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As you may have already experienced, there’s many different terms used when it comes to mortgages.
It can get quite confusing to understand the ins and outs, whether you’re new to the process or not.
Although your mortgage adviser should explain what different terms mean, it can result in ‘information overload’, so we wouldn’t blame you if you forget what some of these terms are.
For this reason, we have created a mortgage jargon buster that you can refer to at any time.
Additional borrowing
Taking out more money from your mortgage lender, on top of your existing mortgage. Funds may be raised for various reasons.
Advance
Another word for a mortgage loan.
Affordability Check
The mortgage lender’s assessment to help decide whether you can afford the mortgage repayments based on your income, expenses, credit history and more.
Also known as a ‘mortgage in principle’ or ‘decision in principle’, This is a conditional offer from a mortgage lender detailing the amount they may be willing to lend you based on your financial information and credit check. This is not the same as a mortgage offer.
Annual percentage rate (APR)
The total cost of borrowing, expressed as an annual percentage rate. This can be used as a reference when comparing different mortgage products.
Arrangement fee
A fee charged by the mortgage lender to cover the administrative costs of setting up the mortgage. This is typically either payable upfront, or added to the loan amount. If added to the loan, interest will be payable on this fee over the full term of the mortgage.
Bad credit
This refers to the credit history of an applicant. This is a broad term and may refer to missed payments on credit commitments, County Court Judgements, Individual Voluntary Arrangements, bancruptcy and so on.
Balance outstanding
This refers to the total current balance of a mortgage.
Bank of England Base Rate
The Base Rate is a rate set by the Bank of England. It serves as a benchmark for other lending rates in the UK. Changes in the base rate can influence mortgage interest rates, but may not necessarily have a direct impact.
Booking fee
This is a fee charged by a mortgage lender to cover administration and/or the set up of your mortgage.
Bridging loan
This is a short-term loan that provides temporary financing to ‘bridge the gap’ between the purchase of a new property and the sale of their existing property.
Broker
A mortgage broker, also referred to as a mortgage adviser or mortgage intermediary, helps people find and arrange a suitable mortgage deal.
Building regulation
Legal requirements (regarding health and safety) and standards for the construction and modification of buildings.
Building Society
A financial institution owned by its members. Building Societies offer a range of mortgages and savings.
Building survey
A comprehensive inspection of a property. This would be carried out by a qualified surveyor (i.e. RICS qualified) to assess its condition and identify any defects and/or issues.
Buildings insurance
Buildings insurance is designed to cover the cost to rebuilt a property following structural damage.
Buy to let mortgage
A product designed for properties that are to be rented out to tenants.
Capital
Another term for the mortgage amount being applied for or outstanding.
Capital and interest mortgage
A repayment method whereby your payments contribute partly towards the mortgage debt (the capital) and the interest charged by the lender. This is also referred to as a ‘repayment mortgage’.
Capped rate mortgage
A variable rate mortgage that has a fixed upper rate limit, known as a ‘cap’ or ‘ceiling’.
Cashback mortgage
Where a mortgage lender offers a cash lump sum, which is paid to you when you complete.
County Court Judgement (CCJ)
A court order issued upon failure to repay a debt. This will show up on your credit history, which may impact mortgage options.
Charge on a property
A legal interest in a property, such as a mortgage or other form of secured loan.
Commercial mortgage
A type of mortgage which is designed to finance commercial properties (rather than residential properties), such as offices, retail spaces, industrial premises etc.
Completion
This is the final step in the property purchase process. This is the point at which the current seller must move out and the new buyer can move in.
Contents insurance
A policy that covers your personal possessions against loss or damage, due to events such as theft, fire or flooding.
Conveyancer/conveyancing
A conveyancer is a person who specifically deals with property transactions. The legal process of property transactions, typically carried out by a solicitor or conveyancer.
Covenant
A legal restriction or agreement that is included in the property’s title deeds or lease, outlining certain obligations or restrictions for the property owner or occupier.
Credit reference agency
A company that will hold credit history information of an individual. Mortgage lenders will typically use these credit reference agencies to obtain data when determining creditworthiness of an applicant.
