The glossary
70 words the industry uses
and does not explain.
Mortgage language is not complicated on purpose, but nobody stops to define it either. Here is the whole vocabulary, each in a sentence, with the bit that actually matters to you.
A
- Adverse credit
- Any negative mark on your credit file - missed payments, defaults, county court judgments, a debt management plan, an IVA or bankruptcy. How recent it is usually matters more than how serious it was.
- Affordability assessment
- The lender's calculation of what you can sustainably repay. It takes your income, deducts your commitments and outgoings, applies a multiple, then stress-tests the payment at a rate above the one you are being offered.
- Agreement in principle
- A lender's provisional indication that it would lend you roughly a given amount. Usually issued the same day and valid 60 to 90 days. Estate agents expect to see one before they take your offer seriously. Also called a decision in principle or a mortgage in principle.
- APRC
- Annual Percentage Rate of Charge. The total cost of the mortgage expressed as a yearly rate over the full term, including fees. Useful for comparing like with like, but it assumes you stay on the same product for 25 years, which almost nobody does.
- Arrangement fee
- See product fee.
- Arrears
- Payments you have missed and not yet made up. Mortgage arrears are among the most damaging things that can appear on a credit file.
B
- Base rate
- The Bank of England's official interest rate. Tracker mortgages move directly with it. Fixed rates do not, though the expectations of where it is heading feed into how they are priced.
- Bridging loan
- Short-term secured borrowing, usually to buy before you have sold. Interest is charged monthly rather than annually and there are arrangement fees on top. It works when the exit is certain and imminent, and is dangerous when the exit is only hoped for.
- Broker fee
- A fee an intermediary may charge for arranging your mortgage. It should be disclosed in writing, as a specific figure, before you commit to anything.
- Buildings insurance
- Cover for the structure itself. Every lender requires it to be in place from exchange of contracts, not from completion.
- Buy to let
- A mortgage for a property you will let out rather than live in. Assessed on the rent the property produces rather than your salary. Some buy to let mortgages are not regulated by the Financial Conduct Authority.
C
- Capital and interest
- The standard repayment method, where each monthly payment covers the interest and chips away at the balance. At the end of the term the mortgage is gone. Also called a repayment mortgage.
- Capital raising
- Borrowing more than you currently owe when you remortgage, and taking the difference as cash. Common reasons are home improvements, a deposit for another property, or replacing more expensive debt.
- CCJ
- County Court Judgment. A court order confirming you owe a debt. It stays on your credit file for six years from the date registered. A satisfied CCJ is treated very differently from an unsatisfied one.
- Chain
- The sequence of linked sales and purchases that all have to complete on the same day. The longer it is, the more people there are who can delay it.
- CIS
- Construction Industry Scheme. Subcontractors taxed at source under CIS are treated as self-employed by HMRC, but a useful number of lenders will assess them from vouchers or payslips much like an employee.
- Completion
- The day the money moves, the property legally changes hands and you get the keys.
- Consent to let
- Permission from your residential lender to let the property out temporarily without switching to a buy-to-let mortgage. Usually granted, often for a small fee. Letting without it breaches your mortgage terms.
- Conveyancing
- The legal work of transferring property ownership. Done by a solicitor or a licensed conveyancer. Choose one on your lender's panel or you will add weeks.
- Credit file
- The record three agencies - Experian, Equifax and TransUnion - hold on how you have handled credit. They hold different data, which is why one lender can decline you and another approve you on the same day.
D
- Debt consolidation
- Rolling unsecured debts into your mortgage. The monthly payment falls, but you convert a short debt into a long one, usually pay more interest overall, and secure it against your home.
- Decision in principle
- See agreement in principle.
- Default
- A lender's formal declaration that an account has broken down, usually after three to six missed payments. It stays on your file for six years from registration.
- Deposit
- The cash you put in yourself. Five percent is the practical floor for a home you live in; twenty-five percent is the working assumption for a buy to let.
- DIP
- See agreement in principle.
- Disbursements
- The costs your solicitor pays out on your behalf - searches, Land Registry fees, bank transfer charges. Listed separately from their own fee.
E
- Early repayment charge
- A penalty for leaving a deal before it ends, typically one to five percent of the balance and usually stepping down each year. It is the single biggest thing to check before signing a five-year fix.
- EPC
- Energy Performance Certificate. Legally required before a property is marketed, and landlords must meet a minimum rating to let a property.
- Equity
- The share of the property you actually own - its value minus the mortgage. It grows as you repay and as the property gains value.
- Exchange of contracts
- The point at which the deal becomes legally binding on both sides. Before exchange either party can walk away. After it, they cannot without serious cost.
F
- Fixed rate
- A rate that cannot change for an agreed period, commonly two or five years. You get certainty; in exchange you accept an early repayment charge if you leave early.
- Freehold
- You own the building and the land it stands on, outright and forever.
G
- Gazumping
- When a seller accepts a higher offer from someone else after having accepted yours. Legal in England and Wales right up until exchange.
- Gifted deposit
- Money given by close family towards your deposit. It must genuinely be a gift, with the giver signing to confirm they retain no interest in the property and want nothing back.
