A
Advance
This is a mortgage loan.
Agreement in Principle
An Agreement in Principle (AIP), also referred to as a Mortgage in Principle (MIP) or Decision in Principle (DIP), is an initial certificate confirming that you have passed a basic credit check and provides you with an estimate of the mortgage loan amount you may be able to borrow towards a property purchase or remortgage. Estate agents typically require an AIP when you make an offer on a property, as it demonstrates that you have the necessary financial position to proceed with the purchase.
Arrangement Fee
This is a one-off fee applicable on some mortgage products, often known as a product fee. Lenders typically offer deals with a product fee and a lower rate of interest or deals without a fee but a higher rate of interest. An arrangement fee can be paid on application, deducted from the loan advance, or added to the mortgage.
APRC
The Annual Percentage Rate of Charge (APRC) is the total cost of the loan expressed as an annual percentage, although this assumes that you remain with the same lender for the whole mortgage term, most of which is likely to be on their standard variable rate.
Arrears
You fall “in arrears” if you fall behind or fail to maintain your committed mortgage payments.
B
Base Rate
An interest rate that’s set by the Bank of England (BOE). This is the rate of interest that tracker mortgages and the lender’s standard variable rate (SVR) will likely follow.
Broker
An independent mortgage adviser that can help you assess a large number of mortgage options and products from different banks, building societies, and other mortgage lenders to help you establish the best and most suitable option for your needs. As an independent mortgage broker will offer an advised service, they can make a recommendation for what they believe to be your best option.
Buildings Insurance
This is an insurance policy against the cost of rebuilding a property entirely from the ground up if it was destroyed, for example, in a fire, flood, or storm. This will be a compulsory requirement of any mortgage lender and is the borrower’s responsibility to ensure a suitable policy is in place from exchange of contracts. Although not including contents as standard, a combined buildings and contents insurance policy often provides a discount.
C
Capital and Interest Mortgage
Also known as a repayment mortgage, this is when your monthly mortgage payment will include both interest as well as a portion of the outstanding capital that you owe.
Cashback
This is an incentive that many mortgage lenders include on their products. This is paid on completion, either to the borrowers directly or to their conveyancer. On a remortgage, the cashback can be used towards the cost of the legal work involved.
CHAPS Fee
A small fee to cover the cost of the electronic funds transfer from the mortgage lender to a borrower or their conveyancer.
Charge
This is how a mortgage lender protects their interests, by placing a charge on the property on which they have a mortgage.
Completion
This is the end of the purchase process where the rest of the funds required for the purchase change hands and the legal ownership of the property is transferred from the seller to the buyer, also known as moving day!
Contents Insurance
This is an insurance policy against the cost of replacing your possessions within the property if destroyed, stolen, or lost. This is an optional insurance policy, and although not including buildings insurance as standard, a combined buildings and contents insurance policy often provides a discount.
Conveyancing
This is the legal process of buying or selling property. This can be done by a solicitor or a property conveyancer. In the UK, you cannot buy or sell a property without legal representation.
Cost of Credit
This is the difference in cost between the amount that you borrow and the amount that you’ll end up paying back when taking into account the interest payments as well as other charges.
Critical Illness Cover
This is a type of insurance policy that pays out a specific lump sum if the policyholder is diagnosed with a specific critical illness during the policy term.
D
Debt Consolidation
This is the process of combining outstanding debts such as personal loans, credit cards, or car finance into one commitment—for example, into a debt consolidation mortgage.
Decision in Principle
A Decision in Principle (DIP), also referred to as an Agreement in Principle (AIP) or Mortgage in Principle (MIP), is an initial certificate confirming that you’ve passed a basic credit check and gives you an idea of the mortgage loan you may be able to borrow towards a purchase or a remortgage of a property. Estate agents typically require an AIP when you make an offer on a property, as it shows that you may be in the required financial position to purchase it.
Deeds
The title deeds to a property or land are the legal documents which record and evidence its ownership. The deeds to a property will transfer when a property is purchased or sold.
