Glossary Of Terms

Navigating the world of mortgages can feel overwhelming, especially with the use of technical terms and jargon which is often used by lenders and financial experts.

Whether you’re a first-time buyer, a seasoned investor, or just looking to refinance, understanding mortgage-related terminology is crucial to your understanding and ability to make informed decisions.

A

  • Additional Borrowing: Borrowing additional funds with the same lender on top of an existing mortgage.
  • Agreement in Principle (AIP): A lender’s provisional agreement to lend a certain amount based on a credit check, offering an estimate of borrowing potential.
  • Annual Percentage Rate of Charge (APRC): Reflects the total cost of borrowing, including interest and fees, helping compare mortgage deals.
  • Arrears: Are missed mortgage payments, resulting in overdue amounts.
  • Arrangement Fee: A one-time fee charged by a lender for setting up a mortgage, often added to the loan balance.

B

  • Bankruptcy Search: A check to ensure a borrower hasn’t been declared bankrupt.
  • Base Rate: The interest rate set by the Bank of England, influencing mortgage rates.
  • Booking Fee: A fee charged by lenders when applying for certain mortgage deals, typically non-refundable.
  • Bridging Loan: A short-term loan used to finance a property purchase while waiting for another property’s sale.
  • Buildings Insurance: Insurance covering a property’s structure from damage, required by lenders.
  • Buy-to-Let: A mortgage for purchasing a property to rent out.

C

  • Capital Repayment: The portion of the loan that must be repaid over time, along with interest.
  • Cashback Mortgage: A mortgage offering a lump sum cashback on completion.
  • Capped Rate Mortgage: A variable-rate mortgage with a maximum cap on the interest rate.
  • CCJ (County Court Judgment): A legal decision against someone who hasn’t repaid a debt, affecting mortgage approval.
  • Collar: A lower limit below which the interest rate on a variable-rate mortgage cannot fall.
  • Completion: The final step in the home-buying process when ownership is transferred.
  • Completion Fee: A charge paid to a lender when a mortgage deal is finalized.
  • Consent to Let: Permission from a lender to let out a property that has a residential mortgage.
  • Contract: A legally binding agreement between buyer and seller.
  • Conveyancing: The legal process of transferring property ownership.
  • Credit Reference Agency: Companies that gather financial data to assess a borrower’s creditworthiness.

D

  • Deeds: Legal documents proving property ownership.
  • Decision in Principle: Another term for an Agreement in Principle.
  • Defaulting: Failing to make agreed mortgage payments.
  • Deposit: The upfront payment made when purchasing a property, usually 5-40% of the purchase price.
  • Discounted Rate Mortgage: A mortgage offering a discount on the lender’s standard variable rate for a specific period.
  • Drawn-down Funds: The process of receiving funds from a mortgage loan.

E

  • Early Repayment Charge (ERC): A penalty for repaying a mortgage early or overpaying beyond the allowed limit.
  • Employment Status: A borrower’s employment situation, which lenders assess during mortgage applications.
  • Equity: The difference between the property’s value and the remaining mortgage balance.
  • Exchange of Contracts: When contracts are exchanged, making the sale legally binding.

F

  • First Legal Charge: A lender’s primary claim on a property if the borrower defaults.
  • Fixed-Rate Mortgage: A mortgage with an interest rate fixed for a certain period, ensuring consistent payments.
  • Flexible Mortgage: A mortgage allowing overpayments, underpayments, or payment holidays.
  • Freehold: Complete ownership of both the property and the land it stands on, without time limits.
  • Full Reinstatement Value: The cost to completely rebuild a property, typically required for insurance.

G

  • Gazumping: When a seller accepts a higher offer after already agreeing to sell to someone else.
  • Gross: Income before taxes or deductions.
  • Guarantor Mortgage: A mortgage where a third party (usually a relative) guarantees payments if the borrower defaults.

H

  • Higher Lending Charge (HLC): A fee some lenders charge when a borrower’s loan-to-value (LTV) ratio is high.
  • HM Land Registry: A government body recording property and land ownership in England and Wales.

