Mortgage Glossary
This detailed mortgage terminology glossary explains the key concepts you may encounter when researching and applying for a mortgage.
If you can’t find what you’re looking for here, contact our experts who will be happy to provide more information.
APRC (Annual Percentage Rate of Charge)
The total annual cost of the mortgage, expressed as a percentage of the total amount borrowed.
AVM (Automated Valuation Model)
A quick way for lenders to estimate your property’s value based on recent local sales, without needing to send a surveyor.
Base Rate
The UK’s core interest rate set by the Bank of England, which lenders often use to determine their own Standard Variable Rate (SVR).
Buildings Insurance
Cover that protects the property itself, with the insured amount potentially differing from the purchase price.
Business Buy to Let
Buying a property as an investment, with income from tenant rent and potential capital growth.
Buy-to-Let
A mortgage specifically for the purchase of a property that will be rented out to tenants, rather than owner-occupied.
Capital and interest
A capital and interest mortgage involves making monthly payments over a set number of years to cover both the borrowed amount (capital) and the interest charged. If you make all your payments on time, you will have fully paid off your mortgage by the end of the term.
Capped Rate
A mortgage where your interest rate can’t exceed a specified maximum, usually for the initial years.
Cashback
A cash amount paid by a lender to incentivize you to take out a mortgage with them.
Completion
The final stage when the property’s sale price reaches the seller’s account, completing the purchase.
Compulsories
Compulsory insurances that some lenders require, such as their own buildings insurance.
Consumer Buy to Let
Buy-to-let mortgages for borrowers who didn’t intend to invest, have no other BTL properties, and are just remortgaging. These are regulated for greater consumer protection.
Contents Insurance
Cover for the personal belongings inside your home, separate from the buildings insurance.
Conveyancing
The legal process of transferring property ownership from seller to buyer.
Council Tax
A local authority charge based on your property’s value, usually paid by tenants in rented accommodation.
County Court Judgement (CCJ)
A court ruling against you for defaulting on debt, which can negatively impact your credit record.
Credit Reference Agency
Where lenders check your credit history when assessing your mortgage application.
Critical Illness Cover
Insurance policies that pay out a lump sum if you are diagnosed with a specified critical illness, such as cancer, heart attack or stroke.
Current Account
A bank account with a cheque book and/or debit card, typically paying little interest.
Debt Consolidation
Using a mortgage to pay off other debts like credit cards or loans, in order to simplify repayments and potentially reduce the overall interest cost.
Deeds
The legal documents proving property ownership, which the lender records their mortgage on.
Deposit
The initial lump sum you contribute towards the property’s purchase price, typically 5-10%.
Deposit-based Savings
Saving which earns regular, usually variable interest based on the amount invested.
Discounted Rate
A mortgage with an interest rate below the lender’s standard variable rate, at least initially.
Distance mortgage mediation contract
Mortgages completed remotely, not face-to-face.
Diversification
Spreading investment risk across different asset types like shares, deposits and property.
Early Repayment Charges (ERCs)
Fees charged if you repay your mortgage early, which can make switching lenders costly.
Employment Status
A lender’s term for your working arrangements, with self-employed seen as higher risk.
Endowment Mortgage
A mortgage funded by an insurance-based savings plan to repay the loan at the end.
Exchange of Contracts
When the property purchase becomes legally binding for both parties.
Execution-only/Non-advice
A service that carries out orders without providing any advice.
First Time Buyer
Someone purchasing their first residential property. First-time buyers may be eligible for special mortgage products and stamp duty discounts to help them get on the property ladder.
Fixed Rate
A mortgage with a set interest rate, usually for an initial period of 2-5 years.
Flexible Mortgage
Allows overpayments, payment holidays and reborrowing, useful for irregular incomes.
Graduate mortgage
Specialist mortgages for graduates, often requiring no deposit.
Gross
Before tax or deductions.
Growth
An investment strategy focused on maximizing capital value rather than income.
Higher Lending Charge
An insurance premium you may pay if borrowing a high percentage of the property’s value.
Home and Contents Insurance
Cover for the physical property itself (buildings insurance) as well as the contents inside (contents insurance). Lenders often require borrowers to have building insurance.
Home Mover
Someone who is moving to a new residential property, either upsizing, downsizing or relocating. This is distinct from a first-time buyer or remortgage customer.
Illustration
A lender’s estimate of your monthly payments and setup costs for a particular mortgage.