Deposit
A mortgage deposit refers to the upfront amount of money you contribute towards purchasing a property. This can be savings, a gift, or with certain lenders, you can use a bank loan for your deposit. The amount of deposit required varies depending on the lender, mortgage product, and other criteria. It is possible to obtain a mortgage with 0% deposit if you use a specific scheme or purchase a shared ownership property, but typically most lenders will offer a 5% deposit mortgage.
Disbursements
These are various costs incurred during the conveyancing process in relation to buying or remortgaging a property. These are often incurred at the start of the transaction, so you may be asked to pay for these upfront.
Discharge
This is when you have paid off a mortgage; it has been discharged.
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E
Early Repayment Charge (ERC)
Some mortgage products, such as most fixed-rate mortgages, will have a penalty charge if you redeem or pay back the loan early. This is known as an Early Repayment Charge (ERC). The exact amount will be calculated as a percentage of the outstanding loan amount and will vary depending on the product, period remaining on the product, and also the mortgage lender. Check your original mortgage offer for the exact terms and conditions for the amount. If you are considering paying an early repayment charge, it’s important to seek advice from a professional mortgage adviser to ensure this is the right thing to do, as there may be other options available.
European Standardised Information Sheet (ESIS)
This is also known as a Mortgage Illustration, or a Key Facts Illustration (KFI). This document details the terms and conditions, the facts and figures, as well as the small print of the specific mortgage product recommended to you. This will be provided to you before a full mortgage application is submitted to a lender.
Equity
This is the difference between the current value of your property and the total amount outstanding on your mortgage.
Exchange of Contracts
This is the point that both buying and selling a property become legally binding. Both parties have now signed their copy of the contract, which are then exchanged by their respective solicitor or conveyancer. Unless agreed otherwise, the buyer’s conveyancer will transfer 10% of the purchase price to the seller’s side, and a completion date is agreed.
Exit Fee
This is an administration fee payable to some lenders when you fully repay your mortgage. This may also be known as a redemption fee or a deeds fee.
F
Financial Conduct Authority (FCA)
This is the regulatory authority in the UK for the financial services industry. The FCA regulates mortgage lenders and mortgage intermediaries and ensures they hold the appropriate permissions to give mortgage advice. Firms must be directly authorised by the FCA or must be an appointed representative of a directly authorised firm.
Fixed Rate Mortgage
This is a type of mortgage product where the interest rate remains the same for an agreed period of time, such as two, three, five, seven, or ten years. Some mortgage lenders even offer products where you can fix for the whole term of the mortgage, up to 40 years. Your rate of interest will not change during a fixed-rate period, even if the BOE base rate changes.
Freehold
This is a type of tenure for property ownership where you own the property as well as the land that it sits on indefinitely unless sold or transferred. A house will typically be freehold, whereas it is most common for a flat to be leasehold. It is possible to purchase a freehold flat, although getting a mortgage for a freehold flat is likely to be more complicated for legal reasons.
Full Structural Survey
This is the most comprehensive of reports or inspections available, which will be completed by a RICS-accredited surveyor for the benefit of the property’s buyer. It will look at all main features of the property, such as the walls, the roof, its foundations, the plumbing, woodwork, electrical wiring, the drains, and even the garden. This will also be the inspection with the highest cost.
Further Advance
This is the process of borrowing additional funds from your current mortgage lender. This would likely be on a different product to the one you currently have, but just like the main mortgage loan, this will also be secured against the property.
G
Gazumping
This is when a seller accepts an offer for the sale of their property to one buyer but then later decides to accept a different, higher offer from a different party. Gazumping can also refer to the seller deciding they want to raise the asking price at any point after they have orally agreed to accept a lower offer. As it is legally permitted for a seller to do this, it will often leave the original buyer out of pocket with no legal recourse. An agreement to buy or sell a property is nothing more than a verbal agreement before exchange of contracts, which is the first point a transaction becomes legally binding.
Gazundering
This is where a buyer that’s already made an accepted offer to buy a property changes the amount of their offer or the agreed price later through the process. This could be just before exchange of contracts. As it is legally permitted for a buyer to do this, it can leave the seller out of pocket with no legal recourse. An agreement to buy or sell a property is nothing more than a verbal agreement before exchange of contracts, which is the first point a transaction becomes legally binding.
