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Ability To Pay: A method for establishing how creditworthy a borrower is, by calculating how much money they will have left to make payments on a mortgage after other deductions have been made from their gross income.
Acceleration Clause: A clause in a legal document that enables the lender to collect the balance of a loan if a borrower defaults on one or more payments.
Acceptance: A positive response to a financial offer. Acceptances can be ‘conditional’, ‘express’, ‘implied’ or ‘qualified’, depending on the circumstances of the offer and whether there are any additional mitigations, conditions or requirements.
Accident Insurance: Insurance that covers certain injuries, such as loss of a limb or vision.
Accident, Sickness and Unemployment Insurance: Insurance cover arranged by a borrower to protect against an inability to make mortgage payments.
Additional Principal Payment: An additional payment each month to help reduce a debt.
Additional Security: When a mortgage exceeds a specific loan-to-value, lenders may ask for additional security.
Administration Charge: Many lenders will keep a proportion of the fee charged for the valuation to cover their own costs. If an application falls through, this part of the valuation fee will not be refunded.
Advance: The total amount of the mortgage/loan.
Affordability: The ratio of a house price to disposable income. Can also be measured by calculating the ratio of income to average mortgage interest payments.
Affordable Housing: Housing that falls within the budget of key public sector workers and first time buyers. Generally, there is a shortage of affordable housing in southern England.
Agreement In Principle: This means that an application for a mortgage or other financial product has been provisionally accepted, but will ultimately depend on factors such as a valuation report and confirmation of employment.
Annual Bonus: A bonus paid annually on an endowment mortgage. The value of the bonus is dependent on the performance of the investment fund being used to repay the mortgage.
Annualised Percentage Rate (APR): The interest rate of a loan calculated to include any additional costs levied by the lender. It is a measure of the true cost of borrowing. It is a legal requirement that a true APR figure be provided with any loan.
Annuity Mortgage: An alternative term for a Capital & Interest repayment mortgage.
Arrangement Fees: A fee charged by a lender for setting up a loan. This fee is normally payable upon completion but can often be added to the loan if required.
Arrears: A late payment, or a payment after the event.
Arrears Fee: Charges for any late payments.
Asking Price: The initial starting price at which a property owner is being sold.
ASU: Income protection cover for loss of earnings due to accident, sickness, or unemployment.
Audited Figures: A set of business accounts that have been certified by an accountant. Self employed borrowers may need to provide 3 years worth of accounts ratified by an auditor to be able to apply for a mortgage.