- Guarantor
- Someone who agrees to cover the payments if you cannot. Their income helps you borrow more, and they take on real liability.
H
- Hard search
- A full credit check that leaves a visible footprint on your file for twelve months. Several in a short window read as distress and start costing you approvals.
- HMO
- House in Multiple Occupation. Let room by room to unrelated tenants. Higher yields, but licensing requirements, room-size rules and a much smaller lender panel.
I
- ICR
- Interest Cover Ratio. The buy-to-let test: annual rent against the mortgage interest at a stressed rate. Typically 125% for a basic-rate taxpayer and 145% for a higher-rate one.
- Interest only
- A mortgage where the monthly payment covers only the interest, so the balance never falls. Standard for buy to let. You still need a credible plan to repay the capital at the end.
- IVA
- Individual Voluntary Arrangement. A formal agreement to repay creditors over a set period. It appears on your file for six years and severely narrows the lender panel while it is running.
J
- Joint borrower sole proprietor
- An arrangement where a family member's income supports the mortgage but they are not named on the deeds. It preserves your first-time buyer stamp duty relief and keeps their own tax position clean.
L
- Land Registry
- The government register of who owns what. Your solicitor registers the change of ownership after completion.
- LBTT
- Land and Buildings Transaction Tax. Scotland's equivalent of stamp duty, with its own bands.
- Leasehold
- You own the right to occupy the property for a fixed number of years, but not the land. Common for flats. Short leases, under about seventy years remaining, cause real problems with lenders.
- Let to buy
- Remortgaging your current home onto a buy-to-let and keeping it as a rental while you buy somewhere else to live. Two mortgages, and the additional property surcharge applies to the purchase.
- LTT
- Land Transaction Tax. Wales's equivalent of stamp duty, with its own bands.
- LTV
- Loan to Value. The mortgage as a percentage of the property's value. The single most important number in mortgage pricing, because lenders price in bands and the price jumps at each boundary.
M
- Mortgage offer
- The lender's formal, binding commitment to lend, issued after underwriting and valuation. Typically valid three to six months.
O
- Overpayment
- Paying more than your contractual monthly amount. It attacks the capital directly, so every pound removes all the future interest that pound would have cost. Most fixed deals allow 10% of the balance a year without penalty.
P
- Portability
- The ability to take your existing mortgage deal to a new property instead of paying to leave it. It is never automatic - you have to re-apply and pass current criteria.
- Portfolio landlord
- Someone with four or more mortgaged buy-to-let properties. Lenders then stress-test the whole portfolio, not just the property being bought, and want a business plan and a portfolio schedule.
- Product fee
- The lender's fee for a particular deal, from nothing to about 1,500 pounds, sometimes charged as a percentage of the loan. Adding it to the mortgage means paying interest on it for the whole term.
- Product transfer
- Switching to a new rate with your existing lender. No legal work, usually no valuation and normally no fresh affordability assessment - which makes it a lifeline if your circumstances have worsened.
R
- Remortgage
- Moving your mortgage to a different lender, usually for a better rate or to raise money. Distinct from a product transfer, where you stay put.
- Retention
- Money the lender holds back from the advance until specified work is done to the property.
S
- SDLT
- Stamp Duty Land Tax. The purchase tax in England and Northern Ireland, charged in slices. Payable within fourteen days of completion, and it cannot be added to the mortgage.
- Searches
- Enquiries your solicitor makes of the local authority, water authority and environmental records. Often the slowest part of the whole purchase.
- Second charge
- A loan secured against your home behind the existing mortgage. Sometimes a better answer than remortgaging when you have a very good rate you do not want to disturb.
- Self-build
- A mortgage released in stages as construction progresses, rather than in one lump at completion.
- Shared ownership
- Buying a share of a property, typically 25% to 75%, and paying rent on the rest. A much smaller deposit is needed. Read the lease and the service charge carefully.
- Soft search
- A credit check that only you can see. It leaves no footprint, which is why most agreements in principle now use one.
- SPV
- Special Purpose Vehicle. A limited company set up solely to hold property. The standard structure for landlords buying through a company.
- Stress test
- Checking that you could still afford the payments at a rate materially higher than the one you are being offered. Every lender does it, and it is often what really limits your borrowing.
- SVR
- Standard Variable Rate. The rate your lender moves you onto automatically when your deal ends. It is almost always the worst rate that lender offers.
T
- Tie-in period
- The window during which an early repayment charge applies. Usually the same length as the deal, but occasionally longer - which is worth checking.
- Top slicing
- Using surplus personal income to bridge a shortfall in buy-to-let rental cover. Not offered by every lender, and genuinely useful in low-yield areas.
- Tracker
- A rate that follows the Bank of England base rate plus a fixed margin. You benefit immediately when the base rate falls and pay more when it rises. Often has no early repayment charge.
U
- Underwriter
- The person at the lender who actually reads your file and makes the decision. The reason a well-packaged application moves faster than a scattered one.
V
- Valuation
- The lender's assessment of what the property is worth, to make sure it covers the loan. It is not a survey and it is not for your benefit.
- Vendor
- The person selling the property.
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