Ground Rent
This is an annual fee that a leaseholder is required to pay to the freeholder for use of their land.
Gifted Deposit
This is when funds are gifted from one party to another to aid them in purchasing a property. Although most lenders will limit acceptable gifted deposits to immediate family members only, it is also acceptable for friends, extended relatives such as uncles or aunts, or even property developers to provide a gifted deposit.
Guarantor
This is a third party who will agree to meet the monthly mortgage repayment if the borrower is unable to do so. This is more common with first-time buyers, and the guarantor will likely be a parent or family member.
H
Help to Buy
Help to Buy (HTB) is the name given to several different home purchasing schemes involving the UK Government, all designed to aid home ownership. Some examples of different schemes, although not limited to, include Forces Help to Buy, Help to Buy Equity Loan, Help to Buy ISA, Shared Ownership, or Right to Buy.
Home Buyers Report
This is a mid-level, mid-cost survey option which will be completed by a RICS-accredited surveyor for the benefit of the property’s buyer, often just for peace of mind. The Home Buyers Report differs from a full structural survey as it will not be as comprehensive. This report serves to make comments on the property’s condition as opposed to a full investigation of the property and will only include the parts of the property that are easily accessible.
I
Income Protection
This is a type of insurance policy that replaces the policyholder’s income that’s lost due to sickness or accident.
Initial Benefit Period
This is the period of time during which your mortgage has an incentivised period. This could be a two-year fixed-rate mortgage or a five-year tracker mortgage, for example. During the lifetime of your mortgage or mortgage term, you can have many different initial benefit periods, and it’s often advised to remortgage to a new deal when your initial benefit period comes to an end.
J
Joint Tenants
This refers to the legal ownership of a property and is where each joint tenant owns an equal right to the whole property. If one party dies, the whole property ownership will revert entirely to the other joint tenant or joint tenants. This legal agreement supersedes any Will the deceased party may have had.
Joint Borrower Sole Proprietor (JBSP) Mortgage
A Joint Borrower Sole Proprietor mortgage or a JBSP mortgage allows multiple borrowers to be named on a mortgage for affordability purposes but only one of the borrowers named on the title deeds as the legal owner of the property. This is a type of guarantor mortgage, often utilised by parents looking to support their children towards home ownership.
K
Key Facts Illustration (KFI)
This is also known as a Mortgage Illustration, or a European Standardised Information Sheet (ESIS). This document details the terms and conditions, the facts and figures, as well as the small print of the specific mortgage product recommended to you. This will be provided to you before a full mortgage application is submitted to a lender.
L
Land Registry
This is the official body that holds all details of property ownership.
Leasehold
This is a type of tenure for property ownership where you own the property but not the land that it sits on. You own the right to lease the property for a specific number of years. Although not always, flats are typically owned on a leasehold basis, and getting a mortgage for a freehold flat will be more complicated for legal reasons.
Getting a mortgage for a property with a short lease, under 70 years, will also be difficult, if even possible at all. A lease term can be extended, and it’s advisable to enquire about this if interested in buying a property with a short lease.
Loan to Value (LTV)
The Loan to Value (LTV) of the mortgage is the percentage of the property’s value that is owed on the mortgage loan. The LTV is what decides the rate of interest that will be payable on the product, and these tend to be in brackets of 5%. 100% LTV such as some shared ownership options, 95% LTV, or even 90% LTV will be considered the highest risk mortgages and be the most difficult to secure, whereas mortgages under 60% LTV tend to come with the lower rates or best deal. If you owe £100,000 on a property valued at £200,000, this is 50% LTV.
Lifetime of the Mortgage
This is what we refer to as your true mortgage term. As your actual mortgage term can vary depending on your circumstances, you may choose to remortgage to increase or decrease your term throughout the lifetime of your mortgage.
Life Insurance
This is a type of insurance policy that would pay out a specific amount, the sum assured, if one of the policyholders were to die within a specific policy term. Life insurance for mortgage protection is very common and highly recommended in most scenarios, as this would ensure that the mortgage is fully repaid in the event of one’s death during the mortgage term.
