Knowledge Hub
Mortgage Jargon Buster
Confused by mortgage terminology? Our A-Z guide explains the key terms you need to know.
Agreement in Principle (AIP)
A document from a mortgage lender stating how much they are prepared to lend you. It is not a guarantee but is useful when viewing properties.
Annual Percentage Rate of Charge (APRC)
The total cost of the loan expressed as an annual percentage. It includes the interest rate and any other fees associated with the mortgage.
Arrangement Fee
A fee charged by the lender for setting up the mortgage. This can often be added to the loan amount.
Base Rate
The interest rate set by the Bank of England. Many variable rate mortgages are linked to this rate.
Bridging Loan
A short-term loan used to 'bridge' the gap between buying a new property and selling an existing one, or for auction purchases.
Buy-to-Let (BTL)
A mortgage for a property that you intend to rent out to tenants rather than live in yourself.
Capital and Interest
A repayment method where your monthly payments cover both the interest and a portion of the amount borrowed, ensuring the loan is paid off at the end of the term.
Conveyancing
The legal process of transferring property ownership from one person to another, handled by a solicitor or conveyancer.
Decision in Principle (DIP)
Another term for an Agreement in Principle (AIP).
Early Repayment Charge (ERC)
A penalty fee charged if you pay off your mortgage early or switch deals during a fixed-rate period.
Equity
The difference between the value of your property and the amount you still owe on your mortgage.
Fixed Rate Mortgage
A mortgage where the interest rate stays the same for a set period (e.g., 2, 3, or 5 years), regardless of changes to the Base Rate.
Freehold
Complete ownership of the property and the land it stands on.
Guarantor Mortgage
A mortgage where a parent or close relative agrees to be responsible for the debt if you miss payments.
Interest-Only Mortgage
A mortgage where your monthly payments only cover the interest. The capital amount borrowed must be paid off in full at the end of the term.
Leasehold
Ownership of the property for a set number of years, but not the land it stands on (common with flats).
Loan to Value (LTV)
The size of your mortgage as a percentage of the property's value. For example, a £180,000 mortgage on a £200,000 house is 90% LTV.
Negative Equity
When the value of your property falls below the amount you owe on your mortgage.
Remortgage
Switching your mortgage to a new deal with a different lender without moving home.
Stamp Duty Land Tax (SDLT)
A tax paid to the government when buying a property over a certain price threshold.
Standard Variable Rate (SVR)
The lender's default interest rate that you move onto after your fixed or tracker deal ends.
Tracker Mortgage
A variable rate mortgage that tracks a specific economic indicator, usually the Bank of England Base Rate, plus a set percentage.
Valuation Fee
A fee paid to the lender to check how much the property is worth for mortgage purposes.