Mortgage Jargon Buster

A

Agreement in Principle (AIP)
Also known as a Mortgage in Principle (MIP) or Decision in Principle (DIP). This is an indication of how much you may be able to borrow for a property purchase or remortgage. An AIP can be shown to estate agents or sellers as evidence that you’re financially positioned to buy.

APRC (Annual Percentage Rate of Charge)
Shows the total cost of a mortgage expressed as an annual percentage. It allows you to compare different mortgage offers easily.

Arrangement Fee
A fee charged by a lender for setting up or reserving funds for a specific mortgage deal. This may be paid upfront or added to your loan.

Arrears
If you miss mortgage payments, you fall “into arrears”. Lenders may charge fees and interest on overdue amounts.

Assignment
The transfer of legal ownership of an insurance policy or lease from one party to another.

B

Balance Outstanding
The amount of mortgage debt still owed at any given time.

Bank of England Base Rate
The interest rate set by the Bank of England. Many lenders’ tracker and standard variable rates move in line with this rate.

Broker / Intermediary
A professional adviser who can recommend mortgages or other financial products that suit your circumstances.

Buildings Insurance
Covers the cost of rebuilding a property if it’s damaged or destroyed (for example by fire, flood or storm).

Building Regulations
The legal standards new building work must meet to ensure health, safety and energy efficiency.

C

Capital and Interest Payment
Your monthly repayment covers both the interest on the loan and part of the original capital borrowed.

Cashback Mortgage
A mortgage that provides a lump sum or percentage of your loan in cash when you complete.

CHAPS Fee
A fee for transferring mortgage funds electronically to your solicitor.

Charge
A legal claim on a property, such as a mortgage or other secured debt.

Completion (Date of Entry in Scotland)
The day ownership transfers from seller to buyer; you can move in.

Conclusion of Missives
The final stage of contract agreement in Scotland.

Contents Insurance
Covers the cost of replacing household possessions if they’re stolen or damaged.

Contract
The formal document setting out the terms under which the property will change hands.

Covenant
A legal obligation in a property’s deeds or lease, binding on current and future owners (e.g. restrictions on alterations).

Conveyancer
A licensed professional (not necessarily a solicitor) who carries out the legal work on a property transaction.

Conveyancing
The legal process of transferring property ownership from one party to another.

Credit Scoring
A system lenders use to assess your creditworthiness by scoring your answers to a set of questions about your finances.

D

Debt Consolidation
Combining multiple debts (loans, credit cards etc.) into a single loan, often secured on your property.

Decision in Principle (DIP)
Another term for an Agreement in Principle (AIP).

Deeds
The legal documents proving property ownership and outlining associated rights and obligations.

Deposit
The upfront amount you pay towards the purchase price of a property. The size required depends on the lender and product.

Direct Debit
An instruction that allows an organisation to collect regular payments directly from your bank account.

Disbursements
The various costs a solicitor pays on your behalf during a property transaction.

Discharge
Repaying a mortgage in full.

Discount Mortgage
A mortgage offering a discounted interest rate for a set initial period.

E

Early Repayment Charge (ERC)
A fee some lenders charge if you repay part or all of your mortgage early, particularly during a fixed-rate or discount period.

Easement
A legal right to use another person’s land for a specific purpose, such as a right of way.

Equity
The difference between your home’s market value and the amount still owed on your mortgage.

Exchange of Contracts
In England and Wales, the point at which buyer and seller are legally bound to complete the transaction and a deposit is paid.

Exit Fee
An administration fee payable to a lender when you fully repay a mortgage.

F

Financial Conduct Authority (FCA)
The UK’s financial services regulator. All mortgage lenders and advisers must be authorised by the FCA or act as an appointed representative of an authorised firm.

Fixed Rate Mortgage
A mortgage with an interest rate that remains the same for a set period, regardless of changes in the base rate.

Fixtures and Fittings
Non-structural items (such as curtains, light fittings or appliances) included in a property sale.

Flexible Mortgage
A mortgage that allows overpayments, underpayments, payment holidays or borrowing back overpayments.

Freehold
You own both the property and the land it stands on indefinitely.

Full Structural Survey
A comprehensive inspection of a property’s condition, covering structural elements, services and external areas.

Further Advance
An additional loan secured against your property, taken after your main mortgage has completed.

G

Gazumping
When a seller accepts a higher offer from another buyer after verbally agreeing a lower offer with you.

Gazundering
When a buyer lowers their offer just before exchange of contracts.

Gifted Deposit
Funds provided by someone else (often a family member) to make up part or all of your mortgage deposit.

