Mortgage jargon explained
Below are some of the key mortgage terms you may hear. This list is not exhaustive but should assist you in picking the right deal.

Arrangement Fee - Some lenders will charge an administration fee and others may charge an arrangement fee. The idea of the fee is to cover the administration involved in arrangement of the loan. The fee can either be paid prior to arranging the loan or added to the loan. This fee may also be deducted from the advance upon completion of the deal.

Benefit Period - A period at the start of a mortgage where you get a special rate offered by a lender, normally lower than their standard variable rate.

Buy to Let – When an individual purchases a property with the aim of renting it to another party. This has been increasingly popular in recent years with specialist lenders springing up. Most lenders will have internal lending criteria and a certain rent will be needed to make a loan viable. Some lenders ask for minimal rental coverage eg 100% of payments. Others demand that the rent covers 130% of the mortgage payment. If using property as an investment make sure it is thus viable.

Capped - A mortgage product that will not increase above a certain percentage. For example "capped at 4%" would mean the rate could never be above this. This gives the borrower some peace of mind.

Cash back - When a lender offers a certain amount of cash on completion to the customer as an incentive to take out their product. It is important that this is taken for what it is. You should ensure that this is financially worthwhile and the deal does not suffer as a consequence.

Collared - A mortgage product that will not fall below a certain percentage. For example "collared at 3%" would mean the rate could never be below this. This gives the lender financial security but may allow them to offer a slightly better rate.

Deferred interest - Allows a borrower to make payments at a later date. However, the capital owed will increase during the deferred period. E.g. deferred for 3 months means that you would only have to pay the capital element of the mortgage with the interest being added on each month.

Discount - When a mortgage is set at a specific % below the lenders Standard Variable Rate (SVR) e.g. if the lender has an SVR of 5% and the discount is -2% you would actually pay 3%.

Early Repayment Penalty (ERP) - The amount it will cost to either pay off your mortgage or leave a provider. These are often 2-3% of the value of the loan during an initial benefit period and are used by lenders to keep borrowers with them.

Equity – The value of your house minus any mortgages and secured lending that you have on it leaves what is called the equity. Remember this can also be negative if house prices fall.

Flexible - A mortgage with special additional features e.g. paying more or less than was initially agreed, making lump sum payments (overpaymemnts), temporarily stopping payments (payment holiday). Each lender will have their own definition so make sure it meets your needs.

Guarantor - An agreement by a third party to pay a mortgage if the main applicant is unable to do so, often a parent for a first time buyer. This is a binding legal contract and should not be entered into without seeking legal advice. It can however, assist in reducing any Capital Gains Tax Liability because the guarantor only has an obligation to guarantee the loan rather than owning the property.

Homebuy - A government sponsored scheme that assists existing tenants, Key workers and those in need, to get on the property ladder.

Islamic Mortgages - Under the law of the Koran, the charging of interest is forbidden. There are special types of Islamic mortgage to circumvent this problem. The two most common are Ijara under which the bank buys the property for the client and the client then leases it back from the bank, making monthly payments and Murabaha where the bank buys the property and the client then buys it immediately back for a higher price, paying off the debt over a specified term e.g. 15 years. For advice on lenders offering these service please see the following website Islamic Mortgages

Joint Ownership - A type of ownership which entitles both owners to 100% ownership of the property. What this really means is that upon the death of either party ownership passes entirely to the survivor. By changing this ownership into Tenants in Common under which each individual owns a % of the property you can make significant IHT savings. You should seek specialist legal advice on how to do this.

Key Features – This should be provided by a mortgage broker and provides details of charges made by the broker, rates

and fees as well as other information.

Let to Buy – Otherwise known as shared ownership, Involves buying only part of a property and paying rent on the remainder. These allow some people otherwise unable to do so to get a foot on the property ladder but are surprisingly uncommon.

Lifetime Mortgages - A means of older homeowners releasing money from their property. Normally called home reversion or equity release schemes there will be no monthly payments or fixed repayment date. However, the lender will expect money back when the house is sold reducing any potential inheritance or money available to buy a new house. The fees on these arrangements are often high and the value you will receive for your house may be below that of the market.

Mortgage Deed. - The contract between the lender and the borrower. It sets down the legal obligations of the borrower and the rights of the lender.

Offset - A Special type of mortgage run side-by-side with a bank account. These are not appropriate for everyone. The way it essentially works is as follows: cash in your bank account does not receive interest but the amount of interest you pay on your mortgage is also reduced. E.g. If your Mortgage was £150,000 and you had £50,000 in the bank you would only pay interest on £100,000 of your mortgage. This can, dependent on the lender, be used to reduce your monthly payment or the term of the mortgage, saving huge amounts.

Porting/ Portable - This is a feature that allows a borrower to transfer borrowing from one property to another. This may mean that charges and fees are avoided or a special rate is retained. You can often "port" just part of a mortgage onto a new property.

Redemption Statement - Issued by your existing lender it shows exactly what you would need to pay, including all fees and interest owing, to pay off your mortgage.

Right-to-Buy - Allows tenants in council houses to purchase their homes with a big discount.

Self-Cert- Often used for self-employed people, this means a lender agrees that the applicant can confirm their own income rather than providing all the necessary evidence i.e. P60, payslips, accounts.

Sub-prime, non-confirming, non-status - A Mortgage geared towards those with County Court Judgements (CCJs), poor credit history, or for those clients who have been bankrupt or in arrears. Rates are likely to be higher than those available in the market as a whole.