Credit score
This is essentially a snapshot of an individual’s creditworthiness, expressed as a percentage.
You’ll find that different credit reference agencies have different scoring systems, and mortgage lenders may have their own.
You will need to pass the mortgage lender’s credit scoring system, if they have one, otherwise your application will be declined.
At Rosehill, we take pride in building long-term relationships with our clients. We don’t see ourselves as just a mortgage broker, but rather a trusted partner who will be with you every step of the way.
At Rosehill, we take pride in building long-term relationships with our clients. We don’t see ourselves as just a mortgage broker, but rather a trusted partner who will be with you every step of the way.
Date of Entry
The date that ownership of a property is transferred. This relates to property purchases in Scotland. Essentially this is the equivalent of a completion date in other parts of the UK.
Debt consolidation
When an individual wants to combine their debts (e.g. credit card, loan etc.) into a single loan.
Debt to income (DTI)
A comparison of an individual’s total debt payments in relation to their income.
Deposit
The amount of money a person has to contribute towards their property purchase. This deposit (or a portion of this deposit) is payable on exchange of contracts.
Direct debit
An instruction from a person to arrange regular, automatic payments to be made from their account. This arrangement is typically used for making mortgage repayments.
Disbursements
In relation to property purchases, disbursements refer to costs and expenses incurred as part of the legal work.
Discharge
Paying off a mortgage in full.
Discount rate mortgage
A mortgage product with an interest rate set below the mortgage lender’s standard variable rate for a specific period of time.
Early repayment charge (ERC)
A fee or penalty charged by a mortgage lender if a borrower repays their mortgage in full, or a portion of it over and above any agreed overpayment allowance.
Energy Performance Certificate (EPC)
A document that provides information about a property’s energy efficiency. This is required when selling or renting out a property.
Equity
This is the amount of value a person holds in a property. It’s the difference between the market value of a property and the amount owed on the mortgage.
Equity release
A product available to older homeowners to allow them to release equity (cash) without having to sell their property.
European Standardised Information Sheet (ESIS)
This is a document that provides mortgage information. As it’s standardised (like a template), these documents provided by different mortgage lenders are made easier to compare with each other.
EWS1 Form
This stands for External Wall Fire Review, and is used to assess the fire safety of high rise properties.
Exchange
This is the point in the process where contracts are signed and exchanged between the buyer and seller. When contracts are exchanged, the buyer and seller are legally committed to complete on the transaction.
This is the point at which the deposit is payable by the buyer.
Financial Conduct Authority (FCA)
The independent body that regulates the financial services industry. The FCA sets rules and standards to protect consumers.
First Homes Scheme
A Government initiative to help first time buyers onto the property ladder. It offers discounted properties to eligible buyers.
First time buyer
A person who is purchasing a property for the first time, anywhere worldwide.
Fixed rate mortgage
A mortgage product where the interest rate is fixed (does not change) for a certain amount of time, typically ranging from 2 to 15 years.
As the rate is fixed, the mortgage repayments will remain the same over the fixed period.
Fixtures and fittings
Items that are permanently fitted to a property. This may include built-in appliances, light fixtures, and bathroom fixtures. These items will usually be included in the sale of the property unless otherwise stated.
Freehold
Ownership of both the property and the land it stands on.
Full structural survey
A detailed inspection of a property. This will detail the main features of the property, including the foundations, walls, roof, and other elements.
Further advance
An additional loan that a property owner applies for with their existing lender.
The further advance may have its own terms, interest rate, and repayment schedule.
Gazumping
When a seller accepts a higher offer from another buyer after already accepting an offer from the initial buyer.
Gazumping can be hugely frustrating for the original buyer, as they may have already invested time and money into the process.
Gazundering
Where a buyer reduces their offer, typically just before the exchange of contracts. This is the opposite of gazumping.
Ground rent
This is a regular payment made from the leaseholder to the freeholder. This is typically paid annually.
Guarantor
A guarantor is someone who agrees (guarantees) to take responsibility in paying the mortgage for the primary borrower if they can’t or won’t keep up with the repayments.
