Mortgage Glossary Of Terms

Navigating the world of mortgages can feel overwhelming, especially when lenders, estate agents, solicitors, and financial professionals use technical terminology throughout the home-buying process.

Whether you’re a first-time buyer, moving home, remortgaging, investing in property, or exploring buy-to-let opportunities, understanding mortgage terminology can help you make informed financial decisions with confidence.

This comprehensive mortgage glossary explains common mortgage, property, and lending terms in clear, straightforward language, helping you better understand how mortgages work.

Plain-English Mortgage Terms Explained

Additional Borrowing: Borrowing extra funds from your existing mortgage lender on top of your current mortgage balance. Homeowners often use additional borrowing for home improvements, debt consolidation, or large expenses.
Adverse Credit Mortgage: A mortgage designed for borrowers with adverse credit history, such as missed payments, defaults, CCJs, or previous bankruptcy.
Affordability Assessment: A detailed review carried out by lenders to determine whether a borrower can comfortably afford mortgage repayments based on income, expenditure, debts, and lifestyle costs.
Agreement in Principle (AIP): Also known as a Decision in Principle (DIP) or Mortgage in Principle. An Agreement in Principle is a lender’s provisional indication of how much they may be willing to lend based on an initial credit check and affordability assessment.
Annual Percentage Rate of Charge (APRC): A percentage showing the total yearly cost of a mortgage, including interest and certain fees. APRC helps borrowers compare mortgage products more accurately.
Arrears: Missed mortgage payments that remain unpaid. Falling into mortgage arrears can affect your credit file and may lead to repossession if unresolved.
Arrangement Fee: A fee charged by a mortgage lender for setting up a mortgage product. Sometimes referred to as a product fee or completion fee. This may be paid upfront or added to the mortgage balance.
Automated Valuation Model (AVM):A digital property valuation system used by some lenders to estimate a property’s value without requiring a physical inspection.

Bank of England Base Rate: The official interest rate set by the Bank of England. Mortgage lenders use the base rate to influence variable and tracker mortgage rates.
Bankruptcy Search: A legal search carried out during the mortgage process to confirm whether an applicant has been declared bankrupt.
Beneficial Interest: A person’s financial interest or entitlement in a property, even if their name is not listed on the legal title.
Booking Fee: A non-refundable fee charged by some lenders to reserve a mortgage product or interest rate.
Borrowing Capacity: The maximum amount a lender may be willing to lend based on affordability and lending criteria.
Bridging Loan: A short-term finance solution used to “bridge the gap” between buying a property and selling another one.
Buildings Insurance: Insurance that protects the physical structure of a property against damage from events such as fire, flooding, or storms.
Buy-to-Let Mortgage: A mortgage designed for purchasing a property that will be rented out to tenants rather than lived in by the borrower.

Capital Repayment: The portion of your monthly mortgage payment that reduces the outstanding loan balance, separate from interest payments.
Cashback Mortgage: A mortgage product that provides a lump-sum cash payment when the mortgage completes.
Capped Rate Mortgage: A variable-rate mortgage where the interest rate cannot rise above a specified limit or “cap”.
CCJ – County Court Judgment: A court order issued against someone who has failed to repay money owed. A CCJ can negatively affect mortgage eligibility and credit scoring.
Chain: A sequence of connected property transactions where each purchase depends on another sale completing successfully.
Chain-Free Property: A property sale or purchase with no linked transactions, often helping speed up completion.
Collar: A minimum interest rate below which a lender’s variable or tracker mortgage cannot fall.
Completion: The final stage of the property purchase process when funds are transferred, ownership changes hands, and keys are released.
Completion Fee: A fee charged by the lender when the mortgage funds are released.
Completion Statement: A financial summary issued by a solicitor detailing all funds required to complete a property purchase.
Consent to Let: Permission granted by a lender allowing a homeowner with a residential mortgage to rent out their property temporarily.
Contents Insurance: Insurance covering personal belongings and household items inside a property.
Contract Exchange: The point at which signed contracts are exchanged between buyer and seller, making the property transaction legally binding.
Contract Race: A situation where a seller negotiates with multiple buyers simultaneously before contracts are exchanged.
Conveyancing: The legal process of transferring ownership of property from one person to another, usually carried out by a solicitor or licensed conveyancer.
Credit Check: A search carried out by lenders to review a borrower’s credit history and financial behaviour.
Credit Reference Agency: An organisation that collects and maintains credit information used by lenders to assess a borrower’s creditworthiness. Common UK agencies include Experian, Equifax, and TransUnion.
Credit Score: A numerical indication of a borrower’s creditworthiness based on their financial history, borrowing habits, and repayment record.

