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Loans Questions E-M

I :: J :: L :: M

I

IFA - Independent Financial Advisor

In theory, these intermediaries should look at the entire financial market before making a selection and offer unbiased advice and access to all suitable financial products. they sometimes still have access to special deals not on offer elsewhere because they may subscribe to a mortgage panel along with other advisers and brokers. Together they convince lenders to provide special packages in return for their continued custom. The only trouble is that they have to deliver a certain level of business over a year to remain on the panel, so they may favour some products over others.

IFA

Independent Financial Advisor.

Impaired credit

Impaired credit loans are specialist products for customers whose credit problems disqualify them from using the lenders' standard products. Some lenders specialise in loans such as these, which are also known as 'non-status' loans.

Incidence of interest calculation

The frequency that the outstanding interest and ongoing mortgage repayments are calculated. Charging interest on the outstanding balance of your loan at the end of each day, means you reap immediate benefits of any repayments you make, since you will be charged interest on a smaller debt each day. As long as you are making payments on time, the more often interest is calculated the better for you. This is a common feature of flexible mortgages, but is not restricted solely to them. When interest is calculated annually, repayments are not updated to include the reduction in capital that arises from the payments you make throughout the year.

Income multipliers or multiples

The size of the mortgage that lenders offer, will often be worked out by multiplying your income each year by a set percentage.

Income protection insurance

Insurance designed to protect you if you are unable to continue providing for yourself or others. Income protection will not specifically pay off your mortgage, loans, private medical treatment or special needs that arise through disability. It will provide you with a regular weekly or monthly income if you become unable to work as a result of accident, sickness or disability. The amount of benefit that is paid out it is not linked to your mortgage or other loan payments, but your overall level of income.

Income references

Conformation of stated income provided by an employer or certified accounts if self employed.

Income Replacement

An insurance policy that will provide an income in the event of job loss or illness.

Income protection insurance

A useful policy for ensuring regular income in the event of agreed circumstances, such as redundancy or unemployment due to sickness.

Interest Only Mortgage

With this type of product, your monthly repayments will only cover the interest element of the loan. You need to have repayment options, such as an endowment or an ISA to cover repayment of the Capital element of the loan upon maturity.

Inflation

With this type of product, your monthly repayments will only cover the interest element of the loan. You need to have repayment options, such as an endowment or an ISA to cover repayment of the Capital element of the loan upon maturity.

Insurance 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.

Interest Only Mortgage

With this type of product, your monthly repayments will only cover the interest element of the loan. You will typically set up another repayment vehicle eg an endowment or ISA to repay the capital element of the loan.

Interest rate

A charge that borrowers owe for the service of being lent money. It is charged as a percentage of the total amount of capital owed and accounts for the majority of the APR.

Interest

The amount the lender charges the borrower for a loan.

Intermediaries

Brokers and other intermediaries attempt to arrange suitable financial products or policies for you. They can be fully independent, part of a network that uses a panel of providers, or tied to certain institutions in which case they can only sell their products.

Insurance Single

Insurance to protect the income / repayment of the loan applicant. Split / double - insurance to protect the income of the second wage earner.

(Term) Insurance

A life insurance policy often linked with a mortgage or loan. The premium goes towards insuring your life, and will pay off loan in the event of death. No benefits are received after the policy expires.

IPT Insurance premium tax

Tax on all UK general insurance under Government control, currently charged at 4% ( 1/1/2000 ) of the premium.

ISA Individual Savings Account

ISAs provide tax-free growth, generated mainly by stock market investment. The ISA aims to repay the loan's capital at the end of its term, but the interest element must be cleared separately as you go along.

J

Joint account

An account usually held by two people both of whom have responsibility for its use and debt.

Joint income

The total gross income of the mortgage applicants.

Joint liability

The responsibility of two or more people to fulfill the terms of a loan or debt.

Joint mortgage

A mortgage shared jointly between two people with the agreement that if one dies, the other automatically inherits their share.

Judgement lien

A court-ordered monetary judgment against a current or previous property owner which has not been paid.

 

L

 

Late charge

A fee a lender imposes on a borrower when the borrower does not make a payment on time.

Late payment

A payment a lender receives after the due date has passed.

Leasehold

A property that is rented for a fixed term.

Lender

The actual company that provides the finance to satisfy a loan or mortgage request.

Lender's arrangement fees

Fee for arranging a loan passed on to the buyer by lender.

Lenders fees

Administration costs incurred by a lender to secure a loan, paid by the applicant.

Lessee

The individual or company to whom a lease is granted.

Lessor

The individual or company who grants a lease.

Level Term Assurance

Your estate will receive a lump sum if you die during the term of your loan. Ideal for interest only loans as the amount owed on the loan remains the same throughout the life of the loan.

