Mortgage Glossary Index

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Payment cap
A legal limit on the amount a monthly payment can increase on an adjustable rate mortgage.

Payment default
This results when you are unable or simply unwilling to meet your mortgage repayments. If you default on your payments, the lender is ultimately entitled to sell your home in order to recover the loan. Different lenders will have different policies on how long they give you before they start the legal proceedings to recover the loan. Many will have a separate schedule of charges which you will incur before they start proceedings.

Payment holiday
A short break from regular mortgage repayments, sometimes offered with flexible mortgages. This can sometimes be a useful feature for self-employed people or others with irregular income.

Payment of balance
This usually takes place between a week and a month after exchanging contracts. It is possible to have a simultaneous exchange and completion if you are in a real hurry to get moving. When you complete the sale, your solicitor forwards the remaining balance of the purchase price to the seller's solicitor. You then have the right to take occupancy of the property and are free to move in.

Payment protection insurance
A type of insurance that pays your loan for you if you become unable to work for an extended period of time, as a result of redundancy, accident, sickness or disability. Most non-mortgage PPI products are taken out for a length of time that corresponds to the life of the loan it is protecting.

Payment shock
Payment shocks are when the discount period ends and the monthly repayments jump by a large amount to match the Standard Variable Rate. You must be sure that you can budget for this in your monthly expenses.

Pension mortgage
A type of interest-only mortgage where your mortgage payments are combined with payments into your personal pension fund. This is designed to mature on your retirement, so the mortgage loan term must end between the ages of 50 and 75 unless the borrower is in an industry where the Inland Revenue permits earlier retirement. The pension also needs to provide you with an income during retirement, so only twenty five percent of the pension fund can be taken as a lump sum to pay of your mortgage.

Pension plan
An investment plan which can provide a lump sum on and an income after retirement. A pension plan is sometimes used as a way of providing a lump sum to repay the capital of an interest only mortgage.

Percentage advance
The size of mortgage expressed as a percentage in relation to the value of the property.

Personal pension
A structured personal savings and investment plan to provide for your financial needs after you retire. You can use some or all of the proceeds from a personal pension to pay off an interest-only mortgage. You will need to arrange life assurance separately to a personal pension.

Personal search
This is a manual search by a conveyancer or some other specialist, who manually undertakes the same activities as in a local search. These can be completed in a matter of days rather than weeks or months, though they do end up being up to fifty pounds more expensive.

Policy excess
The amount you will have to pay when you make a claim. For example, this may be the first £100 of a £1000 claim for damage caused by a fire.

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.

Policy schedule
A policy that details how much cover you have (the sum insured), the discount you qualify for (if any), and the premiums you have to pay. With some policies you may get a new schedule when you renew the policy or whenever you want to change your policy.

Portability
A product feature that governs whether you can take the mortgage with you if you move during the introductory offer period and beyond. This saves you having to pay off the loan and take out a new one.

Portable mortgage
The mortgage can be transferred from one property to another without incurring penalties.

Possession
When a buyer signs the papers and receives the keys to the house, they officially take possession.

Possessory title
The description given by the Land Registry to the title or ownership of a property where the registry is not entirely satisfied as to the vendor's ownership of the property due to a discrepancy. It is satisfied only that the person is lawfully in possession of the property, as opposed to title absolute and good leasehold title.

Pre-approval
Where a potential home buyer attempts to secure a guaranteed mortgage approval before making an offer on a house.

Pre-approval letter
A letter from a lender that informs a seller about the amount of money that a potential buyer can obtain.

Premium
In the context of insurance, a premium is the regular sum you pay to keep your cover in force.

Prepayment penalty
Lenders can impose a penalty on a borrower who pays a loan off before its expected end date.

Prequalification
A process by which a potential home buyer qualifies for a home mortgage before making an offer on a house. A lending institution agrees to make a loan in the specified amount to the person it has prequalified.

Prime rate
The best interest rate available to a lender's most qualified customers.

Principal
The amount of money that the borrower owes on a mortgage - the amount on which interest is calculated.

Private Medical Insurance
This insurance which gives you access to private medical care in the event of injury or illness. This will not normally cover injuries or illnesses present prior to accepting a policy. The main downside to most of these plans is that you usually have to pay for hospital accommodation, surgeon's fees, and drugs or medication upfront and then receive a refund once your claim has been processed.

Private sale
The sale of a property without the use of an estate agent.

Private treaty
The sale of property by private treaty is the most common method employed by estate agents and involves preparing descriptive details of the property and quoting a definitive asking price. Details can then be viewed by potential buyers and viewings arranged.

Protection products
A protection product shields you from exposure to the financial hardship caused by events such as unemployment, illness or injury. Some protection products are designed to provide additional medical or financial benefits to those that are available through the state system.