A

Advance

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.

Arrears

Requested mortgage payments which are overdue.

B

‍Balance

The total you currently owe on your mortgage.

Base rate

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).

BoE

Bank of England.

Buildings insurance

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.

C

‍Closing charge

‍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.

Completion

It is the day when ownership of property is transferred from seller to buyer. This is when the new house officially becomes yours.

Contract

Covers particulars of the prospective sale.

Conveyancing solicitor

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.

D

‍Daily interest

‍Calculated on the balance outstanding at the end of each day.

Decision in principle

See ‘Agreement in principle’.

Deposit

A percentage of the price of the property, paid when contracts are exchanged.

E

‍Early Repayment Charge (ERC)

A charge you might incur if you pay off your mortgage before the agreed end of your deal.

Equity

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).

Exit fee

This is an administration fee payable to service providers when you fully repay your mortgage.

F

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.

Fixed-rate mortgage

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.

Freehold

Outright ownership of the property and the land on which it stands. There is no limit to the time on this ownership.

G

‍Gazumping

When the seller accepts an offer from someone but then, prior to exchange of contracts, accepts a higher offer from someone else.

Gifted deposit

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.

Ground rent

An annual charge payable by leaseholders to the freeholder.

Guarantor

A person who promises to pay the borrower’s debt, specifically in the case of a borrower failing to do so.

H

‍Homeowner 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.

I

‍Initial interest

‍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.

Interest-only mortgage

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.

J

‍Joint 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.

K

KGNTSH

Keep going, nothing to see here.

L

Land Registry

Keeps all records of property including plans, any leases and details of ownership.

Leasehold

The right to possession, but not ownership, of a property for an agreed period of time. Ultimate ownership remains with the freeholder.

Lender

The financial institution where you have your mortgage.

Life cover

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.

M

Maturity date

The date the mortgage must be repaid in full, or by which a new agreement needs to be taken out.

Monthly repayment

The amount you pay to your lender for your mortgage each month.

Mortgage illustration

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’.

Mortgage offer

An offer of guaranteed value, including T&Cs, once the mortgage is approved.

Mortgage term

The amount of time over which you are repaying your mortgage.

N

‍Negative equity

‍When the property is worth less than the mortgage taken out on it.

O

Overpayment

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.

P

Payment holiday

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.

Portability

Where an existing mortgage can be transferred between properties in the event of moving house.

Premium

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.

Principal

The amount of the loan on which interest is calculated.

Product fee

This is your mortgage set-up fee.

Q

Questions

Whatever questions you may have (there is no such thing as a silly question), you can always ask us!

R

‍Remortgage

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).

Repayment mortgage

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.

S

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.

Stamp duty

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.

T

Tie-in term

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.

U

Unable To Think Of Anything Here (UTTOAH)

‍Typically used when there’s nothing relevant to say.

V

‍Valuation

An assessment carried out by the mortgage lender to ascertain the property’s value.

Variable rate

The interest rate can go up or down if your mortgage lender decides to change their Standard Variable Rate (SVR).

Vendor

The person(s) you are buying your new home from.

W

When XYZ (WXYZ)

When XYZ are the last letters and there’s nothing else you can write.

X

When XYZ

… are the last letters and there’s nothing else you can write.

Y

When YZ

… are the last letters and there’s nothing else you can write.

Z

When Z

… is the last letter and there’s nothing else you can write.