Term - The term chosen for the loan. The longer the term the more you will pay to the lender overall.

Valuation - Most lenders will request a basic valuation to ensure that a property is fit for mortgage. There will be a fee for providing this service. It is also possible to request a more detailed homebuyers valuation or a structural survey. These are more thorough investigations, performed by a specialist surveyor, of the state of the property and can ease your mind as a buyer. There is of course a charge for these types of survey and you should liaise with the lender to find out what each type of survey will provide.

What makes a listed property - Listing is essentially the legal protection of important buildings against demolition, alteration or extension. While overall responsibility for listing lies with the Secretary of State, it's the job of English Heritage to assess and advise on applications. Of course it's not just residential properties that are listed; pubs, warehouses, factories and theatres can all warrant careful preservation. Criteria for listing include:

The older and rarer a building, the better it's chances of being listed. Buildings constructed before 1700 which have survived in their original condition are pretty much guaranteed to make the list. Anything dating before 1840 stands a good chance too. From 1840 onwards there are more surviving examples so requirements are stricter. A building will need some special interest above and beyond its age. While modern buildings can be listed, those built after 1945 will need something exceptional about them to be listed

Architectural Interest - The style and proportions of a building are important factors. Properties built by notable architects will get bonus points, as will those featuring important examples of building techniques or layout. Any alterations must be judged to have added or preserved architectural interest rather than detracting from it.

Historical Interest - Connections with historic figures or events can work in a building's favour. A passing lodger won't count for much, but many buildings have played significant roles in Britain's social, economic, cultural or military history.

Group Value - Some buildings which wouldn't necessarily make the grade on their individual merit will be listed because of their group value. This tends to be when a building forms part of an important architectural unity or example of planning, such as a square, terrace or model village.

Listed buildings are graded to reflect their relative importance:

  • Grade I are those of exceptional interest
  • Grade II* are particularly important and of more than special interest
  • Grade II are of special interest and warranting preservation. Around 92% of listed buildings fall into this category.

When thinking about buying a listed property it is important to check that any changes made by previous owners have been carried out in accordance with the strict regulations governing renovation and maintenance. Listed properties are protected inside and out, and you can't change the character of the building without permission in the form of Listed Building Consent (LBC). Alterations requiring applications include:

Painting over brickwork

  • Removing external surfaces
  • Adding dormer windows or roof lights
  • Changing roofing material
  • Putting up aerials or satellite dishes
  • Removing internal walls
  • Altering fireplaces, panelling or staircases

As a new owner, you can't be prosecuted for someone else's shoddy work or failure to acquire LBC. However, you do need to watch out in case you are forced to rectify previous mistakes from your own pocket. This can be a real nightmare, and it is well worth bringing in a solicitor or surveyor with experience dealing with listed buildings. You can also get useful information from the Listed Property Owners Club English Heritage

Restoration and renovations - If you find yourself moving into a listed property requiring renovation or alteration then you can't just start bashing away. Put down the hammer and get the paperwork sorted first. Repairs exactly matching the existing look of the property should be alright without LBC, but it is always wise to check.

The conservation officer at your local council is first port of call when enquiring about LBC. They should be able to tell you

whether or not your proposed work needs permission and whether it is likely to be accepted. It takes at least eight weeks for a decision to be made following an application for LBC

If plans to alter a listed property are refused then you have six months in which to appeal. LBC is a serious business. If you carry out work without the proper permission you are guilty of a criminal offence punishable by a fine or prison sentence, and the local council will make you return the property to its original state.

You should also do your research when hunting for architects, builders and suppliers. Some will have more experience and expertise in dealing with listed properties. Getting in touch with fellow owners of listed buildings is a good way to pick up recommendations. Again, the Listed Property Owners Club is a helpful source of information and advice.

Even without the legal obligations involved in occupying a listed property, it makes sense to maintain attractive features and decorate sympathetically. This can pose a problem when you come to source materials for your DIY projects.

There are several shops specialising in fittings and accessories for the period home. Lassco in London is famed for its architectural antiques, salvage and curiosities

Here you can find anything from 17th century oak panelling to earthenware baths and gothic stone archways. Willow and Stone in Cornwall offers all sorts of period hinges, hooks, brackets, bells, buzzers, knobs and handles.

Be prepared to pay a premium for specialist materials and skills. Thatchers, for example, are in short supply these days and don't come cheap. Pest problems can add to maintenance costs, and older timbered constructions are particularly vulnerable to infestation. Allergy sufferers should beware: pollen, mould and spores are often buried deep in the fabric of older buildings.

It's a common perception that moving into an older property means giving up all the convenience and efficiency of a modern home. While you may find yourself struggling with damp and pests, you could be surprised by unexpected bonuses. A recent study from British Gas showed that older constructions, particularly Tudor properties, can be more energy efficient than modern builds.

The survey found that Tudor properties leaked around ten cubic metres of air an hour while houses built in the 1960s leaked over fifteen. Tudor architecture uses a wooden framework of beams with spaces filled by wattle and daub or stones, making the building airtight and reducing carbon emissions. Older properties also tend to have less environmental impact associated with their construction, since materials had to be sourced locally.

Listed properties come with a unique range of quirks and perks. Owning a little piece of architectural heritage can be a romantic dream comes true. Just remember that affairs of the heart come hand in hand with high costs, careful maintenance and complex legalities.