Ground Rent
An annual charge leaseholders pay to the freeholder.

Guarantor
A third party (often a parent) who agrees to meet your mortgage payments if you cannot.

H

Help to Buy
A collective name for various government schemes aimed at helping first-time buyers purchase a home.

Higher Lending Charge (HLC)
A charge sometimes made when you borrow more than a set percentage (often 75%) of a property’s value. It protects the lender.

Homebuyer’s Report
An intermediate-level property survey commenting on structural condition, usually arranged by the lender.

Home Contents Insurance
Covers your personal possessions against theft or damage.

I

IDD / Initial Disclosure Document
Explains a lender’s or intermediary’s services, fees and charges to help you compare providers.

Interest-Only Mortgage
You pay only the interest each month. The capital must be repaid separately, often via an investment plan.

J

Joint Applicants / Joint Mortgages
Where two or more people jointly own a property and are jointly responsible for the mortgage.

Joint Tenants
A form of ownership where, on the death of one party, their share automatically passes to the other(s).

K

Key Facts Illustration (KFI) / ESIS
A standardised document showing the main costs and features of a mortgage to make comparisons easier.

L

Land Registry
The government body holding official records of property ownership.

Land Registry Fee
A fee to register your ownership details when you buy a property or change lenders.

Leasehold
You own the property for a fixed number of years but not the land it stands on. Flats are typically leasehold.

Life Insurance
Pays out on death of the policyholder and can be arranged to clear a mortgage balance.

Local Authority Search
Checks with the local council for information that could affect the property (e.g. planned developments).

Loan to Value (LTV)
Your mortgage expressed as a percentage of the property’s value (e.g. £50k loan on a £100k property = 50% LTV).

M

Maturity Date
The date your mortgage must be fully repaid or renewed.

Monthly Interest
Interest calculated on a monthly basis.

Monthly Repayment
The amount you pay your lender each month.

Mortgage Deed
The legal document giving the lender rights over your property until the mortgage is repaid.

Mortgage Illustration
A pre-application document outlining key mortgage features, payments and fees.

Mortgage Offer
The formal offer from your lender setting out the approved loan’s terms and conditions.

Mortgage Term
The length of time over which you agree to repay your mortgage.

N

Negative Equity
When your home’s value falls below the amount you owe on your mortgage.

NHBC (National House Building Council)
Provides warranties against major structural defects in new-build homes.

O

Overpayment
Paying more than your regular monthly amount. Overpayments reduce interest and shorten the mortgage term.

P

Payment Holiday
A temporary break from making mortgage payments (interest usually continues to accrue).

Planning Permission
Approval from the local authority for new building work or changes of use.

Portability
Taking your existing mortgage product with you when you move to a new property.

Premium
The regular amount you pay for an insurance policy.

Product Fee
A fee charged by a lender for a particular mortgage product.

Product Transfer
Switching to a new mortgage deal with the same lender when your current deal ends.

R

Rebuild Costs
The estimated cost of rebuilding your home from scratch, used for insurance purposes.

Remortgage
Switching your mortgage to a new deal or lender without moving home.

Repayment Mortgage
Also called a Capital and Interest mortgage. Your monthly payments repay both interest and capital over time.

Retention
When a lender withholds part of the mortgage funds until specified repairs are completed.

S

Solicitor
A legal professional (or conveyancer) handling the legal aspects of buying or selling a property.

Stamp Duty Land Tax
A tax payable when you buy a property. The amount depends on price and buyer status (e.g. first-time buyer).

Standard Variable Rate (SVR)
A lender’s default interest rate after your initial mortgage deal ends.

Subject to Contract
Indicates that an agreement is not yet legally binding.

Survey
A professional inspection report on the condition of a property.

Surveyor
The professional who carries out the survey.

T

Tenancy in Common
A form of joint ownership where each person owns a defined share. On death, their share becomes part of their estate rather than automatically passing to the other owner(s).

Tenants
People occupying a property they do not own.

Title
The legal record of property ownership.

Total Amount Payable
The total cost of repaying a mortgage over its full term.

Tracker Rate Mortgage
A mortgage whose interest rate moves in line with the Bank of England base rate plus a fixed margin.

Transfer of Equity
Adding or removing someone from a mortgage or property title.

Transfer Deeds
Land Registry forms transferring ownership from seller to buyer.

V

Valuation
An assessment of a property’s market value carried out on behalf of the lender.

Valuation Fee
The charge for carrying out a valuation.

Variable Rate
An interest rate that can move up or down at the lender’s discretion.

Vendor
The person or organisation selling a property.