Debt Consolidation: Combining multiple debts into a single loan or mortgage repayment, often to simplify finances or reduce monthly payments.
Debt-to-Income Ratio (DTI): A measure lenders use to compare a borrower’s monthly debt commitments against their income when assessing affordability.
Decision in Principle (DIP): Another term for an Agreement in Principle (AIP).
Deeds: Legal documents proving ownership of a property.
Default: Failing to meet the agreed mortgage repayment terms.
Declined Application: When a lender refuses a mortgage application based on affordability, credit history, or lending policy.
Deposit: The upfront contribution paid towards the purchase price of a property. In the UK, mortgage deposits typically range from 5% to 40%.
Dependent: Someone financially reliant on the borrower, such as a child or non-working family member.
Discounted Rate Mortgage: A mortgage where the lender offers a discount below its Standard Variable Rate (SVR) for a set introductory period.
Down Valuation: When a lender’s surveyor values a property lower than the agreed purchase price.
Drawdown: The process of releasing mortgage funds from the lender.

Early Repayment Charge (ERC): A fee charged if you repay your mortgage early, switch lenders, or overpay beyond permitted limits during a tie-in period.
Energy Performance Certificate (EPC): A certificate showing a property’s energy efficiency rating from A to G. EPCs are legally required when selling or renting property in the UK.
Equity: The difference between a property’s market value and the remaining mortgage balance.
Equity Release: A way for older homeowners to access money tied up in their property without selling it.
Estate Agent: A professional who markets and facilitates the buying and selling of property.
Exchange of Contracts: The legal stage where contracts are exchanged and both buyer and seller become committed to the transaction.
Expat Mortgage: A mortgage designed for UK nationals living and working abroad.

Family-Assisted Mortgage: A mortgage where family members help support the borrower through savings, guarantees, or security against another property.
First Charge Mortgage: The primary loan secured against a property, taking priority over other secured borrowing.
First-Time Buyer: Someone purchasing their first residential property.
Fixed-Rate Mortgage: A mortgage with an interest rate fixed for a specified period, such as two, three, five, or ten years, providing predictable monthly payments.
Flexible Mortgage: A mortgage allowing features such as overpayments, underpayments, or payment holidays.
Freehold: Ownership of both the property and the land it stands on indefinitely.
Freehold Management Company: An organisation responsible for managing communal areas and services within certain freehold developments.
Full Reinstatement Value: The estimated cost of rebuilding a property entirely from scratch for insurance purposes.

Gazumping: When a seller accepts a higher offer from another buyer after previously accepting an offer.
Gifted Deposit: Money provided by a family member or third party to help fund a property deposit, usually requiring written confirmation.
Gross Income: Income before deductions such as tax, National Insurance, or pension contributions.
Ground Rent: A fee sometimes payable by leaseholders to the freeholder of a property.

Hard Credit Search: A detailed credit check visible on a borrower’s credit report, usually carried out during a formal mortgage application.
Help to Buy: A UK government-backed scheme designed to help eligible buyers purchase a home. Some Help to Buy schemes have now closed to new applicants.
Higher Lending Charge (HLC): A fee charged by some lenders where the loan-to-value ratio is considered high-risk.
HM Land Registry: The government department responsible for registering ownership of land and property in England and Wales.
Home Mover Mortgage: A mortgage arranged by borrowers purchasing a new residential property while selling an existing home.

