage
Also known as ‘self cert’, these mortgages were developed for self-employed people. Applicants who ran their own business or don’t technically have an employer were granted a mortgage without having to confirm their income by way of a P60, payslips, accounts, etc. In the current economic climate, these mortgages have virtually disappeared.

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.

Solicitor/Conveyancing Fees
Conveyancing is the legal process to transfer the ownership of a property from the seller to the buyer. If you are buying a property, your solicitor generally works on behalf of the mortgage lender, who usually insists on certain searches before they will release the money for your property.

Stamp Duty
You pay Stamp Duty Land Tax (SDLT) when you buy houses, flats and other land and buildings over a certain price in the UK.

Standard Variable Rate
This is a rate set by the lender, your payments may rise and fall in line with the Bank of England base rate changes, but not necessarily at the same time or by the same amount or at all. Your lender may not necessarily pass on the change in base rate immediately.

Structural Survey
This is a detailed report that can include tests on drains and utilities. It could be very useful if you’re thinking about building an extension, or purchasing an older property.

Sub Prime/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.

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.

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).

Tie-In Period
This is the period during which you are ‘locked in’ to your mortgage deal and will pay an early repayment charge to move your mortgage elsewhere – for example, if you have a 2 year fixed, your tie-in period might be for 2 years. Once an initial deal is up, you will typically move from your introductory rate to your mortgage lender’s standard variable rate (SVR), which is usually higher, so if you don’t have to pay early repayment charges to switch to a new deal at this point you may well save money by doing so.

Title Deeds
The legal documents which set out the ownership of a property.

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.

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.

Valuation
This is the most basic type of survey and is the mortgage lender’s inspection of the property to assess whether it is suitable for a mortgage.

Valuation and Survey Fees
You will need to get a valuation and survey carried out on the house you want to buy. A valuation will value the property and tell you how much it is worth, whilst a survey will tell you about the structure of the property and any faults that it may have. There are 3 levels of valuation/surveys 1. A basic valuation, 2. Homebuyers survey, 3. Full structural survey.

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.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Not all Buy to Let Mortgages are regulated by the Financial Conduct Authority.

You may have to pay an early repayment charge to your existing lender if you remortgage.

There may be a fee for arranging your mortgage, however the precise amount will depend on your circumstances. Typically the fee is £395.