Mortgage Dictionary: A

Ability To Pay

A method of working out the creditworthy-ness of a customer, by estimating how much he or she will have left to make payments on a loan or mortgage after other deductions have been made from gross income.

Acceleration Clause

Allows the lender to collect the balance of a loan if a borrower misses one or more payments.

Acceptance

A positive response to an offer or a counter-offer. Acceptances may be 'conditional', 'express', 'implied' or 'qualified', depending on the circumstances of the deal and whether there are any further mitigation's, conditions or requirements.

Accident

An unexpected event, usually referring to an injury or fatality, although in some accidents it is just property that gets damaged. Although some accidents are easier to prevent than others, the financial damage can be limited by taking out accident and sickness insurance, and ensuring that your car, house and other valuable property are properly covered.

Accident Insurance

Insurance that covers you if you suffer certain injuries, such as loss of a limb or vision.

Accident, Sickness And Unemployment Insurance

Insurance cover arranged by the borrower to protect against inability to meet mortgage payments. Unemployment cover is restricted to cover certain events only. Exclusions to this insurance include dismissal due to professional misconduct or taking voluntary redundancy. The accident and sickness cover does not cover any act of self-injury or any injury related to the use of alcohol or drugs.

Account

See bank account, insurance account, credit account, trade account, foreign currency account.

Added To Loan

The additional costs associated with arranging a mortgage that include a high loan to value fee or arrangement fees, which can be added to the amount you borrow. Fees that may be added vary by lender.

Additional Principal Payment

An extra payment each month to help reduce a debt.

Additional Security

When lending exceeds a certain loan-to-value, lenders may require additional security. The simplest form of additional security is a single mortgage loan-to-value, however other security such as cash or shares may be accepted as security.

Add-On Interest

Interest a borrower pays to the lender for the duration of the loan.

Adjustment Date

Date on which interest rates change for variable rate mortgages.

Administration Charge

Any fee charged by bank or other financial institution to cover costs beyond day to day running of an account. This typically involves banks sending letters to customers to tell them they have gone overdrawn.

Administration Charge

Some lenders will reserve a proportion of the fee charged for the valuation to cover their own costs. If an application does not proceed, this part of the valuation fee may not be refunded, even if the valuation has not taken place. See valuation fee.

Advance

Amount of your mortgage/loan. See also Cash Advance.

Advice Centre

A drop in centre which can offer advice on personal issues, including financial problems such as debt, unemployment or divorce. The most popular advice centres include: CAB (Citizens' Advice Bureaux), Student Advice centres, Job centres, and some council "one stop shops".

Affidavit

A legal statement made in writing and in the presence of a solicitor or other legal professional. From the latin verb affidare; affidavit is the past tense "I have pledged".

Affidavit Swear Fee

A fee charged when a mortgage lender is required to swear an affidavit.  This is a written legal statement to a solicitor in connection with mortgage arrears.

Agreement In Principle

This means you have been accepted for a mortgage or other financial product, but it will depend on issues such as a valuation report and confirmation of employment.

Annual

Any payment or report which is due once each year.

Annual Bonus

A bonus paid annually on an endowment mortgage which is dependent on the performance of the investment fund being used to repay your mortgage.

Annualised Percentage Rate (A.P.R)

An explanation to identify the true cost of borrowing and a standard in order to provide a method of comparing costs of different loans. Initially mortgage lenders were not obliged to quote an APR due to its inappropriateness in comparing mortgage loans. APR was designed to reflect the cost of different types of hire-purchase contracts that were 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.

Annuity Mortgage

Another term for a capital & interest repayment mortgage.

Applicant

Someone who applies for a mortgage, or other financial product.

Applicant Type

A method of classifying applicants by status or other market segment. Common types for mortgages applicants might include first time buyer, self employed, or buy to let.

Application

The process of applying for credit, or other products. The vast majority of credit applications need to be made in writing, although it may be possible for some services, such as an overdraft extension, to be arranged over the phone. Even internet based credit applications will usually require you to sign documents before the application is finalised.

Application Fee

Any charges made for an application.

Applied Or Nominal Interest Rate

Rate used to calculate interest due.

APR

See Annualised Percentage Rate.

Architect

A professional who is employed to design plans for, or extensions to, buildings. Some modifications to your house may require the approval of an RIBA recognised Architect, in order to get approval for a home improvement loan or re-mortgage. You should always check the credentials of anyone calling themselves an Architect, as it is not possible to practice as such in the UK without being a member of the RIBA.

Arrangement Fee

A fee charged by a lender for setting up the loan. Normally payable upon completion but may sometimes be added to the loan. See fee, fees added to loan, booking fee, Conveyancing fee, land registry fees, IGP, stamp duty and valuation fee.

Arrears

A late payment, or a payment after the event, for example most salaries are paid "monthly in arrears" - i.e. the first payment is one month after commencement of work.

Arrears Fee

Charges for any late payments. See late payment fee.

Asking Price

This is the initial starting price for which the property owner is looking to sell their property. It is rare for the asking price to get paid, except in a rapidly rising property market.

Assumption

When a buyer assumes the loan payments and obligations of the seller. If the purchaser defaults on the loan both the buyer and seller are responsible for the debt.

ASU

Income protection cover for loss of earnings caused by accident, sickness, or unemployment.

Atrium

A inner courtyard of a home or other property that is open to the sky.

Attic

A space in between the ceiling an the roof of your house. It can often be converted into an extra room, significantly increasing the value of a property.

Auction

The process whereby something is bought at a price that arises from a process of bidding. If you bid for and win a home at an auction you will be legally bound to buy the house.

Auctioneer

A person who controls an auction.

Audited Figures

These are a set of business accounts that have been ratified by an accountant. Self employed people may need to provide 3 years worth of figures checked by an auditor to be able to get a mortgage.

Australian Style Mortgage

A form of mortgage where the repayment period is reduced due to interest being calculated daily.

Average

The sum of any amount divided by the number count. A statistical term often used to describe financial figures, such as "average house prices", "average earnings".