Mortgage Glossary Index

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Call option
A clause in a loan agreement that allows a lender to ask for the balance at any time.

Cancellation clause
A clause that details the conditions under which each party may terminate the agreement.

Cap
A limit on the amount the interest rate or monthly payment can increase in an adjustable rate mortgage.

Cap & collar mortgage
This is a mortgage that has both a top and bottom limit set for the interest rate. It is a very safe and risk free type of mortgage, as you are protected against intetrest rate rises above a certain point, but you are losing some of the potential gains if interest rates drop.

Capital
In the context of mortgages, capital describes the original sum borrowed as distinct from interest required on that loan. A repayment mortgage involves repayment of a little of the capital interest each month.

Capital appreciation / depreciation
The increase or decrease in the value of the individual's investment in the property.

Capital expenditure
The cost of making improvements on a property.

Capital gains
Profits an investor makes from the sale of real estate or investments.

Capital gains tax
A tax placed on the profits from the sale of real estate or investments.

Capital growth
Where the original amount you invest increases over a period of time. Generally this is achieved by interest or dividends being added back to an account for reinvestment.

Capped rate mortgage
As with all variable rate mortgages, the rate follows the lender's SVR up and down. The difference with this type of mortgage is that the rate is guaranteed not to go above the level at which it is 'capped'. This type of mortgage is popular in times of steadily rising interest rates.

Cash buyer
A person or persons who do not require a mortgage in order to buy a home and who do not have a property to sell. Other cash buyers are those with a mortgage arranged and no property to sell or those who have already sold their property.

Cash deficit
In relation to a loan, this is money still owed at the end of the repayment period of an interest only mortgage.

Cash surplus
In relation to a loan, this is money left, over and above the level required to pay off the debt.

Cashback mortgages
Cashback mortgages provide you with a single lump sum of cash immediately on completion of the mortgage transaction. The amount of the lump sum is usually calculated as a percentage of the overall loan amount, though it can be a set figure. The percentage of the loan that is given as cashback can be as high as 5%, though amounts in the region of 1 to 3% are more common. Various different types of rate can come with cashback - capped, discounted, fixed and variable. There are also a lot of mortgages that award you three or four hundred pounds to go towards your solicitor's fees. Although this is a form of cashback, it would generally be classed as an incentive and not specifically as a cashback mortgage.

CAT standard
These are a set of standards proposed by the government aimed at ensuring a certain level of standard amongst financial products such as mortgages and ISAs. Whilst they are a sign that a lender or provider is a reputable business and offers products that are of a certain quality, a CAT mark does nott ensure that a product is the most suitable one for you.

Caveat
A formal notice, that asks a court to suspend action until the party which filed the challenge can be heard.

Caveat emptor
A legal principle derived from Latin than means "let the buyer beware."

CCJ - County Court Judgement
Whenever someone fails to pay for something and is subsequently taken to court, the magistrate may issue a County Court Judgement against that individual to pay the outstanding debt. This may well affect your ability to raise finances in the future.

Certificate of deposit (CD)
A document which shows that the bearer has a specified amount of money on deposit with a bank, stock-brokerage firm or other financial institution.

Certificate of title
A written opinion on the status of a piece of property based on an examination of the public record.

CHAPS
Clearing House Automated Payment System. An electronic way of transferring money between accounts.

Charge
Security the lender relies on when granting a mortgage.

Charge certificate
A certificate from the Land Registry that shows the boundaries of a property and gives details of covenants affecting it.

Chattel mortgage
A lien on personal property used as collateral for a loan.

Chief rent
A payment made on freehold land to the original freeholder for an infinite period. Distinct from ground rent which has a finite period.

Clear title
Ownership of the property is clear, with no legal complexities.

Closing
The final procedure in which documents are signed and recorded, and the property is transferred.

Closure fees
A fee charged by the lender when you pay off the homeloan at the end of the mortgage term. 

CML
Council of Mortgage Lenders. Building societies, banks and other lenders are members of this trade organisation.

Code of practice
An agreement that certain professions can sign up to in which they agree to act or serve in a certain way and which therefore protects the consumer in areas (such as estate agency) which are not regulated by an institution.

Collateral security
Additional security a borrower supplies to obtain a loan.