Liabilities

Basically, liabilities are debts that you have and the regular outgoing payments that you make.The reason you must show your bank statements is usually to help the underwriters identify anything in your current expenditure that may impinge upon your ability to repay the loan. They may want to know about any other mortgages, debts, credit cards, HP agreements, loans, overdraft facilities, maintenance and court orders.

Liability

A sum of money liable to repayment i.e. a debt.

Life Insurance

A life insurance policy specifically suited to mortgage or loan protection. Some of the premium goes towards life insurance for covering your loan in the event of the loan holder's death. The rest is invested for a pay out at the end of the term.

Lien

A legal claim against an asset.

Life Assurance

A life assurance policy provides for a lump sum to be paid out on certain eventualities in return for the payment of a single or regular premiums. Some of the premium you pay goes towards insuring your life and will pay off the loan in the event of your death. The rest is invested to pay out a lump sum at the end of the term.

Lifetime cap

A limit on how high the interest rate on a variable rate mortgage can rise over the lifetime of the loan.

(Secured) Loan

A loan to be used for any purpose. The equity in the property is put up as security against not paying the loan back.

(Unsecured) Loan

A loan to be used for any purpose. The credit rating or financial position of the applicant is such that no security for the loan is required.

Loan application

The first step toward in submitting a home loan requires the borrower to itemize basic financial information.

Loan application fee

A fee related to the loan application.

Loan consolidation

When one large loan is taken out to pay off a variety of smaller loans held with different providers. A mortgage can be used for this purpose and in some cases can work out cheaper as mortgage rates tend to be cheaper than personal loan interest rates.

Loan Secured

A loan secured against the property.

Loan to Value Ratio (LTV)

The ratio of your mortgage to the market value of your property. Expressed as a percentage. For example, if you have a mortgage of £95,000 on a property worth £100,000, the loan to value is 95%.

M

Mandatory products

These are supplementary products that some lenders insist you purchase along with the core product that you are buying. This is often loan protection or accident, sickness and unemployment insurance.

Margin

The lender's "retail markup" on the loan. For example, if the index rate for an variable rate mortgage is 5 percent but the lender has a 2.5 percentage-point margin, the rate the borrower will pay is 7.5 percent.

MCRI

Mortgage Code Register of Intermediaries. A register maintained by the Council of Mortgage Lenders of the names of mortgage brokers subscribing to the Mortgage Code.

Mortgage Guarantee Insurance (MGI)

Mortgage Guarantee Insurance. An insurance policy designed to make good any shortfall between the amount owed on a mortgage and the value of the mortgaged property. Provides a benefit to the lender in the event of repossession resulting from non-payment.

MIG

Mortgage Indemnity Guarantee. See MGI.

MIRAS

Stands for 'mortgage interest relief at source'. It used to be a tax relief on mortgage interest repayments but was scrapped in 2000.

Modification

A change in any of the terms of the loan agreement.

Monthly fee

A fee charged once a month.

Monthly repayment

This is the amount you pay to your lender each month towards the cost of your loan.

MIG

Mortgage Indemnity Guarantee. See MGI.

Mortgage

The name given to a loan used to buy a property.

Mortgage acceleration clause

A clause which allows a lender to demand that the entire balance of a secured loan be repaid in a lump sum under certain circumstances. The acceleration clause is usually triggered if the home is sold, title to the property is changed, the loan is refinanced or the borrower defaults on a scheduled payment.

Mortgage application

Forms used to assess whether you meet the lender's underwriting criteria. These criteria are set to ensure that barring any unforeseeable change in circumstances, you will be able to support the mortgage and meet the repayments. Questions relate to such things as your personal details, existing loans secured against the property, credit history etc.

Mortgage code

The mortgage code is a set of standards defined by the Council of Mortgage Lenders, that lenders voluntarily subscribe to. It sets out codes of conduct on how a lender or intermediary should act when arranging your mortgage, as well as how you should be dealt with once your mortgage is in place. It also tells you how to complain in the event of a lender not keeping to the code and who to complain to.

Mortgage code arbitration scheme

An arbitration service between members of the public and lenders.

Mortgage Deed

Document detailing a loan to purchase a home.

Mortgage debt

The amount outstanding on your mortgage.

Mortgage payment protection insurance (MPPI)

An MPPI policy pays your mortgage or other loan repayments for you if you become unable to work for an extended period of time, as a result of redundancy, accident, sickness or disability. It should provide enough income to cover all your monthly mortgage expenses. If you have a repayment mortgage, this should be your capital and interest repayment and if you have an interest-only mortgage, the MPPI should cover your interest payment as well as your normal monthly contribution to the investment vehicle that will repay your loan.

Mortgagee

A bank or other financial institution that lends money to the borrower. The borrower is considered the mortgagor.

Mortgagor

The mortgagor is another term for the borrower.

MPC

Monetary Policy Committee of the Bank of England . Meets monthly to discuss and alter interest rates etc.