111 terms explained

Mortgage Glossary

Mortgages come with a lot of jargon. Our A–Z glossary explains every term in plain English so you can navigate the process with confidence.

A

Agreement in Principle (AIP)

A conditional indication from a lender of how much they may be willing to lend you, based on a preliminary credit check.

Annual Percentage Rate (APR)

The total annual cost of your mortgage expressed as a percentage, including the interest rate and mandatory fees.

A cost measure introduced by the EU Mortgage Credit Directive that shows the total cost of a mortgage over its full term, including fees and rate changes.

Arrangement Fee

A fee charged by a lender for setting up a mortgage product, often associated with their most competitive interest rates.

Payments that are overdue, meaning you have fallen behind on the scheduled repayment amounts for a debt such as a mortgage, loan or credit card.

B

The interest rate set by the Bank of England that directly influences the rates lenders charge on mortgages and savings products.

A non-refundable fee charged by some lenders to reserve a mortgage product, typically paid at the point of application.

A short-term secured loan used to bridge the gap between buying a new property and selling an existing one, or to fund a purchase quickly.

A fee charged by a mortgage broker or adviser for their services in finding and arranging a suitable mortgage on your behalf.

Buildings Insurance

Insurance that covers the cost of repairing or rebuilding your property if it is damaged by events such as fire, flood, subsidence or storms — required by mortgage lenders.

Buy to Let Mortgage

A mortgage designed for purchasing a property that you intend to rent out to tenants rather than live in yourself.

C

Capped Rate Mortgage

A variable rate mortgage with an upper limit (cap) guaranteeing your rate will never exceed a certain level during the deal period.

CCJ (County Court Judgement)

A court order issued in England and Wales when someone fails to repay a debt, which is recorded on their credit file and can make obtaining a mortgage more difficult.

Charge on Property

A legal claim registered against a property by a lender, giving them the right to recover their debt from the property's sale.

An asset pledged as security for a loan, which the lender can claim if the borrower defaults; for mortgages, this is the property itself.

The final stage of a property purchase when ownership is legally transferred, funds are paid, and you receive the keys.

Completion Statement

A financial summary prepared by your conveyancer showing all the money coming in and going out on completion day.

Permission from your residential mortgage lender allowing you to rent out your property temporarily, without converting to a full buy-to-let mortgage.

A qualified legal professional who handles the legal transfer of property ownership on your behalf.

The legal process of transferring property ownership from the seller to the buyer.

Credit Reference Agency

An organisation that collects and maintains records of your credit history, which lenders use to assess mortgage applications.

A numerical score that represents how creditworthy a lender considers you to be, based on your borrowing and repayment history.

D

Debt Consolidation

The process of combining multiple debts into a single loan, often secured against your property, to simplify repayments and potentially reduce monthly costs.

Debt Management Plan (DMP)

An informal agreement between you and your creditors to repay your debts at a reduced rate you can afford, typically arranged through a debt management company.

Debt-to-Income Ratio (DTI)

The percentage of your gross monthly income that goes toward debt repayments, used by lenders to assess whether you can afford a mortgage.

Decision in Principle (DIP)

A preliminary decision from a lender indicating how much they are prepared to lend you, often used interchangeably with Agreement in Principle.

A marker placed on your credit file when you have failed to keep up with repayments on a credit agreement, typically after three to six missed payments.

The upfront cash amount you put toward buying a property, with the remainder covered by your mortgage.

Third-party costs paid by your solicitor on your behalf during the conveyancing process, such as searches, Land Registry fees, and bank transfer charges.

Discounted Rate Mortgage

A mortgage offering a set discount off the lender’s standard variable rate for an introductory period, meaning your rate can still change.

A facility that allows you to take money in stages from an approved loan or equity release plan, rather than receiving the full amount upfront.

E

Early Repayment Charge (ERC)

A fee charged by your lender if you repay your mortgage — in full or above a permitted amount — before the end of a fixed, discounted, or introductory rate period.

Endowment Mortgage

An interest-only mortgage linked to an endowment policy, where the policy is intended to grow enough to repay the loan at the end of the term.

Energy Performance Certificate (EPC)

A document that rates a property's energy efficiency on a scale from A (most efficient) to G (least efficient), required by law when selling or letting a property in the UK.

The portion of your property that you own outright — the difference between its current market value and the amount you still owe on your mortgage.

A way for homeowners aged 55 and over to access the value tied up in their property without having to move.

Exchange of Contracts

The point at which the buyer and seller become legally committed to the property transaction, with a completion date set.