Collateral 
The property or other asset which the lender can sell to repay the loan if the borrower does not keep up the mortgage payments. In most cases, the home is collateral on a mortgage. If the borrower fails to repay the loan, the property will be repossessed. 

Collection
The series of steps a lender takes to bring a delinquent mortgage up to date.

Collusion
The action of two or more people to break the law.

Commission
A percentage of the sale price which the selling party receives. This can be an estate agent in relation to a property, a broker selling you a mortgage or other products and even a dorr to door salesman selling you a nice new set of double glazing.

Commission amount
An amount deducted to reflect the costs of providing a service.

Commitment
A promise by a lender to make a loan with specific terms for a specified period.

Commitment fee
The fee a lender charges for promising to make a loan.

Common area
An area inside a housing development that is owned by all residents.

Common law
A body of laws based on custom, usage and rulings by courts in various jurisdictions.

Comparables
Properties used as comparisons to determine the value of a certain property.

Comparative market analysis
An estimate of the value of a property based on an analysis of sales of properties with similar characteristics.

Competent
A term for a buyer who is "legally fit to enter into a sales contract".

Completion date
The point at which contracts have been exchanged and legal transfer of the property from the seller to the buyer is finalised. The buyer can take possession of the property from this day.

Completion statement
A statement, prepared by the seller, stating exactly how much the buyer should be paying on completion.

Completion
This is the date when the buyer's solicitor forwards the funds for the purchase of the house to the seller's solicitor. Once the seller's solicitor has received the funds, the buyer legally becomes the owner of the property and can move in. The mortgage must be effective before this date in order for the funds to be transferred. The buyer must also pay stamp duty, if applicable, and register their name with the Land Registry. 

Compound interest
The interest paid on the principal balance in a mortgage and on the accrued and unpaid interest of the loan.

Compulsories
This is shorthand for compulsory insurance. Some lenders, at least for certain mortgages, insist that you take out their buildings insurance - which is not usually the most cost effective on the market.

Conclusion of missives
Scottish term for exchanging contracts.

Condition of the sale
This is a legally binding clause in the contract of the property sale. A buyer may insist upon the removal of the ridiculous garish carpets in a house, as a condition of the sale, or insist that some minor repair work is completex before the transaction is finalised.

Conditional insurance
The borrower must sign up to one or more insurance policy with the lender in order to take out a specific mortgage. Check that the insurance premiums are competitive. 

Conformation of mortgage offer
This is when you get a written confirmation of your mortgage offer from your lender-to-be. You usually receive two things - a standard covering letter and a written mortgage confirmation. This will normally set out some of your personal details, some facts about the property, your salary details, your solicitors (if appointed), and will require a signature.

Construction loan
Short-term loans a lender makes for the construction of homes and buildings. The lender disburses the funds in stages.

Consumer credit act
Act of legislation to define the rules relating to lending money and aimed at protecting the consumer when credit is agreed with a third party.

Contents insurance
This protects your belongings and possessions that are not part of the fabric of your house. Contiguous lots Pieces of property that are adjoined.

Contingency
Provision within a contract that renders an agreement incomplete until a designated event such as a survey or inspection occurs.

Contingent fee
A fee that must be paid if a certain event occurs.

Contract
A legal document between two parties confirming any sort of agreement such as terms of sale, employment or service.

Contract for deed
A contract in which the seller agrees to defer all or part of the purchase price for a specified period of time.

Contractual liability
The terms of a contract to which you must abide. There may be financial or even criminal penalties which you incur if if you do not meet your contractual liabilities.

Contractual lien
A voluntary obligation such as a mortgage or trust deed.

Contribution
An amount of money paid into an account. This can be a 'one off' payment or on a regular basis.

Conventional loan
A long-term loan a lender makes for the purchase of a home.

Conveyance
The transfer of title of property.

Conveyance tax
A tax imposed on the transfer of real property.

Conveyancer
A specialist in the legal aspects of buying a house. This may be a solicitor but not all solicitors are skilled conveyancers, so be sure they undertake this type of work regularly as it is complicated and very important.

Conveyancing
This is the legal work required for buying and selling a property. The conveyancing process essentially involves the transfer of "good title" or ownership from one party to another. It is a fairly complicated and longwinded process that involves untangling the legal jargon found in the title deeds, and checking the background of your property with the local authority and title searches.

