Annual Percentage Rate (APR) - a definition intended to identify the true cost of borrowing and to provide the consumer with a method of comparing the true costs of different types of loan.

Mortgage loans were originally excluded from a requirement to quote an APR and was designed more to reflect the cost of different types of hire-purchase contracts which, at the time the legislation was drafted, were frequently quoted on flat and fixed basis giving headline rates which were often half the APR. It is a legal requirement that a true APR figure be provided with any loan illustration.

Arrears - mortgage payments that have not been made by the due date in accordance with the mortgage deed.

Basic Annual Income - the amount of money earned that is guaranteed regardless of the individual or the company performance.

Bankrupt - an individual who has been declared bankrupt in accordance with the Insolvency Act. A supervisor is appointed to receive a bankrupt person's earnings. The bankrupt is permitted to receive an allowance on which to live with the balance being reserved for the benefit of his or her creditors.A bankrupt person is not permitted to hold a bank account or apply for credit in excess of £250 without the court's permission.

CCJ - County Court Judgment - judgment for debt in the county court. If a judgment is settled in full within 30 days of the date of the judgment it will not appear in the credit register. In the event of a payment after that date the judgment will appear in the register but will be shown as being satisfied. If a judgment has not been settled and is outstanding this is likely to lead to a lender's refusing a mortgage application. In fact applications are still likely to be declined if satisfied judgments are shown. A small number of lenders will offer loans when a judgment has been satisfied if the amount involved is small.

Commercial Mortgage - a loan granted for a commercial purpose, normally secured against commercial property, although residential property may be used. Usually carries a higher rate of interest than a residential mortgage because the lender perceives a higher degree of risk.

Credit Check - enquiry made on the credit history of an applicant, normally by reference to one of the major credit agencies such as Equifax, CCN or Westcott Data.

Debt Consolidation - replacing a number of existing loans with a single loan from a new lender. This can result in a reduction in your monthly payments by spreading the larger loan over a longer period and possibly, by reducing the overall interest rate. The borrower should realise that they could end up paying more overall at the end of the term.

Discharged CCJ - county court judgement which has been paid.

Equity - the stake that you own in your home, i.e. the property value less the mortgage loan outstanding.

First Charge - normal legal charge used to secure the main mortgage. A lender with a first legal charge over a property has a first call on any funds available from the sale of the property.

Fixed Rates - a loan where the initial payments are based on a certain interest rate for a stated period and the rate payable will not change during that period regardless of changes in the lender's standard variable rate.

Flat Over Shop - residential dwelling situated above retail premises. Lenders are likely to take a similar approach to flats above any form of commercial premises. Some lenders will not lend on this type of security as it is seen as having limited appeal to prospective purchasers and may therefore have a lower value compared to an otherwise similar property in a wholly residential block. Any property that is located above commercial property is found generally to take longer to resell than properties which do not have any commercial element. A flat above a take-away restaurant is going to be more difficult to arrange a loan on than a flat above a book shop.

Higher Lending Charge - a charge made by some lenders to those who wish to borrow a high percentage of the value of the property – usually 75% to 90%. All or part of this charge may be used by the lender to buy an insurance policy to protect themselves in the event of the property being taken into possession and sold for less than the outstanding debt. Although the lender uses part or all of the money paid by the borrower to purchase this insurance, the insurance only protects the lender and not the borrower.

Home Improvements - works carried out to improve your home. Mortgage interest relief used to be given on loans for home improvements in the same way as for house purchase. Loans taken out before its abolition still receive this relief but this is lost if you move lender.

Housing Association - a society, body of trustees or company which is established for the purposes of providing, building, improving or managing, or facilitating, or encouraging the construction or improvement of, housing accommodation. It does not trade for profit. Anyone wanting help with housing puts his or her name down on the housing association list which acts in the same manner as council house lists. See shared ownership.

Individual Voluntary Arrangement (IVA) - introduced under the Insolvency Act 1986 with the intention of allowing an individual to avoid bankruptcy and make maximum possible restitution to creditors. An IVA is seen as preferable to bankruptcy as the debtor can retain his tools of trade and, in the case of a professional person, continue to practice, or hold company directorships. IVAs can be set up for either a person or a company.

An Insolvency Practitioner petitions the High Court for protection for a borrower debtor under an IVA. A proposal is put to the creditors of whom 75% must accept. If this is achieved, the arrangement becomes binding upon debtor and all creditors named in the agreement. If the debtor fails to meet payments under an IVA the Insolvency Practitioner is likely to petition for the individual to be made bankrupt. Whilst bankruptcy normally lasts for only three years some creditors insist that IVAs last a longer period.

Interest Only - interest only mortgage - loan for which only payments of interest are paid to the lender during the term of the loan. All mortgages other than capital and interest repayment loans are a form of interest only loan. Some lenders will allow loans to be set up without any specific provision to repay the capital at the end of the period this is known as a pure interest only loan.

Land Registry - A record of property, ownership and the mortgage is registered in a central register at HM Land Registry.

Lender - An organisation which offers mortgage products.

LTV loan to value ratio - is the ratio of the loan amount to the property valuation expressed as a percentage. E.g. if a borrower is seeking a loan of £20,000 on a property worth £40,000 it has a 50% loan to value rate. If the loan were £30,000, the LTV would be 75%. The higher the loan to value the greater the lender's perceived risk. Lenders will be more cautious in underwriting high loan to value loans. Loans above normal lending LTV ratios may require additional security.

Mortgage Term - length of time before the mortgage loan must be repaid.

Negative Equity - situation which occurs when the amount loaned against a property is in excess of the market value of the property.

Right To Buy - option for council tenants to purchase the property in which they reside, often at a discount proportional to the length of occupancy. See separate sub menu for more information.

Second Charge - a legal charge that ranks behind a first charge, possibly to secure a second mortgage, or a guarantee given to secure other borrowings.

Shared Ownership - method of property purchase in partnership with a Housing Association. The borrower purchases part of the property and rents the remainder from the Housing Association. Also known as co-ownership, this arrangement is designed for people who could not otherwise become homeowners. Under most arrangements, the minimum purchase amount is 25% of the property value with the remainder available to be purchased in blocks of 25%.

Unemployed - not in employment or receiving any regular salary; not self-employed. (Could be receiving state benefits.)

Variable Rate - interest rate that will vary over the term of the loan, normally in line with the general cost of borrowing.