JARGON BUSTER.
MORTGAGE TERMS SIMPLIFIED.
Let’s be honest, mortgage jargon can be confusing. You’re definitely not alone if you’ve ever felt overwhelmed by the technical terms, even experienced homebuyers often find themselves scratching their heads. But it doesn’t have to be that way. Together, we’ll cut through the confusion and make your mortgage journey simple, clear, and empowering.
A TO Z MORTGAGE JARGON GUIDE.
A
Agreement in Principle (AIP)
An Agreement in Principle (AIP), also known as a mortgage in principle or decision in principle, gives you an indication of how much you may be able to borrow towards the purchase or remortgage of a property. It's a document you can show to an estate agent or seller to demonstrate that you may be in a financial position to proceed.
APRC
The Annual Percentage Rate of Charge (APRC) is the total cost of the loan expressed as an annual percentage. The APRC helps you compare different mortgage offers.
Arrears
If you fall behind on your mortgage payments, you are “in arrears.”
B
Base Rate
The interest rate set by the Bank of England, which tracker mortgage rates and lenders’ standard variable rates usually follow.
Broker / Intermediary
An independent adviser who can help you arrange mortgages and other financial products.
C
Capital and Interest Payment
Your monthly payment covers both the interest charged and a portion of the original loan amount, reducing the total balance outstanding.
CHAPS Fee
A fee charged to cover the cost of electronically transferring mortgage funds to the borrower.
Conveyancing
The legal process of buying and selling property. This is usually carried out by a solicitor or licensed conveyancer.
Cost of Credit
The difference between the amount you borrow and the total amount you’ll repay, including interest and charges.
D
Decision in Principle
Another term for an Agreement in Principle.
Deeds
The legal documents that record the ownership of a property and any associated land.
Mortgage Deposit
The amount you put towards the purchase price of a property from your own funds. This varies by lender and product. Some lenders offer mortgages with as little as a 5% deposit for first-time buyers.
E
Early Repayment Charge (ERC)
A fee charged by some lenders if you repay your mortgage early, often applicable to fixed-rate products. Check your mortgage offer or terms and conditions for details.
Equity
The difference between your home’s current value and the amount you still owe on your mortgage.
Exit Fee
An administration fee payable when you fully repay your mortgage.
F
Fixed Rate Mortgage
A mortgage where the interest rate stays the same for a set period (e.g., two or five years), regardless of changes to the base rate.
Freehold
You own both the property and the land it stands on outright.
G
Gazumping
When a seller accepts an offer on their property, but later accepts a higher offer from another buyer, leaving the original buyer to either increase their offer or lose the purchase.
Gifted Deposit
A deposit funded by someone else, such as a family member, to help you purchase a property.
Guarantor
A third party (often a parent or guardian) who agrees to make your mortgage repayments if you are unable to.
H
Help to Buy
A term for several UK Government schemes aimed at helping first-time buyers get onto the property ladder.
Higher Lending Charge (HLC)
A fee sometimes charged when borrowing more than 75% of a property’s value. It protects the lender if you default on your mortgage.
J
Joint Applicants / Joint Mortgages
Where two or more people share equal ownership of a property. If one person dies, their share automatically passes to the surviving owner(s), regardless of any will.
L
Land Registry
The official body that holds details of property ownership.
Leasehold
You own the property but not the land it is built on, for a set number of years. Flats are usually owned on a leasehold basis. It can be difficult to get a mortgage if there are fewer than 70 years left on the lease of the property you want to buy. Leases can be renegotiated, but the shorter the remaining term, the more expensive it usually is.
LTV (Loan to Value)
Loan to Value (LTV) is the size of your mortgage expressed as a percentage of the property’s value. For example, if you have a £50,000 mortgage and your home is worth £100,000, your LTV is 50%.
M
Maturity Date
The date by which the mortgage must be repaid in full, or when a new agreement will need to be arranged.
Monthly Repayment
The amount you pay your lender each month towards your mortgage.
Mortgage Illustration
A document you should be given before you make a mortgage application. It outlines key details of your mortgage, such as monthly payments, interest rate, and fees.
Mortgage in Principle
Another term for an Agreement in Principle.
Mortgage Offer
A formal document confirming your approved mortgage, including the terms and conditions.
Mortgage Term
The length of time over which you will repay your mortgage (e.g., 25 years).
N
Negative Equity
When the value of your home is less than the amount you owe on your mortgage.
O
Overpayment
When you pay more than your agreed monthly mortgage payment. You can make a one-off lump sum payment or regularly overpay alongside your usual monthly amount. Overpayments can reduce the interest you pay and shorten your mortgage term.
P
Portability
The ability to transfer your existing mortgage to a new property when you move house.
Payment Holiday
A temporary break from making mortgage payments. Interest will still be charged during this time. This option is usually only available on flexible mortgages.
Product Fee
A set-up fee charged by a lender for arranging your mortgage. Product fees vary between lenders.
R
Rebuild Costs
The estimated cost to rebuild your home if it is destroyed (for example, by fire). This figure is required for insurance purposes.
Remortgage
Switching your mortgage to a new deal, either with your current lender or a different lender.
S
Stamp Duty
A tax paid when buying a property. In England and Northern Ireland, there is no stamp duty on properties priced up to £250,000 (or £425,000 for first-time buyers), but rates apply to amounts above these thresholds. Rates increase as the property price increases.
Standard Variable Rate (SVR)
The default mortgage interest rate your lender charges after your initial mortgage deal ends.
Service Fee
A fee charged by a lender to obtain details from your existing mortgage lender, with your written consent.
T
Tracker Rate Mortgage
A mortgage with an interest rate set at a fixed margin above the Bank of England base rate. The rate rises and falls in line with changes to the base rate.
V
Valuation
An assessment carried out for the lender to confirm that the property is worth the amount you wish to borrow.
Variable Rate
A mortgage interest rate that can go up or down, usually in line with the lender’s Standard Variable Rate.