Conveyancing fees
A solicitor will charge you a basic fee for undertaking the conveyancing work associated with the purchase of your property. This covers their time spent on taking your instruction, advising you, working on the contract refinements, liasing with the other party's solicitor, explaining the contract to you, obtaining your signature, exchanging contracts, investigating the title deeds, and basically dealing with all other related matters.

Cooperative mortgages
Any loans related to a cooperative residential project.

Cooperative project
A project in which a corporation holds title and sells shares representing individual units to buyers who then receive a proprietary lease as their title.

Copy statement
This is an additional statement of your mortgage account. You are usually charged by your lender when you request a copy of an annual statement previously issued or when you request a statement outside of the normal annual statement period. Costs £10 - £20

Co-signer
A person who assumes joint liability for a loan. The co-signer of a loan agreement is not necessarily, however, a co-owner.

Council of Mortgage Lenders
An institution that sets out code a code of good practice which mortgage lenders volunteer to stick to - they are not regulated by the government.

Counter cheque
A cheque withdrawal made over the counter, issued by the cashier.

County court fee
This is charged when a lender provides information to solicitors relating to county court rules when your mortgage payments are in arrears. Costs £25 - £30

County Court Judgement
Whenever someone fails to pay for something and is subsequently taken to court, the magistrate may issue a County Court Judgement against that individual to pay the outstanding debt. This may well affect your ability to raise finances in the future.

County Court re-issue fee
This fee will apply when county court papers are re-issued by your mortgage lender to solicitors within three or six months of the issuing of the original information. Costs £25 - £20.

Covenant
Rules and regulations governing the property contained in its title deeds or lease.

Cover
In the context of insurance, cover describes the specific risk a given policy protects you against. Life cover protects your family against the financial consequences of your death, buildings cover against damage to the property that you live in.

Credit
A measurement of a person's ability to pay bills on time. Several companies track individuals' credit histories by detailing late or missed payments on loans, credit cards and other debts.

Credit agencies
Companies such as Equifax or Experian that are often used by lenders to assess your financial background and determine the level of risk involved with lending you money.

Credit averse
When a borrower has a poor credit history, has previously been declared bankrupt or has outstanding County Court Judgements, they are often described as credit averse. People with averse credit ratings often have to pay higher interest rates on a mortgage. 

Credit checks
These are checks made when you try to borrow money or purchase goods on hire purchase, and are used to determine the risk of lending you money. They will examine your credit history and check for payment defaults and what you owe to other financial organisation. A credit agency is often used.

Credit history
If you have a history of bad debts, county court judgements or bankruptcy to your name, you may not be eligible for a mainstream mortgage. To help ensure you are a good credit risk, a lender may require references from your existing lender, bank or landlord. In addition to this, many lenders will make use of the services of one of the two large credit agencies, Experian and Equifax. These offer a credit inquiry or a full credit application, which show details of any existing credit arrangements or county court judgements against you.

Credit period
The time frame for which the lender agrees to provide you with credit.

Credit rating
The degree of credit worthiness assigned to a person based on credit history and financial status.

Credit reference agency
When assessing your application, a mortgage lender will study your records. These records are held centrally by credit reference agencies, and contain information for many different aspects of your life.

Credit union
Nonprofit cooperative organizations that provide banking and financial services, including mortgages, home improvement loans and home equity loans, to their members.

Creditor
An individual or institution to whom a debt is owed.

Critical illness insurance
Covers an individual for life or for a set period against a number of serious illnesses, diseases and medical conditions. It pays out a single tax-free lump sum on the diagnosis of one of the illnesses specified in the policy details. The most common of these included in a policy of this sort are: Heart attack, Stroke, Cancer, Kidney or liver failure paralysis and multiple sclerosis. AIDS is not usually included.

Curable defect
A deficiency in a property that is easy or inexpensive to fix, such as chipping paint.

Currency swings
These affect foreign currency mortgages. In pound sterling terms, the value of the capital outstanding on your mortgage can rise or fall dramatically if there is movement in the value of either the currency of the loan or UK pounds sterling. If the value of the pound increases, you should benefit from lower repayments, as the value of the foreign currency you have borrowed decreases. Less sterling is required to buy the same amount of foreign currency necessary to meet the repayments and vice versa.