I

  • Income: A borrower’s total earnings considered when applying for a mortgage.
  • Interest-Only Mortgage: A mortgage where only interest is paid during the term, with the full loan balance due at the end.
  • Interest Rate: The percentage charged by a lender for borrowing money.

L

  • Leasehold: Ownership of a property for a set number of years, but not the land it sits on. Usually an apartment.
  • Lifetime Mortgage: A form of equity release for people aged 55+, allowing borrowing against a property’s value.
  • Loan-to-Value (LTV): The ratio of the loan amount to the property’s value, expressed as a percentage.
  • Local Authority Search: A search to uncover any planning issues affecting a property.

M

  • Monthly Payment: The amount paid each month to cover the mortgage and interest.
  • Mortgage Deed: A legal document outlining the mortgage terms.
  • Mortgage Intermediary: A broker who arranges a mortgage between a borrower and a lender.
  • Mortgage Offer: The official offer of a loan made by a lender to a borrower.
  • Mortgage Term: The length of time over which the mortgage is to be repaid, often 25–40 years.
  • Mortgagee: The lender in a mortgage.
  • Mortgagor: The borrower in a mortgage.

N

  • Negative Equity: When the outstanding mortgage exceeds the property’s value.
  • Net: Income after taxes or deductions.
  • New Build Property: A property that has recently been constructed and has not been lived in before.

O

  • Offset Mortgage: A mortgage linked to savings, with interest calculated on the difference between the loan and savings balance.
  • Outstanding Balance: The remaining amount of money owed on a mortgage.
  • Overpayment: Paying more than the required monthly payment, reducing the mortgage balance faster.

P

  • Payment Holiday: A break from making mortgage payments, agreed upon with the lender.
  • Porting: Transferring a mortgage to a new property when moving house.
  • Procuration Fee: A fee paid by a lender to a broker for arranging a mortgage.
  • Product Period: The term during which the mortgage deal (such as a fixed rate) applies.
  • Property Chain: A sequence of linked property transactions, where each sale is dependent on another.

R

  • Rebuild Cost: The estimated cost to rebuild a property from scratch for insurance purposes.
  • Redemption of a Mortgage: The process of paying off the remaining balance of a mortgage.
  • Remortgaging: Switching to a new lender, typically for better rates.
  • Repayment Mortgage: A mortgage where both the interest and capital are paid, reducing the loan balance over time.
  • Repossession: When a lender takes ownership of a property due to missed mortgage payments.
  • Residential Mortgage: A mortgage for buying a property intended for personal use.

S

  • Searches: Legal checks on a property to identify any issues affecting its sale.
  • Self-Build Mortgage: A mortgage for individuals building their own homes.
  • Shared Ownership: A scheme where buyers purchase part of a property and pay rent on the remainder.
  • Stamp Duty Land Tax (SDLT): A tax paid on property purchases above a certain value.
  • Standard Variable Rate (SVR): The default interest rate lenders use after the initial mortgage deal ends.
  • Structural Survey: A detailed inspection of a property’s condition.
  • Sub-Prime Mortgages: Mortgages offered to borrowers with poor credit histories.
  • Switching: Moving from one mortgage deal to another, often to secure better terms.

T

  • Tie-In Period: The period during which early repayment charges apply if a borrower leaves a mortgage deal.
  • Title Deeds: Legal documents proving ownership of a property.
  • Title Search: A check to confirm a seller’s legal ownership of the property.
  • Tracker Mortgage: A variable-rate mortgage where the interest rate follows the Bank of England base rate.
  • Transfer Deed: A document transferring property ownership.

U

  • Underwriting: The process of assessing a mortgage application to determine if the lender should approve the loan.

V

  • Valuation: An assessment of a property’s market value, usually done by the lender.

Y

  • Yield: The return on investment from a buy-to-let property, calculated by dividing rental income by the property’s value.

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MAPIO Financial Limited is an Appointed Representative of PRIMIS Mortgage Network, a trading name of First Complete Ltd. First Complete Ltd is authorised and regulated by the Financial Conduct Authority.

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