Income: A borrower’s earnings considered during mortgage affordability assessments.
Income Multiples: A calculation used by lenders to estimate how much a borrower may be able to borrow based on annual income.
Initial Rate Period: The introductory period during which a fixed, discounted, or tracker mortgage rate applies.
Insolvency: A financial state where an individual or company cannot repay debts owed.
Interest-Only Mortgage: A mortgage where monthly payments only cover interest charges, with the original loan balance repaid at the end of the term.
Interest Rate: The percentage charged by a lender for borrowing money.

Joint Mortgage: A mortgage taken out by two or more applicants, often used by couples, family members, or business partners.
Joint Owner, Sole Proprietor: A mortgage where another person, often a parent or close relative, agrees to come on the mortgage with you to help with income, but not an owner on the Title Deeds.
Joint Tenants: A legal ownership arrangement where all owners have equal rights to the entire property.

Key Facts Illustration (KFI): A document previously used to explain mortgage costs and features. Many lenders now use the European Standardised Information Sheet (ESIS).

Leasehold: Ownership of a property for a fixed period of time under a lease agreement, without ownership of the land itself.
Lending Criteria: The rules and requirements lenders use when deciding whether to approve a mortgage application.
Let-to-Buy Mortgage: A mortgage arrangement where a homeowner rents out their existing property while purchasing a new home.
Lifetime Mortgage: A type of equity release available to homeowners aged 55 or over, allowing borrowing against the value of their home.
Limited Company Buy-to-Let: A buy-to-let mortgage taken out through a limited company structure rather than personal ownership.
Loan-to-Income Ratio (LTI): A calculation comparing the mortgage amount requested to the borrower’s annual income.
Loan-to-Value (LTV): The percentage of a property’s value being borrowed through a mortgage. For example, borrowing £180,000 on a £200,000 property equals 90% LTV.
Local Authority Search: A legal search revealing planning permissions, road schemes, and local issues affecting a property.

Monthly Mortgage Payment: The monthly amount paid towards the mortgage, including capital and/or interest.
Mortgage Broker: A professional who compares mortgage products and helps borrowers arrange mortgages with lenders.
Mortgage Deed: A legal document outlining the terms and conditions of the mortgage agreement.
Mortgage Holiday: An agreed temporary suspension or reduction in mortgage repayments.
Mortgage Intermediary: Another term for a mortgage broker who arranges mortgages between borrowers and lenders.
Mortgage Offer: The lender’s formal written confirmation agreeing to provide the mortgage loan.
Mortgage Protection Insurance: Insurance designed to help cover mortgage repayments if the borrower cannot work due to illness, accident, or unemployment.
Mortgage Retention: When a lender temporarily withholds part of the mortgage funds until specific property repairs or conditions are satisfied.
Mortgage Term: The total length of time over which the mortgage will be repaid, commonly between 25 and 40 years.
Mortgage Valuation Fee: A fee charged for assessing the property’s value for lending purposes.
Mortgagee: The mortgage lender.
Mortgagor: The borrower taking out the mortgage.

Negative Equity: When the outstanding mortgage balance exceeds the property’s current market value.
Net Income: Income remaining after taxes and deductions.
New Build Property: A newly constructed property that has not previously been occupied.

Occupier Consent Form: A legal document signed by adults living in a property who are not named on the mortgage, confirming the lender’s rights over the property.
Offset Mortgage: A mortgage linked to a savings account where savings are used to reduce the amount of interest charged.
Outstanding Balance: The remaining mortgage amount still owed to the lender.
Overpayment: Paying more than the required monthly mortgage payment to reduce the balance faster and potentially save interest.

Part and Part Mortgage: A mortgage combining repayment and interest-only borrowing.
Payment Holiday: An agreed temporary pause in mortgage repayments, subject to lender approval.
Peppercorn Rent: A very low or nominal ground rent charged on some leasehold properties.
Portfolio Landlord: A landlord who owns multiple rental properties.
Porting: Transferring an existing mortgage deal from one property to another when moving home.
Principal: The original amount borrowed on a mortgage before interest is added.
Procuration Fee: A commission paid by a lender to a mortgage broker for arranging a mortgage.
Product Fee: Another term for an arrangement fee charged by the lender.
Product Period: The period during which a mortgage deal, such as a fixed or discounted rate, applies.
Product Transfer: Switching to a new mortgage deal with your existing lender without changing lender entirely.
Property Chain: A sequence of linked property transactions where each sale depends on another completing successfully.
Property Valuation: An assessment of a property’s market value carried out for lending purposes.