M
Maturity Date
This is the final date by which the mortgage must be fully repaid, also known as the end of the mortgage term or the end of the lifetime of your mortgage.
Monthly Payment
This is how much your mortgage payment will be to your lender in each calendar month.
Mortgage Illustration
This is also known as a Key Facts Illustration (KFI), or a European Standardised Information Sheet (ESIS). This document details the terms and conditions, the facts and figures, as well as the small print of the specific mortgage product recommended to you. This will be provided to you before a full mortgage application is submitted to a lender.
Mortgage in Principle (MIP)
A Mortgage in Principle (MIP), also referred to as an Agreement in Principle (AIP) or Decision in Principle (DIP), is an initial certificate confirming that you’ve passed a basic credit check and gives you an idea of the mortgage loan you may be able to borrow towards a purchase or a remortgage of a property. Estate agents typically require an AIP when you make an offer on a property, as it shows that you may be in the required financial position to purchase it.
Mortgage Offer
This is your guaranteed offer from a mortgage lender. Once your mortgage offer has been approved, you’ll get a formal offer setting out the terms and conditions of your new mortgage. A mortgage offer will typically be valid for 180 days, although it may be possible to extend this if required.
Mortgage Term
This is the total number of years which you have to pay back your entire mortgage loan. On a repayment mortgage, this is the number of years it will take for your monthly repayments to reduce your mortgage loan down to zero to be considered repaid. If an interest-only mortgage, then this is how many years you will have before you are required to redeem the mortgage balance from an alternative source.
During the lifetime of your mortgage, the term can be increased or decreased depending on your circumstances. You may also be permitted to make overpayments, which will reduce your mortgage term and save you interest payments over the long term.
N
Negative Equity
This is when the value of your property falls lower than the outstanding amount that you owe on your mortgage.
O
Overpayment
This is when you pay more than just your regular monthly mortgage payment. You can overpay by increasing your monthly direct debit or make an ad hoc lump sum. A product with unlimited overpayments may be an option, although fixed rates are typically limited to 10%–20% of the outstanding mortgage balance without incurring any fees or charges. By making overpayments, you will save money in interest and shorten the term of your mortgage.
P
Porting
This is applicable to home mover mortgages. Porting is when you keep an existing mortgage deal or product and move it to a new property. You may consider porting if you already have a great mortgage deal or wish to avoid an Early Repayment Charge (ERC) when moving home. Not all products are “portable,” so you will need to review the terms and conditions of your current mortgage carefully before relying on this as an option.
Payment Holiday
This is a period where you do not make any payments on your mortgage. Although you have not paid, interest will still be charged during this period. This feature is usually offered when overpayments have been made or on a flexible product and was also very common during the COVID-19 pandemic.
Product Fee
This is a one-off fee applicable on some mortgage products, often known as an arrangement fee. Lenders typically offer deals with a product fee and a lower rate of interest or deals without a fee but a higher rate of interest. We always calculate the true cost of each product before we make a recommendation, to ensure you get the most cost-effective option over the initial benefit period. An arrangement fee can be paid on application, deducted from the loan advance, or added to the mortgage.
R
Rebuild Cost
This is an estimated figure for what it would cost to rebuild your property entirely from the ground up if it was completely destroyed—for example, in a fire. This may also be known as the reinstatement value of the property, which will be required for building insurance purposes. A Home Buyers Report will include a reinstatement valuation as well as a sales market valuation; these two figures are very different as the rebuild cost is simply what it would cost to rebuild and will not take into account the land, market conditions, or sales demand for the property.
Redemption Fee
A redemption fee, which is often referred to as an exit fee or a mortgage discharge fee, is essentially just an administration fee that you may be charged when you repay your mortgage in full or remortgage to a different lender. This is separate from an Early Repayment Charge (ERC) and covers the administrative costs associated with closing your mortgage account. The amount of the fee will vary depending on the lender, typically from £30–£225. It’s a good idea to familiarise yourself with all of the fees and charges associated with your new mortgage product before committing to moving forward. The exact fees and charges will always be set out in your KFI or ESIS document provided.
