The Mortgage Glossary
Mortgage jargon, explained. Everything you need to know from A to Z.
A
Additional Borrowing
Borrowing extra money from your current lender, often for home improvements, secured against your property.
Adverse Credit
A history of credit problems (such as late payments/arrears, CCJs, Defaults, Debt Management Plans & Bankruptcy) that could make getting a mortgage more difficult.
Affordability Assessment
The process where a lender checks your income and outgoings to ensure you can comfortably afford the monthly repayments.
Agreement in Principle (AIP)
Also known as a Decision in Principle (DIP). A document from a lender stating how much they could potentially lend you.
Annual Percentage Rate of Charge (APRC)
The "true" cost of a mortgage over its entire term, including all interest and fees, expressed as a yearly percentage.
Application Fee
A fee that can charged by the lender to process the application. This is not always required up front.
Applicant / Borrower
The purchaser of the property / person taking out the mortgage.
Arrears
Missed or late mortgage payments.
B
Base Rate
The interest rate set by the Bank of England. It influences the rates lenders offer for trackers and variable mortgages.
Booking Fee
A small upfront fee (usually £99–£250) to "book" or secure a specific mortgage deal while you apply.
Broker / Intermediary
An expert (like Aura Mortgages) who searches across a comprehensive range of lenders to find the best mortgage for you whilst managing & guiding you through the application from start to finish.
Buy-to-Let (BTL)
A mortgage specifically for buying a property that you intend to rent out to tenants
C
Capital Repayment Mortgage
A Mortgage where your monthly repayment is made up of some interest & some capital. The capital being the original loan amount. This means as you repay monthly the total balance is reducing over the full term of the mortgage.
Cashback Mortgage
An incentive where the lender gives you an amount of cash-back upon completion of your mortgage.
Comonhold
You own the property outright (freehold) and jointly own & manage the shared areas with others.
Completion
The final legal step. The money is transferred, and you officially become the owner of the property.
Conveyancing
The legal work required during the mortgage process. For a purchase this will be to transfer the property ownership and for the remortgage this is to transfer any funds and lender detail on the legal documents.
Credit Score
This is a rating by the credit provider based on your management of finances, payment history, existing credit and public reports.
Credit Report
Factual record of your personal credit history complied by credit reference agencies like Experian, Equifax & TransUnion, detailing your borrowing & payment history, address & public records.
D
Deeds (Title Deeds)
Legal documents that prove ownership of a property. Most are now stored digitally by the Land Registry.
Deposit
Up front payment that you make towards buying a home covering a percentage of the purchase price with the lender providing a loan for the rest. Your Solicitor/Conveyancer will request when required at Exchange of Contracts.
Dept Consolidation
Remortgaging or borrowing additional funds against your home to repay debt such as credit cards, personal loans & store cards into one single larger mortgage payment.
Discounted Rate Mortgage
A variable mortgage where the interest rate is a set percentage below the lender’s Standard Variable Rate (SVR) for a limited time.
E
Early Repayment Charge (ERC)
A penalty fee charged if you pay off your mortgage or switch deals before the agreed period (like a fixed term) ends.
Equity
The difference between your home’s market value and the amount you still owe on your mortgage.
Exit Fee
A administrative fee charged by some lenders for closing your mortgage account once repaid in full or you remortgaged to another lender.
Exchange of Contracts
When the process becomes legally binding to buy & sell.
F
Fixed-Rate Mortgage
A type of home loan where the interest rate is set at a specific percentage and remains unchanged for a predetermined period, known as the fixed term.
Freehold
Owning the building & the land it stands on
G
Ground Rent
A fee paid by leaseholders to freeholders.
Gifted Deposit
Money given to a property buyer, usually given by a family member or builder, to help fund the deposit with no expectation of repayment.
H
Help to Buy
Help to Buy ISA – Now closed to applications however if you already hold an account you can continue to use this under the original rules. Help to Buy Government Initiative – No longer available however some people will still have these open and may wish to consolidate into their mortgage; this can be discussed with an advisor.
Higher Lending Charge (HLC)
A fee occasionally charged if you are borrowing a very high percentage of the property’s value.
I
Interest-Only Mortgage
You only pay the interest each month. You must have a separate plan to pay back the full loan amount at the end of the term.
Interest Rate
This is the percentage you will pay the lender based on the mortgage product you select, loan size, term & deposit.
J
Joint Mortgage
A mortgage taken out by two or more people. All parties are "jointly and severally" liable for the debt.
L
Let-to-Buy
You rent out your current home switching this to a Buy to Let mortgage, allowing you to buy a new property to live in to which you will take out a Residential mortgage.
Leasehold
You own the property for a fixed period of time (lease) but not the land it stands on.
Loan-to-Value (LTV)
The size of your mortgage as a percentage of the property’s value (e.g., an £180k mortgage on a £200k house is 90% LTV).
Lifetime ISA
A government backed savings or investment account that helps people save for their first home or later life, with a 25% government bonus.
M
Maturity Date
The date your mortgage term officially ends and the loan must be fully repaid.
Monthly Repayment
The regular payment you make to your lender.
Mortgage Illustration
A personalised document provided by your broker or lender detailing every cost and term of a specific mortgage.
Mortgage Term
The total length of time you have to pay back the loan (e.g., 25 or 30 years).
Mortgage Prisoner
A homeowner who is unable to switch to a better mortgage deal.
N
New Build
Nearly constructed property that has not been previously occupied or sold as a home.
O
Outstanding Balance
The total amount you still owe on your mortgage at any given moment.
Overpayment
You can opt to pay more than your standard monthly amount either as a one off or regularly to reduce the mortgage balance faster, save on total interest and potentially repay the mortgage off sooner. Please be aware most lender will allow this but often set annual limits e.g. 10% of the annual balance, where exceeding this would incur an Early Repayment Charge (ERC).
Offset Mortgage
A Mortgage where your savings are linked to your mortgage reducing the interest you pay.
P
Product Fee
This is a fee for specific products that often have lower interest rates. You can usually pay this up front or add to the mortgage loan – by adding to the mortgage loan interest will be charged on this amount.
R
Remortgaging
Moving your mortgage from one lender to another, or switching to a new deal with your current lender.
Retirement Interest-Only (RIO)
A mortgage for older borrowers where you only pay interest. The loan is usually repaid when the house is sold or you move into care.
S
Shared Ownership
Buying a share of a property and paying rent on the remaining share to a housing association.
Survey
This is a professional inspection that accesses a properties condition highlighting any defects, structural issues & repairs needed. It helps identify hidden costs & risks, and provides a more detailed report unlike a basic mortgage valuation which only confirms value for the lender.
Stamp Duty Land Tax (SDLT)
A government tax paid on property purchases over a certain price.
Standard Variable Rate (SVR)
The default interest rate you move to once your initial deal expires. It is usually higher than fixed or tracker rates.
Self Build
A home that an individual commissions & builds for their own use rather than buying from a property developer.
T
Tracker Mortgage
A variable rate mortgage that "tracks" the Bank of England Base Rate (usually the Base Rate + a set percentage).
V
Variable Rate Mortgage
Any mortgage where the interest rate can go up or down (includes Trackers, SVRs, and Discounted rates).
Valuation
A check by the lender to ensure the property is worth the amount you are borrowing against, some lenders may charge a fee for this. This is not a survey and is for lending purposes.
Vendor
The seller of the property.
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