Quick Sale Company: A company offering to purchase properties rapidly, often below market value.

Rate Lock: An agreement allowing borrowers to secure a mortgage interest rate for a specific period before completion.
Rebuild Cost: The estimated amount required to rebuild a property entirely for insurance purposes.
Redemption of a Mortgage: The process of fully repaying and closing a mortgage account.
Remortgaging: Replacing an existing mortgage with a new mortgage, either with the same lender or a different lender.
Repayment Mortgage: A mortgage where monthly payments gradually repay both the interest and the original loan amount.
Repossession: When a lender takes legal possession of a property due to serious mortgage arrears.
Residential Mortgage: A mortgage for a property intended to be lived in by the borrower.
Retention: Funds temporarily withheld by the lender pending repairs or additional documentation.
Right to Buy: A government scheme enabling eligible council tenants to purchase their homes at a discount.

Searches: Legal checks carried out during conveyancing to identify issues affecting the property.
Second Charge Mortgage: An additional secured loan taken against a property where another mortgage already exists.
Self-Build Mortgage: A mortgage designed for people building their own home.
Self-Employed Mortgage: A mortgage tailored for borrowers who work for themselves, including sole traders, contractors, freelancers, and limited company directors.
Shared Ownership: A scheme allowing buyers to purchase a share of a property while paying rent on the remaining share.
Soft Credit Search: A preliminary credit check that does not affect a borrower’s credit score.
Sole Trader: A self-employed individual trading in their own name.
Specialist Lender: A lender catering to borrowers with complex income structures, adverse credit, or unusual circumstances.
Split Rate Mortgage: A mortgage where portions of the loan are charged at different interest rates.
Stamp Duty Calculator: An online tool used to estimate Stamp Duty Land Tax payable on a property purchase.
Stamp Duty Land Tax (SDLT): A government tax payable on residential property purchases above certain price thresholds in England and Northern Ireland.
Standard Variable Rate (SVR): A lender’s default variable interest rate that often applies after an introductory mortgage deal ends.
Stress Test: An affordability assessment used by lenders to determine whether borrowers could still afford repayments if interest rates increased.
Structural Survey: A detailed inspection assessing a property’s condition and structural integrity.
Sub-Prime Mortgage: A mortgage designed for borrowers with poor or limited credit history.
Switching: Moving from one mortgage deal to another to secure improved rates or terms.

Tenants in Common: A form of joint ownership where each owner holds a defined share of the property.
Term: The length of time over which the mortgage is to be paid.
Term Extension: Increasing the mortgage term to reduce monthly repayments, potentially increasing total interest paid.
Tie-In Period: The period during which early repayment charges apply if the borrower exits the mortgage product early.
Title Deeds: Legal documents proving ownership of a property.
Title Search: A legal check confirming ownership and identifying restrictions or issues affecting the property.
Tracker Mortgage: A variable-rate mortgage that follows movements in the Bank of England base rate.
Tracker Rate Floor: The minimum interest rate applicable to a tracker mortgage.
Transfer Deed: A legal document transferring ownership of a property from one person to another.

Underwriting: The lender’s process of assessing risk and deciding whether to approve a mortgage application.
Unencumbered Property: A property with no mortgage or secured borrowing against it.

Valuation: A lender’s assessment of a property’s market value.
Valuation Survey: A basic property assessment carried out for the lender to confirm the property’s value and suitability as security for the mortgage.
Variable Rate Mortgage: A mortgage where the interest rate can rise or fall over time.
Vendor: Another term for the property seller.

Write-Off: When a lender agrees not to pursue repayment of part or all of a debt under specific circumstances.

Yield: A calculation used in buy-to-let investing to measure rental return compared to the property’s value, usually expressed as a percentage.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Most Buy-to-Let mortgages are not regulated by the Financial Conduct Authority.

Think carefully before securing other debts against your home. Consolidating debt may reduce your outgoings now, but you may end up paying more overall. Your home may be repossessed if you do not keep up repayments on your mortgage.