Navigating the world of mortgages can feel overwhelming, especially with the use of technical terms and jargon which is often used by lenders and financial experts.

Whether you’re a first-time buyer, a seasoned investor, or just looking to refinance, understanding mortgage-related terminology is crucial to your understanding and ability to make informed decisions.

A

  • Additional Borrowing: Borrowing additional funds with the same lender on top of an existing mortgage.
  • Agreement in Principle (AIP): A lender’s provisional agreement to lend a certain amount based on a credit check, offering an estimate of borrowing potential.
  • Annual Percentage Rate of Charge (APRC): Reflects the total cost of borrowing, including interest and fees, helping compare mortgage deals.
  • Arrears: Are missed mortgage payments, resulting in overdue amounts.
  • Arrangement Fee: A one-time fee charged by a lender for setting up a mortgage, often added to the loan balance.

B

  • Bankruptcy Search: A check to ensure a borrower hasn’t been declared bankrupt.
  • Base Rate: The interest rate set by the Bank of England, influencing mortgage rates.
  • Booking Fee: A fee charged by lenders when applying for certain mortgage deals, typically non-refundable.
  • Bridging Loan: A short-term loan used to finance a property purchase while waiting for another property’s sale.
  • Buildings Insurance: Insurance covering a property’s structure from damage, required by lenders.
  • Buy-to-Let: A mortgage for purchasing a property to rent out.

C

  • Capital Repayment: The portion of the loan that must be repaid over time, along with interest.
  • Cashback Mortgage: A mortgage offering a lump sum cashback on completion.
  • Capped Rate Mortgage: A variable-rate mortgage with a maximum cap on the interest rate.
  • CCJ (County Court Judgment): A legal decision against someone who hasn’t repaid a debt, affecting mortgage approval.
  • Collar: A lower limit below which the interest rate on a variable-rate mortgage cannot fall.
  • Completion: The final step in the home-buying process when ownership is transferred.
  • Completion Fee: A charge paid to a lender when a mortgage deal is finalized.
  • Consent to Let: Permission from a lender to let out a property that has a residential mortgage.
  • Contract: A legally binding agreement between buyer and seller.
  • Conveyancing: The legal process of transferring property ownership.
  • Credit Reference Agency: Companies that gather financial data to assess a borrower’s creditworthiness.

D

  • Deeds: Legal documents proving property ownership.
  • Decision in Principle: Another term for an Agreement in Principle.
  • Defaulting: Failing to make agreed mortgage payments.
  • Deposit: The upfront payment made when purchasing a property, usually 5-40% of the purchase price.
  • Discounted Rate Mortgage: A mortgage offering a discount on the lender’s standard variable rate for a specific period.
  • Drawn-down Funds: The process of receiving funds from a mortgage loan.

E

  • Early Repayment Charge (ERC): A penalty for repaying a mortgage early or overpaying beyond the allowed limit.
  • Employment Status: A borrower’s employment situation, which lenders assess during mortgage applications.
  • Equity: The difference between the property’s value and the remaining mortgage balance.
  • Exchange of Contracts: When contracts are exchanged, making the sale legally binding.

F

  • First Legal Charge: A lender’s primary claim on a property if the borrower defaults.
  • Fixed-Rate Mortgage: A mortgage with an interest rate fixed for a certain period, ensuring consistent payments.
  • Flexible Mortgage: A mortgage allowing overpayments, underpayments, or payment holidays.
  • Freehold: Complete ownership of both the property and the land it stands on, without time limits.
  • Full Reinstatement Value: The cost to completely rebuild a property, typically required for insurance.

G

  • Gazumping: When a seller accepts a higher offer after already agreeing to sell to someone else.
  • Gross: Income before taxes or deductions.
  • Guarantor Mortgage: A mortgage where a third party (usually a relative) guarantees payments if the borrower defaults.

H

  • Higher Lending Charge (HLC): A fee some lenders charge when a borrower’s loan-to-value (LTV) ratio is high.
  • HM Land Registry: A government body recording property and land ownership in England and Wales.

