Mortgage Jargon Buster
Mortgages can be confusing, but they don't have to be. Use our A-Z glossary to translate complex financial terms into plain, simple English.
A
Agreement in Principle (AIP)
A written estimate from a lender indicating how much you can borrow. It's not a guarantee but shows sellers you're a serious buyer.
Annual Percentage Rate of Charge (APRC)
The total cost of the mortgage expressed as an annual percentage. It includes the interest rate and other charges you must pay, such as arrangement fees.
B
Base Rate
The interest rate set by the Bank of England. Tracker and variable rate mortgages usually go up or down in line with this rate.
Broker
A mortgage professional who helps you find and apply for a mortgage. Independent brokers search the whole market to find the best deal for you.
Buy-to-Let (BTL)
A specific type of mortgage designed for buying a property that you intend to rent out to tenants, rather than live in yourself.
C
Capital and Interest Mortgage
Also known as a repayment mortgage. Your monthly payments cover both the interest and a portion of the actual loan amount (capital).
Conveyancing
The legal process of transferring property ownership from the seller to the buyer, usually handled by a solicitor or licensed conveyancer.
D
Deposit
The amount of money you put down upfront towards the cost of the property. The larger the deposit, the better the mortgage rate you can typically get.
E
Early Repayment Charge (ERC)
A fee you may have to pay if you leave your mortgage deal early or overpay by more than your allowed limit.
Equity
The difference between the property's current value and the outstanding amount on your mortgage. As you pay off your mortgage or the property value rises, your equity increases.
F
Fixed-Rate Mortgage
A mortgage where the interest rate stays exactly the same for a set period (usually 2, 3, 5, or 10 years), regardless of what happens to the Bank of England base rate.
G
Guarantor
A third party (usually a parent or close relative) who agrees to pay your mortgage debt if you are unable to do so.
I
Interest-Only Mortgage
A mortgage where your monthly payments only cover the interest. You must have a plan to pay off the original loan amount at the end of the mortgage term.
L
Loan to Value (LTV)
The ratio of the mortgage amount to the property's value, expressed as a percentage. For example, a £180,000 mortgage on a £200,000 house is a 90% LTV.
N
Negative Equity
When the value of your property falls below the amount you still owe on your mortgage.
O
Overpayment
Paying more than your required monthly mortgage payment to clear your debt faster and save on interest. Most lenders have limits on how much you can overpay without a penalty.
P
Porting
Transferring your current mortgage product to a new property when you move house.
R
Remortgage
Switching your existing mortgage to a new deal, either with your current lender or a different one, usually to get a better rate or release equity.
S
Stamp Duty Land Tax (SDLT)
A tax paid to the government when you buy property or land over a certain price in England and Northern Ireland.
Standard Variable Rate (SVR)
The default interest rate your lender charges after your initial mortgage deal (like a fixed rate) ends. It is usually higher than other available rates.
T
Tracker Mortgage
A variable rate mortgage that tracks the Bank of England base rate at a set percentage above or below it.
V
Valuation
An inspection carried out on behalf of the mortgage lender to check the property's worth and ensure it's suitable security for the loan.