Jargon Buster
Early redemption penalties
Charges paid to the lender in compensation for lost interest
if you redeem your loan ahead of schedule. Penalties can
be stepped just like discounts, and can be particularly
severe within the first year. This is to ensure that the
costs that the lender endures in setting up the mortgage
are always covered. Penalties can be a fixed sum of money,
though are often proportion of the loan. With cashback
mortgages, you often have to repay the amount of money
you received as cashback.
Early repayment period
A period of time that applies to certain types of loan
during which a charge will be made if the loan is repaid
in full or in part or its terms are varied at the borrower's
request.
Effective gross income
Additional income that a lender considers when assessing
the loan application of a potential borrower.
Eligibility criteria
These are criteria which you must satisfy before an account
or service application can be progressed.
Employment status
A term used by lenders to describe potential borrowers'
working arrangements. Self-employed applicants are sometimes
seen as a greater risk than employees. Many specialist
lenders and mortgages have emerged in recent years designed
specially for different types of employment status.
Equity
Your equity in the new home is the proportion of the value
of the property that is free from debt.
Equity release
Equity release or home income schemes allow you to generate
either a lump some or a regular income in return for allowing
the lender to take ownership of a portion of your home.
These are often used by people in later stages of life
who have paid of all or most of their mortgage and who
are looking to raise funds without borrowing money.
Excess
Applies to an insurance claim and is simply the first
part of any claim that must be covered by yourself. This
can range from £50 to £1000 or higher. Increasing your
excess can significantly reduce your premium. On the other
hand, a waiver can sometimes be paid to eliminate any
excess at all. Always check the excess in your 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.
Executor
A person appointed to carry out the instructions in a
will. If there is no will, a probate court will appoint
anexecutor.
Existing liabilities
Expenses taken into account by a mortgage lender when
assessing an applicant’s ability to repay the loan. These
include loan repayments, maintenance payments etc.
Extended redemption penalty
This is where the redemption penalty continues beyond
a fixed or capped rate period, effectively tying you in
to the much higher variable rate for a period of time
after the fixed or capped period. As a result you get
stuck paying an uncompetitive rate that eats into the
gains you may have made from having the fixed rate or
capped ratein the first place.
