As soon as you dip your toe in the water of finance, you’ll start to hear all kinds of terms thrown merrily around. If you don’t know your arrears from your equity, or you think LTV refers to a Large TV, check out our library of lingo. We’re here to cast a shining light on the dark mysteries of mortgage-speak….
The amount of money you borrow from your lender.
Agreement / Decision in principle
Also known as a mortgage in principle, it is the amount you can borrow (in principle) based on what the lender knows about you and your circumstances — and can be used to show prospective buyers that you are in a position to purchase. It’s called an agreement ‘in principle’ because the terms of lending, the interest rate, or the amount offered may change at the point you actually apply for the mortgage.
Applied or Nominal interest rate
Rate used to calculate what interest is due.
APRC / Annual Percentage Rate of Charge
The interest on your loan, as well as any other charges, such as the arrangement fee. Lenders all have to calculate the APRC the same way, so you can effectively compare loans.
Requested mortgage payments which are overdue.
The total you currently owe on your mortgage.
The rate of interest set by the Bank of England, and what lenders usually use to set the rates for their various products (eg a Tracker Rate at 1.5% over base rate will always align with the base rate).
Bank of England.
Insurance you have to have as a freehold (or share of freehold) homeowner, which covers your home in the event of fire, vandalism, storm or flood. You’ll need this in place for when the contracts are exchanged. For leasehold properties, the insurance is often managed by the freeholder or management company, and you will have to purchase via them.
Buy-to-Let Variable Rate (BTLVR)
The rate you'll automatically switch to at the end of your current deal. It could be higher or lower than the rate you have been on and may vary over the remaining term of your mortgage.
Broker / Intermediary
An independent adviser who can arrange a mortgage between you (the borrower) and a mortgage lender, as well as help with other financial matters.
The fees charged by the lender at the end of the home-buying process, to cover the admin costs associated with creating the mortgage.
Combined home insurance
When the buildings and contents insurance is combined in a single policy.
It is the day when ownership of property is transferred from seller to buyer. This is when the new house officially becomes yours.
Covers particulars of the prospective sale.
Solicitor or licensed conveyancer who deals with the legal aspects of buying or selling land or property.
Critical illness cover
Pays a lump sum on diagnosis of a specified critical illness during the term of the policy.
Calculated on the balance outstanding at the end of each day.
Decision in principle
See ‘Agreement in principle’.
A percentage of the price of the property, paid when contracts are exchanged.
EEarly Repayment Charge (ERC)
A charge you might incur if you pay off your mortgage before the agreed end of your deal.
Is the difference between the current value of your home and the amount outstanding on your mortgage.
Exchange of contracts
Once this happens, the agreement to sell and buy is legally binding (in England and Wales, but not Scotland).
This is an administration fee payable to service providers when you fully repay your mortgage.
First mortgage payment
This is usually higher than the normal monthly payment because it will include interest from the day that the money is sent to the conveyancer to the end of that month.
A mortgage where the interest rate stays the same for the duration of your deal (e.g two or five years), regardless of the base rate.
Outright ownership of the property and the land on which it stands. There is no limit to the time on this ownership.
When the seller accepts an offer from someone but then, prior to exchange of contracts, accepts a higher offer from someone else.
A gifted deposit is a cash gift (not a loan) you use to pay for some or all of a mortgage deposit. It is usually given by a relative or friend.
An annual charge payable by leaseholders to the freeholder.
A person who promises to pay the borrower's debt, specifically in the case of a borrower failing to do so.
HHomeowner Variable Rate (HVR)
The rate you'll automatically switch to at the end of your residential mortgage deal. At that time, it could be lower or higher than the rate you have been on and may vary over the remaining term.
Higher Lending Charge (HLC)
This is a fee some mortgage lenders apply to those borrowing over a certain percentage of the property’s value. It protects the lender against mortgage defaults.
The amount of interest charged on your loan from the day that the money is sent to your conveyancer to the end of that month.
You only repay the interest each month, not any of the capital initially borrowed. The original loan, and any unpaid costs and charges that have been added to it, will remain outstanding at the end of your mortgage term.
JJoint applicants / Joint mortgages
When two or more people buy and own a property together, and where ownership rights are held equally amongst all persons. If one person dies, ownership reverts entirely to the surviving person or persons. This legal agreement supersedes any Will the deceased may have made.
Keep going, nothing to see here.
Keeps all records of property including plans, any leases and details of ownership.
The right to possession, but not ownership, of a property for an agreed period of time. Ultimate ownership remains with the freeholder.
The financial institution where you have your mortgage.
Insurance pays out a cash lump sum in the event of death and is intended to provide money for the loan to be repaid. There are two types of cover: decreasing or level term, with the latter usually more expensive.
Loan to Value (LTV)
The size of your mortgage as a percentage of the value of your property.
The date the mortgage must be repaid in full, or by which a new agreement needs to be taken out.
The amount you pay to your lender for your mortgage each month.
This should be given to you before you make a mortgage application. It outlines all the details of your mortgage, such as payments and fees.
Mortgage in principle
See 'Agreement in principle'.
An offer of guaranteed value, including T&Cs, once the mortgage is approved.
The amount of time over which you are repaying your mortgage.
When the property is worth less than the mortgage taken out on it.
This is when you pay more than your monthly mortgage payment. Overpayments save you interest and will shorten your term, but not all products permit this option.
This is an agreement you may be able to make with your lender, which allows you to temporarily cease your mortgage payments. During this period, interest will continue to be charged. This feature is usually only available on a flexible mortgage.
Where an existing mortgage can be transferred between properties in the event of moving house.
A payment made to an insurance provider for an agreed level of cover. For example, it could be for buildings, contents, payment protection or life cover.
The amount of the loan on which interest is calculated.
This is your mortgage set-up fee.
Whatever questions you may have (there is no such thing as a silly question), you can always ask us!
Moving your mortgage to a different lender while staying in the same property, possibly to take advantage of a particular mortgage product or better interest rate.
Redemption / Repayment of mortgage
When the mortgage is repaid (also called Mortgage Redemption or Mortgage Repayment).
The interest and part of the amount borrowed are paid each month, so your mortgage will be paid off completely at the end of the mortgage term.
Share of freehold
When the freehold is owned by everyone in the building, rather than an external management company. This can affect how decisions are made around insurance and building work.
The tax charged when you buy a property, calculated as a percentage of the price. If you buy a property with a purchase price up to £125,000, you are not required to pay this.
Standard Variable Rate (SVR)
The standard/default mortgage interest rate you’ll be charged by your lender once your initial deal ends - you can see what this will be as part of the deal you are taking out. If you don’t arrange a new product for when the old one ends, this is the rate you’ll pay.
The period of time you would need to remain on certain mortgage terms to avoid an early repayment charge.
Title deeds/title documents
The legal documents which provide proof of ownership of a property.
Tracker rate mortgage
The interest rate is set at a fixed percentage above the Bank of England (BoE) base rate. The rate payable will rise and fall in line with changes to the BoE base rate.
UUnable To Think Of Anything Here (UTTOAH)
Typically used when there’s nothing relevant to say.
An assessment carried out by the mortgage lender to ascertain the property’s value.
The interest rate can go up or down if your mortgage lender decides to change their Standard Variable Rate (SVR).
The person(s) you are buying your new home from.
WWhen XYZ (WXYZ)
When XYZ are the last letters and there’s nothing else you can write.