I

  • Income: A borrower’s total earnings considered when applying for a mortgage.
  • Interest-Only Mortgage: A mortgage where only interest is paid during the term, with the full loan balance due at the end.
  • Interest Rate: The percentage charged by a lender for borrowing money.

L

  • Leasehold: Ownership of a property for a set number of years, but not the land it sits on. Usually an apartment.
  • Lifetime Mortgage: A form of equity release for people aged 55+, allowing borrowing against a property’s value.
  • Loan-to-Value (LTV): The ratio of the loan amount to the property’s value, expressed as a percentage.
  • Local Authority Search: A search to uncover any planning issues affecting a property.

M

  • Monthly Payment: The amount paid each month to cover the mortgage and interest.
  • Mortgage Deed: A legal document outlining the mortgage terms.
  • Mortgage Intermediary: A broker who arranges a mortgage between a borrower and a lender.
  • Mortgage Offer: The official offer of a loan made by a lender to a borrower.
  • Mortgage Term: The length of time over which the mortgage is to be repaid, often 25–40 years.
  • Mortgagee: The lender in a mortgage.
  • Mortgagor: The borrower in a mortgage.

N

  • Negative Equity: When the outstanding mortgage exceeds the property’s value.
  • Net: Income after taxes or deductions.
  • New Build Property: A property that has recently been constructed and has not been lived in before.

O

  • Offset Mortgage: A mortgage linked to savings, with interest calculated on the difference between the loan and savings balance.
  • Outstanding Balance: The remaining amount of money owed on a mortgage.
  • Overpayment: Paying more than the required monthly payment, reducing the mortgage balance faster.

P

  • Payment Holiday: A break from making mortgage payments, agreed upon with the lender.
  • Porting: Transferring a mortgage to a new property when moving house.
  • Procuration Fee: A fee paid by a lender to a broker for arranging a mortgage.
  • Product Period: The term during which the mortgage deal (such as a fixed rate) applies.
  • Property Chain: A sequence of linked property transactions, where each sale is dependent on another.

R

  • Rebuild Cost: The estimated cost to rebuild a property from scratch for insurance purposes.
  • Redemption of a Mortgage: The process of paying off the remaining balance of a mortgage.
  • Remortgaging: Switching to a new lender, typically for better rates.
  • Repayment Mortgage: A mortgage where both the interest and capital are paid, reducing the loan balance over time.
  • Repossession: When a lender takes ownership of a property due to missed mortgage payments.
  • Residential Mortgage: A mortgage for buying a property intended for personal use.

S

  • Searches: Legal checks on a property to identify any issues affecting its sale.
  • Self-Build Mortgage: A mortgage for individuals building their own homes.
  • Shared Ownership: A scheme where buyers purchase part of a property and pay rent on the remainder.
  • Stamp Duty Land Tax (SDLT): A tax paid on property purchases above a certain value.
  • Standard Variable Rate (SVR): The default interest rate lenders use after the initial mortgage deal ends.
  • Structural Survey: A detailed inspection of a property’s condition.
  • Sub-Prime Mortgages: Mortgages offered to borrowers with poor credit histories.
  • Switching: Moving from one mortgage deal to another, often to secure better terms.

T

  • Tie-In Period: The period during which early repayment charges apply if a borrower leaves a mortgage deal.
  • Title Deeds: Legal documents proving ownership of a property.
  • Title Search: A check to confirm a seller’s legal ownership of the property.
  • Tracker Mortgage: A variable-rate mortgage where the interest rate follows the Bank of England base rate.
  • Transfer Deed: A document transferring property ownership.

U

  • Underwriting: The process of assessing a mortgage application to determine if the lender should approve the loan.

V

  • Valuation: An assessment of a property’s market value, usually done by the lender.

Y

  • Yield: The return on investment from a buy-to-let property, calculated by dividing rental income by the property’s value.