Mortgage tools

Mortgage glossary

Mortgages come with their fair share of jargon. Here's a plain-English guide to the terms you're most likely to come across.

Adverse credit: A poor credit history — such as missed payments, defaults or CCJs — that can affect which lenders and rates are available to you.
AER: Annual Equivalent Rate — shows what the interest rate would be if interest were paid and compounded once each year.
Affordability assessment: A lender's check that you can comfortably manage the repayments, both now and if interest rates were to rise, based on your income and outgoings.
Agreement in Principle: An indication from a lender of how much they may be willing to lend, based on basic information. Also called a Decision in Principle (DIP).
APR: Annual Percentage Rate — the yearly cost of borrowing including interest and standard fees, used to compare credit products.
APRC: Annual Percentage Rate of Charge — the total yearly cost of a mortgage including fees, helping you compare deals like for like.
Arrangement fee: A fee charged by a lender for setting up a mortgage. It can sometimes be added to the loan.
Base rate: The interest rate set by the Bank of England. It influences the rates lenders charge on mortgages and pay on savings.
Booking fee: An upfront fee some lenders charge to reserve a particular mortgage product. It is usually non-refundable.
Bridging loan: A short-term loan used to 'bridge' a gap — for example, buying a new property before your current one has sold.
Buy-to-let: A mortgage for a property you intend to rent out rather than live in yourself.
Capital: The amount of money you borrow, separate from the interest charged on it.
CCJ: County Court Judgment — a court ruling for an unpaid debt that appears on your credit file and can affect a mortgage application.
Completion: The day the funds are transferred, ownership passes to you and you can collect the keys to your new home.
Contents insurance: Cover for your possessions inside the home against risks such as theft, fire and flooding.
Conveyancer: A solicitor or licensed professional who handles the legal side of buying or selling a property.
Conveyancing: The legal process of transferring property ownership from the seller to the buyer.
Credit file: A record of your borrowing history held by credit reference agencies, which lenders use to help assess your application.
Deposit: The portion of a property's price you pay yourself upfront. The rest is covered by your mortgage.
Discounted rate: A mortgage with a set discount off the lender's standard variable rate for an introductory period, so payments can change.
Early Repayment Charge: A fee some lenders charge if you repay or overpay your mortgage beyond agreed limits during a deal period.
Endowment mortgage: An older type of interest-only mortgage where a separate investment policy was intended to repay the capital at the end of the term.
Equity: The share of your property that you own outright — its value minus any outstanding mortgage.
Exchange of contracts: The point at which a sale becomes legally binding and neither party can withdraw without penalty.
Fixed rate: A mortgage where the interest rate stays the same for a set period, so your payments don't change during that time.
Flexible mortgage: A mortgage offering features such as overpayments, underpayments or payment holidays to fit your circumstances.
Freehold: Outright ownership of a property and the land it stands on, with no time limit.
Gazumping: When a seller accepts a higher offer from another buyer after already accepting yours, before contracts are exchanged.
Guarantor: Someone who agrees to cover your mortgage payments if you're unable to, helping you qualify for a loan.
Higher Lending Charge: A fee some lenders apply when you borrow a high percentage of a property's value, protecting the lender if you default.
Interest-only: A mortgage where you pay only the interest each month and repay the capital in full at the end of the term.
Joint mortgage: A mortgage taken out by two or more people who are jointly responsible for the repayments.
Land Registry: The government body that records property ownership and registered charges, such as mortgages, in England and Wales.
Leasehold: Ownership of a property for a fixed number of years, but not the land it sits on, which is owned by a freeholder.
Loan to Income: The size of a mortgage compared with your annual income (often around 4.5×), used by lenders to assess affordability.
LTV: Loan-to-Value — the size of your mortgage as a percentage of the property's value. A lower LTV usually unlocks better rates.
Mortgage offer: The formal confirmation from a lender that they will lend you a specified amount on agreed terms.
Mortgage term: The total length of time over which you agree to repay your mortgage, commonly 25 to 35 years.
Negative equity: When your property is worth less than the outstanding mortgage secured against it.
Offset mortgage: A mortgage linked to your savings, where your savings balance reduces the interest charged on your loan.
Overpayment: Paying more than your required monthly amount to reduce the balance and interest faster, subject to any lender limits.
Porting: Transferring your existing mortgage deal to a new property when you move home.
Product transfer: Switching to a new deal with your existing lender when your current rate ends, without moving to a different provider.
Redemption: Paying off a mortgage in full — for example when you sell, remortgage or reach the end of the term.
Remortgage: Switching your existing mortgage to a new deal or lender, often to get a better rate or release equity.
Repayment mortgage: A mortgage where each monthly payment covers both interest and part of the capital, so the loan is fully repaid by the end of the term.
Repossession: When a lender takes back a property because the borrower has fallen behind on their mortgage repayments.
Searches: Checks carried out by your conveyancer — such as local authority and environmental searches — to uncover anything that could affect the property.
Second charge: An additional loan secured against a property that already has a mortgage, ranking behind the first charge.
Self-build mortgage: A mortgage that releases funds in stages to finance building your own home.
Shared ownership: A scheme where you buy a share of a property and pay rent on the remainder, with the option to buy more later.
Stamp Duty: A tax paid when buying property over a certain price threshold in England and Northern Ireland (rates differ in Wales and Scotland).
Standard Variable Rate: A lender's default interest rate that your mortgage usually reverts to once a fixed or tracker deal ends.
Subject to contract: A phrase meaning an agreement is not yet legally binding and remains open to change until contracts are exchanged.
Term assurance: A life insurance policy that pays out if you die within a set term, often used to protect a mortgage.
Title deeds: The legal documents that prove ownership of a property and set out its boundaries and rights.
Tracker rate: A mortgage whose interest rate follows the Bank of England base rate, plus a set margin, so payments can rise or fall.
Underwriting: The lender's detailed assessment of your application to decide whether — and how much — to lend.
Valuation: A lender's assessment of a property's worth, used to confirm it provides adequate security for the loan.
Vendor: The person selling a property.