Impaired Credit
Specialist mortgages for those with credit problems that disqualify them from mainstream lenders.
Income Protection
Insurance policies that pay out if you are unable to work due to illness or injury, helping to replace lost income.
Independent Mortgage Advice
Advice covering the whole market, with a fee-only option to eliminate conflicts of interest.
Interest
The premium paid to a lender for use of their money.
Interest-Only Mortgage
You only pay the interest each month, with the full loan amount repaid at the end.
ISA Mortgage
A mortgage funded by contributions to a tax-free Individual Savings Account.
Letting Agent
A property agent who helps landlords find tenants and manage the rental process.
Life Insurance
A policy that pays out a lump sum to your beneficiaries in the event of your death, helping to provide financial protection for your family.
Loan To Value
The percentage of the property’s value that your mortgage covers.
Local Search
An examination of local planning records that could affect the property’s future value.
London Inter-Bank Offered Rate (LIBOR)
The interest rate banks lend to each other, sometimes used to set tracker mortgage rates.
Money Markets
The wholesale markets where banks and lenders borrow money, especially for fixed-rate mortgages.
Mortgage Adviser
A firm or individual authorized to provide advice on regulated mortgage contracts.
Mortgage Refinancing
Using a lower rate mortgage to consolidate other debts and reduce monthly costs.
Mortgage Term
The full length of your mortgage, typically 5-30 years, by which time you’re expected to have repaid it.
Mortgage Rate Check
Checking the current mortgage rates available from different lenders, often done when considering remortgaging or a new mortgage application. This allows you to compare the interest rates and find the most competitive deal.
Net
After tax or deductions have been deducted.
New Build
A property that has been newly constructed, rather than an existing home. New build mortgages often have unique features to accommodate the purchase of a brand new property.
Non-Status Loan
A mortgage where your income is not disclosed.
Offset Mortgage
Links your savings to your mortgage, reducing interest without losing access to your money.
Overpayment
Making mortgage payments higher than the minimum required, to pay off the loan faster.
Payment Holiday
A short break from regular mortgage repayments, sometimes offered with flexible mortgages.
Pension Mortgage
A mortgage where the capital repayment is funded by a personal pension.
Premium
In the context of insurance, a premium is the regular sum you pay to keep your cover in force.
Procurement Fee/Procuration Fee
The amount paid by a lender to a mortgage adviser for providing customer applications.
Remortgaging
The process of switching your existing mortgage to a new lender or product, without moving home. This allows you to potentially access better interest rates or borrow additional funds.
Repayment Mortgage
You pay off both the interest and part of the loan capital each month.
Repayment vehicle
The means used to repay a mortgage’s capital, such as an endowment or ISA.
Search
An examination of local planning records that could affect the property’s future value.
Secured (loan)
A loan that is secured against your property, which the lender can repossess if you default.
Self-Cert Mortgage
For self-employed people, where you declare your income without needing to provide proof.
Shared Ownership
A part-buy, part-rent scheme that allows you to purchase a share of a property, typically between 25-75%, and pay rent on the remaining portion.
Standard Variable Rate (SVR)
A lender’s main interest rate, which mortgages often revert to after a special offer period.
Status
A lender’s assessment of the borrower’s creditworthiness and employment situation, which can impact the mortgage products they can access.
Stamp Duty
The tax paid on residential property purchases, with the amount depending on factors like first-time buyer status and whether it’s a main residence or investment.
Surrender
Cashing in an unwanted endowment policy, which often produces a poor return.
Survey
An expert inspection of the property to identify any structural issues or problems.
Surveyor
A qualified professional who inspects properties and produces survey reports.
Tenancy Agreement
A legal contract between a landlord and tenant, setting out the terms of occupancy.
Tenancy Deposit Protection
A legal requirement for landlords to protect their tenant’s deposit.
Title Deeds
The legal documents proving property ownership, usually kept by the mortgage lender.
Tracker Mortgage
A mortgage where the interest rate ‘tracks’ movements in another rate, usually the Bank of England Base Rate.
Underpayment
Making mortgage payments that are less than the minimum required amount. This is generally not recommended as it can lead to the loan term being extended and increased interest costs.
Valuation
An assessment of a property’s current market value, carried out by a surveyor for the lender.
Variable Rate Mortgage
A mortgage where the interest rate can go up or down, usually in line with the lender’s SVR.
Vendor
The seller of a property.
