Jargon Buster

At the top of the page are two important phrases relevant to the loan being regulated by the Financial Services Authority (FSA) or not. For the majority of reasons I am pleased that The FSA regulate certain loans. Beyond the top two terms other jargon phrases are in alphabetical order so if you are looking for a certain word or phrase just scroll down.

Regulated Bridging Loan - Any bridging loan that is on your own home as a first charge or is for a loan on your new home is regulated by the FSA. This gives you added protection that the loan has to be in a format that has to disclose all terms and costs transparently. This gives you far more recourse if you do not think the loan has been conducted fairly.

Unregulated Bridging Loan - Bridging Loans that are secured as a second charge on your own home or any other form of security are not regulated by the FSA. Also first charge loans that are secured against investment property, commercial property or land is not regulated. The only exceptions being commercial where over 40% is used as the residential home of the mortgage holder, such as a shop with a flat, and also if you have a buy to let property that is let out to a close relative.

A to Z of Jargon and terms!

Closed Bridging Loan - This is where you have exchanged contract on the sale of your current home or property but the completion date is after the date that you need to complete on the purchase property. The lender is very safe to lend as they are assured of being repaid as the current property has effectively been sold.

Credit Check and Credit Score - There are two main credit reference agencies that usually hold all of your credit information including whether you are on the electoral roll, details of payment conduct on mortgages, loans and credit cards, plus details of whether there are any county court judgements and loan agreement defaults. A credit check may be used to purely confirm there is no adverse credit where as a credit score is a lenders scoring system on deciding whether you manage your credit to a suitable standard to meet their criteria. There are now many lenders that will perform a credit check but will ignore your credit score.

Default Interest Rate and Terms - This is an absolute must to be aware of; it forms the biggest complaint of all the enquiries I have ever received from a smalll clutch of lenders. When funds are required urgently it is easy to overlook the small print and then if a monthly payment is overlooked or you go beyond the term of the loan some lenders will impose unbelievable terms that there is nothing you can do anything about.

Equitable Charge - This type of charge is becoming very common with secured loans. To get a second sharge on a property generally means that consent is required from the first charge lender being the main mortgage company. With some non high street lenders, they will decline consent as they see it that the client is taking on additional debt they may not be able to afford. An equitable charge does not require consent but does not give the lender such strong security so the loan to value is generally lower.

First Charge Bridging Loan - The lender is taking a first charge on your property when there is no other finance secured against the property. Or the bridging loan will redeem the current first mortgage and also raise the additional necessary finance.

Interest Roll Up - This phrase means that if you cannot afford to service the loan, a set amount of interest is added to the loan so that you do not have to make the monthly payments. Effectively you are borrowing the amount you need plus the interest which is held back. Any interest not used is refunded if not used (with reputable lenders)..

Ninety Day Valuation (also known as forced sale valuation) - The best way to describe this is "how much would I get for the property with a guarantee of completing on the sale of the property in 90 days of less. In a bouyant market in a popular area the 90 day value can be as high as the Open Market Value. In a flat market in an area with lots of property on the market the 90 day value can be as low as 70% of the open market value.

Non Status Bridging Loan - This basically means that the loan is provided regardless of credit rating or income. It is possible for a retired person who is bankrupt to be able to gain a bridging loan on the basis that they need fiunds uintil the property has sold or some other funds are available such as inheritance to clear the bridging loan.

Open Bridging Loan - This basically means that there is a plan on how the loan will be repaid but it is not guaranteed. You may wish to complete on the purchase before you have sold your current home on the basis that there is loads of interest and firm offers but no-one is in a position to exchange contacts on your current property.

Open Market Value - This is the assessed value of the property if it is sold under normal steam with no terms stating the valuation is based on a quick sale.

Second Charge Bridging Loan - This is a second loan secured against the property meaning it is second in priority to the current first charge, which is usually a standard mortgage lender.

Status Bridging Loan - This requires the client to have proof of income and they will also need a clean credit record.

Third Charge Bridging Loan - Where there is an existing mortgage and also a secured loan on the property (secured loan). The bridging loan would be on a third charge baisis. There are very few lenders that will provide a third charge bridging loan as they are third in the pecking order if anything goes wrong.