An administrative fee charged by your lender when you pay off your mortgage in full or transfer to a new lender.

F

FCA (Financial Conduct Authority)

The UK regulatory body that oversees financial services firms, including mortgage lenders and brokers, to ensure they treat consumers fairly and operate honestly.

The primary mortgage lender's legal claim on a property, giving them priority over other creditors if the property is sold or repossessed.

First-Time Buyer

Someone who has never owned a residential property before and is purchasing their first home, which may qualify them for certain benefits and government support.

Fixed Rate Mortgage

A mortgage where the interest rate stays the same for a set period, giving you certainty over your monthly payments.

A type of property ownership where you own both the building and the land it stands on outright, with no time limit on your ownership.

G

When a seller accepts a higher offer from another buyer after already accepting yours, but before exchange of contracts.

When a buyer lowers their offer just before exchange of contracts, putting pressure on the seller to accept a reduced price.

An annual charge paid by a leaseholder to the freeholder for the right to occupy the land on which the property stands.

Guarantor Mortgage

A mortgage where a family member or close relative agrees to cover your payments if you cannot, helping you borrow more or secure approval.

H

Hard Credit Search

A full check of your credit file that is visible to other lenders and can temporarily reduce your credit score, typically carried out when you formally apply for credit.

A government scheme that provided first-time buyers with an equity loan of up to 20% (40% in London) towards the purchase of a new-build home, which closed to new applications in October 2022.

Higher Lending Charge (HLC)

A fee some lenders charge when you borrow above a certain loan-to-value ratio, typically 90% or more, to cover their increased risk.

HMO (House in Multiple Occupation)

A property rented out to three or more tenants from two or more separate households who share facilities such as a kitchen or bathroom.

Home Reversion Plan

A type of equity release where you sell a share of your home to a provider in exchange for a lump sum or regular income, while retaining the right to live there.

Homebuyer Report

A mid-level property survey that checks the condition of a home, highlighting significant defects and potential issues.

I

Income Multiple

The multiplier lenders apply to your annual income to determine the maximum mortgage amount they will offer, typically 4 to 4.5 times.

Individual Voluntary Arrangement (IVA)

A legally binding agreement between you and your creditors to repay part of your debts over a set period, usually five to six years.

Interest Only Mortgage

A mortgage where your monthly payments only cover the interest, leaving the full loan amount to be repaid at the end of the term.

The percentage a lender charges you each year for borrowing money, applied to your outstanding mortgage balance.

UK tax legislation that determines whether a contractor is genuinely self-employed or should be treated as an employee for tax purposes, which affects how mortgage lenders assess their income.

J

A mortgage taken out by two or more people together, with all parties jointly responsible for the repayments.

L

The government body that maintains the official register of property ownership and charges in England and Wales.

A type of property ownership where you own the building for a fixed period (the lease term) but not the land it stands on, which belongs to the freeholder.

The cost of hiring a solicitor or licensed conveyancer to handle the legal work involved in buying a property or remortgaging.

A strategy where you let out your current home and use a new mortgage to buy another property to live in.

Lifetime Mortgage

A type of equity release where you borrow against your home and the interest rolls up over time, with the loan repaid when the property is sold.

Loan to Value (LTV)

The ratio of your mortgage loan to the property’s value, expressed as a percentage — a key factor in determining your interest rate.

M

A loan secured against a property that allows you to buy a home by spreading the cost over many years.

Mortgage Adviser / Broker

A qualified professional who searches the mortgage market on your behalf and recommends suitable products based on your circumstances.

A legal document you sign that gives the mortgage lender a charge over your property as security for the loan.

Mortgage Illustration

A standardised document showing the key features and costs of a specific mortgage product, also known as a European Standardised Information Sheet (ESIS).

A formal, legally binding confirmation from a lender that they will provide you with a mortgage on specified terms.

The total length of time you have to repay your mortgage, typically between 25 and 35 years.

Mortgage Valuation

A basic assessment carried out on behalf of the mortgage lender to confirm the property is worth enough to secure the loan.

The lender who provides the mortgage loan and holds a charge over the property as security.

The borrower who takes out a mortgage and pledges their property as security for the loan.

N

Negative Equity

A situation where your property is worth less than the outstanding balance on your mortgage, meaning you owe more than the home could be sold for.

No Negative Equity Guarantee

A guarantee included in equity release lifetime mortgages that ensures you (or your estate) will never owe more than the value of your property, even if the loan exceeds the home's worth.

