Mortgage Glossary
This detailed mortgage terminology glossary explains the key concepts you may encounter when researching and applying for a mortgage.
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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.