Mortgage Glossary Index

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Early redemption penalties
Charges paid to the lender in compensation for lost interest if you redeem your mortgage ahead of schedule. During a discount period you will be severely penalised if you try to switch to another product or mortgage provider. Penalties can be stepped just like discounts, and can be particularly severe within the first year. This is to ensure that the costs that the lender endures in setting up the mortgage are always covered. Penalties can be a fixed sum of money, though are often proportion of the loan. With cashback mortgages, you often have to repay the amount of money you received as cashback.

Early repayment period
A period of time that applies to certain types of loan during which a charge will be made if the loan is repaid in full or in part or its terms are varied at the borrower's request.

Effective age
The age of a structure estimated by its condition rather than its actual age.

Effective gross income
Additional income that a lender considers when assessing the loan application of a potential borrower.

Eligibility criteria
These are criteria which you must satisfy before an account or service application can be progressed.

Employment status
A term used by lenders to describe potential borrowers' working arrangements. Self-employed applicants are sometimes seen as a greater risk than employees. Many specialist lenders and mortgages have emerged in recent years designed specially for different types of employment status.

Encumbrance
A problem with the title to a property that does not affect the transfer of ownership.

Endowment mortgages
Endowments are unusual products that combine a savings/investment product with an element of life assurance. Their use goes beyond mortgages and they are quite complicated. As with other interest-only mortgages, you pay interest on the full amount of the capital for the entire duration of the loan term. The remainder of your monthly payment goes towards a premium for an endowment policy. A portion of this premium is invested and used to pay off the capital at the end of the mortgage term. There is not usually any absolute guarantee that your repayments will actually be enough to reach the level of your loan.

Equity
Your equity in the new home is the amount of your deposit. The bigger your deposit, the lower the proportion of the loan in comparison to the property value. The less that a lender has to contribute to a property the greater their security and willingness to lend you the money will be. A bigger deposit could also be seen as a stronger commitment to the purchase. Over time, a proportion of your repayments will go towards reducing the capital that you owe to the lender, so assuming the value of the property is unchanged, the amount of equity you own will have risen.

Equity linked mortgage
The lender takes ownership of a stake in the equity of the property. This means that they lend you less than the full amount that is required to buy the home. Interest is only charged on the amount that they lend you and not on the full value of the property. When you sell the property, the lender receives payment in proportion to the amount of equity that they own, and therefore benefits from any increase in the price of the property.

Equity release
Equity release or home income schemes allow you to generate either a lump some or a regular income in return for allowing the lender to take ownership of a portion of your home. These are often used by people in later stages of life who have paid of all or most of their mortgage and who are looking to raise funds without borrowing money.

Escrow account
An account a lender or mortgage servicer establishes to hold funds for the payment of expenses such as homeowners insurance and property taxes. Also known as an impound account.

Essential repairs
Work that needs to be carried out on the property before the mortgage completes.

Estimated valuation
The amount a surveyor believes a property to be worth.

Euro mortgage
A mortgage taken out by those paid in Euros to avoid the need to exchange currency. 

Examination of title
An inspection by a title company of public records and other documents to determine the chain of ownership of a property.

Excess
Applies to an insurance claim and is simply the first part of any claim that must be covered by yourself. This can range from £50 to £1000 or higher. Increasing your excess can significantly reduce your premium. On the other hand, a waiver can sometimes be paid to eliminate any excess at all. Always check the excess in your policy.

Exclusions
These are events, instances or possessions which are not covered by your household or other insurance policy. This can be confusing as the main policy may seem to imply that such events, instances or possessions are covered only to excluded in the small print of the policy. Moral: Read the small print.

Executor
A person appointed to carry out the instructions in a will. If there is no will, a probate court will appoint anexecutor.

Existing liabilities
Expenses taken into account by a mortgage lender when assessing an applicant's ability to repay the loan. These include loan repayments, maintenance payments etc. 

Extended redemption penalty
This is where the redemption penalty continues beyond a fixed or capped rate period, effectively tying you in to the much higher variable rate for a period of time after the fixed or capped period. As a result you get stuck paying an uncompetitive rate that eats into the gains you may have made from having the fixed rate or capped ratein the first place.