O

Offset Mortgage

A mortgage linked to your savings account, where your savings balance is offset against the mortgage debt to reduce the interest you pay.

Paying more than your required monthly mortgage amount, which reduces your outstanding balance and the total interest you pay.

P

Part and Part Mortgage

A mortgage that is split into two portions — one on a repayment basis and one on an interest-only basis.

The system used by employers to deduct income tax and National Insurance from employees' wages before they are paid, which is then sent directly to HMRC.

Porting a Mortgage

Transferring your existing mortgage deal to a new property when you move home, avoiding early repayment charges.

A fee charged by a lender for a specific mortgage product, effectively another name for an arrangement fee.

Product Transfer

Switching to a new mortgage deal with your existing lender without going through a full remortgage application.

A sequence of linked property transactions where each sale depends on the one above and below it completing.

R

Redemption Statement

A document from your lender showing the exact amount needed to pay off your mortgage in full on a given date.

The process of switching your existing mortgage to a new deal, either with your current lender or a different one, without moving home.

Rental Coverage Ratio

A calculation used by buy-to-let mortgage lenders to ensure the expected rental income from a property is high enough to cover the mortgage interest payments, typically by 125% to 145%.

Repayment Mortgage

A mortgage where your monthly payments cover both the interest and a portion of the capital, so the loan is fully repaid by the end of the term.

Repayment Vehicle

A savings, investment, or other financial plan used to build up a fund that will repay an interest-only mortgage at the end of its term.

A deal offered by your existing lender to keep you as a customer when your current mortgage product is ending.

Retirement Interest Only (RIO) Mortgage

An interest-only mortgage designed for older borrowers, where the loan is repaid when the property is sold, typically on death or entry into long-term care.

A government scheme in England that gives eligible council tenants the right to buy their rented home at a discount, with the discount amount based on how long they have been a tenant.

S

An HMRC document that shows your taxable income and tax due for a given tax year, commonly required by mortgage lenders as proof of income for self-employed applicants.

Second Charge Loan

A secured loan taken out against your property in addition to your existing mortgage, using the equity in your home as security.

A loan that is backed by an asset, usually your home, which the lender can repossess if you fail to make repayments.

A regular payment made by leaseholders to cover the cost of maintaining and managing the shared parts of a building or estate.

Shared Ownership

A government-backed scheme that lets you buy a share of a property (typically 25% to 75%) and pay rent on the remainder, making homeownership more accessible.

Soft Credit Search

A preliminary check of your credit file that is only visible to you and does not affect your credit score, often used for eligibility checks and pre-approvals.

Stamp Duty Land Tax (SDLT)

A tax paid to the government when you buy a property or land in England or Northern Ireland above a certain price threshold.

Standard Variable Rate (SVR)

The default interest rate your lender charges once your initial mortgage deal ends, typically higher than fixed or tracker rates.

A lender’s assessment of whether you could still afford your mortgage if interest rates rise significantly above the current level.

Structural Survey

The most comprehensive property survey available, providing a detailed analysis of the building's structure and condition.

A qualified professional who inspects and assesses the condition and value of a property.

T

Tax Year Overview

An HMRC document that confirms the tax you owe for a given tax year and whether it has been paid, used alongside the SA302 as proof of income for mortgage applications.

Legal documents that prove ownership of a property and record any charges, covenants or restrictions on it.

Tracker Mortgage

A mortgage with an interest rate that follows the Bank of England base rate by a set margin, rising and falling as the base rate changes.

U

The process a lender uses to assess whether you meet their criteria for a mortgage, including checks on your income, credit history and the property.

A loan that is not backed by any asset, meaning the lender cannot directly repossess your property if you fail to repay.

V

An assessment of how much a property is worth, carried out by a qualified professional or using automated data models.

A fee for the lender's property valuation, which confirms the property is worth enough to secure the mortgage.

Variable Rate Mortgage

A mortgage where the interest rate can change during the loan, including trackers, discounted rates, and the lender’s SVR.

Browse by Category

Mortgage Basics

Interest Rates

Affordability & Borrowing

Fees & Charges

Payments & Repayment

Overpayment

Mortgage Application Process

Buying a Property

Credit & Adverse Credit

Property & Ownership

Legal Terms

Self Employment & Income

Government Schemes

Insurance

Buildings Insurance

Equity Release

No Negative Equity Guarantee

Regulation & Compliance

FCA (Financial Conduct Authority)

Types of Borrowers

First-Time Buyer

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