Remortgage
This is the process of replacing your current mortgage with a new one. You can take a new product from your existing lender, known as a product transfer, or you may find a better option to change to a new lender. There are many benefits of remortgaging a property, and it is recommended to start this process as far in advance as possible. In many cases, you can secure your new mortgage deal 180 days or 6 months before your existing mortgage deal comes to an end.
Retention
This is where a mortgage lender holds back a portion of the mortgage advance until specified repairs have been completed to the security property to a satisfactory standard. A reinspection may be required prior to releasing this portion of funds.
S
Searches
Also known as property searches or conveyancing searches, these are reports or enquiries requested by your solicitor to gather more information about the specific property you wish to purchase. As part of a standard property purchase, your conveyancer will need to obtain a variety of searches including a local search, environmental, drainage, land registry, and also a bankruptcy search. There may also be additional reports required. As these carry an upfront cost to the conveyancer, these need to be paid for before the legal work can begin.
Service Charge
This is a monthly or annual cost payable to the freeholder towards maintenance of the communal areas or grounds of a leasehold property. The amount of service charge can impact the affordability of mortgage options, so it is important to establish this before making an offer on the property.
Share of Freehold
This is a type of tenure for property ownership where you not only own the leasehold but also a share of the freehold. This is common with blocks of flats, houses converted into flats, or other properties with communal areas that need maintaining. A third party will exist, such as a LTD company, with each leaseholder then owning an equal share of the LTD company. So you could say, you actually lease it from yourself!
Stamp Duty Land Tax (SDLT)
This is a tax paid to the UK government when you buy a property. SDLT is not paid on the first £125,000 of a purchase price, but on any amount over this, you will pay a percentage of the property valuation in stamp duty. The exact rate of SDLT often changes, so we recommend consulting your chosen conveyancer to understand your exact liability.
Subject to Contract
This is where a seller has provisionally agreed to accept a buyer’s offer, but each party is yet to fulfil the obligations of the draft contracts set out by their respective conveyancers. A property that has been sold subject to contract or SSTC has not yet exchanged contracts.
Standard Variable Rate (SVR)
This is a variable rate mortgage that you are normally moved onto if not on any other type of product. A lender’s SVR is likely to be the highest interest rate they would charge, so in most cases, there is little benefit to remaining on this type of mortgage.
Surveyor
This is a professional person that will conduct the valuation, Home Buyers Report, or the full structural survey.
T
Tenants in Common
This refers to the legal ownership of a property where two or more parties purchase and own a property together. Each party will own a specified percentage of the property. If one party dies, their share of the property will form part of their estate and will not automatically pass to the other tenant in common.
Tenure
This refers to the various ways that you can own a property. The most common tenures for a property will be freehold, leasehold, or share of freehold.
Tracker Rate Mortgage
This is a variable rate mortgage where the interest rate payable is directly linked to the Bank of England’s (BOE) base rate. The product will have a fixed percentage above the BOE’s base rate, and although the nature of a tracker is variable, this fixed percentage amount will not fluctuate for an agreed period, such as two or five years or even the full term of the mortgage. Tracker rate products are less likely to have Early Repayment Charges (ERCs) but come with no guarantee of what or when the rate could increase to.
Transfer of Equity
This is the legal process of adding or removing a party to or from the title deeds of a property’s ownership.
U
Under Offer
This is when a seller has provisionally accepted a buyer’s offer to buy their property.
Undertaking
This is a condition contained within the mortgage offer that requires the borrower or their conveyancer to complete a certain action before the mortgage funds are released. This may be a certain repair or investigation to the property.
V
Valuation
This is how mortgage lenders ensure that a property is suitable security for a mortgage loan. They will complete a valuation of the property, either remotely or by arranging for a surveyor to visit the property. The valuation of the property may determine the maximum a lender is willing to lend on the property.
Vendor
This is the seller of a property or piece of land but not necessarily the owner, as it’s possible for a family member or estate to sell a property on another’s behalf, with the correct legal permissions.