Help to Buy
Help to Buy relates to various government-backed schemes designed to help first-time buyers get onto the property ladder. One example is the equity loan, which is a is a loan of up to a specified percentage which is interest free for the first 5 years.
Help to Buy Isa
A Help to Buy Isa is designed to help people save to purchase their first home. The government provides a bonus on the savings deposited into the account, which would be paid on completion.
Higher lending charge (HLC)
A fee charged by some lenders when a person’s deposit is below a certain threshold. This is usually added to the loan.
Homebuyer report
A homebuyer report is a survey conducted by a qualified surveyor to assess the condition of a property before purchase.
It’s an intermediate level survey which provides an overview of the property’s condition, but is not as in-depth as a full building survey.
House of multiple occupation (HMO)
This refers to a property that is rented out to multiple tenants who are not part of the same household. HMOs usually have shared facilities, such as kitchens or bathrooms.
Individual Voluntary Arrangement (IVA)
This is a legal arrangement made between a person and their creditors (people they owe money to) to pay the money owed over a specified amount of time. This can help reduce the monthly commitment.
An IVA is an alternative to bancruptcy.
Initial Disclosure Document (IDD)
This is a document that a mortgage adviser will provide to a client, which outlines their services and the cost of their services.
Interest only mortgage
A mortgage repayment method whereby a person is only required to pay the interest charged by the lender each month. None of the actual mortgage debt is paid on a monthly basis.
The full mortgage debt must then repaid at the end of the mortgage term.
Interest rate
The percentage that a mortgage lender will charge on the amount borrowed. The interest rate applied will directly affect the mortgage repayments.
Intermediary
In relation to a mortgage, an intermediary is simply another term used for a mortgage adviser or mortgage broker.
Japanese Knotweed
Japanese Knotweed is an invasive plant that can cause significant damage to properties.
It can cause issues with the marketability of a property, and treatment plans can be expensive.
Joint mortgage
When two or more people buy a property together, who are jointly responsible for repaying the loan.
Joint tenants
A type of legal ownership when buying a property. Each person is jointly and severally liable to repay the mortgage loan to the lender.
If one joint tenant passes away, their share is automatically transferred to the surviving joint tenants.
Key facts illustration
A document provided by a mortgage lender which outlines the details of a mortgage product. It may also be referred to as a European Standardised Information Sheet (ESIS).
Land Registry
A government agency that is responsible for holding and maintaining records of all registered properties in England and Wales.
Land Registry fee
This is a fee you pay to Land Registry when purchasing a property or changing mortgage lenders, which covers the administration involved in updating their records.
Leasehold
When a person has ownership of a property, but not the land it stands on.
The leaseholder will typically pay a ground rent, and may also be responsible for other charges and obligations outlined in the lease.
Let to buy
When a person owns their current home that they live in, and they now wish to rent this out.
A let to buy is the process of converting the current residential mortgage to a buy to let mortgage. A new residential mortgage may then be taken out for the new purchase.
Funds may be raised against the existing property to contribute towards the deposit for the new purchase.
Borrowers will need to meet the criteria to complete this type of transaction, and should seek tax advice with regards to income tax on the rental income and capital gains tax when selling the property.
Lifetime mortgage
Lifetime mortgages are a type of equity release scheme designed for older homeowners, which allows them to access equity (cash) built up in the property.
No repayments are taken during the mortgage period. The loan is typically repaid, with interest, when the homeowner sells the property, moves into long-term care, or passes away.
Loan to value (LTV)
This is the value of the mortgage amount in relation to the property value, expressed as a percentage.
If you’re buying a property for £500,000 and need a loan amount of £450,000, the loan to value would be 90%.
This is worked out by dividing the loan amount by the purchase price, and multiplying this figure by 100 ((450,000 / 500,000) x 100).
Local Authority search
This is part of the conveyancing process. The conveyancer will request information from the local authority to highlight any potential issues or restrictions that may affect the property (e.g. planning permission).
Market value
The estimated worth of a property, typically valued by an estate agent.
Monthly repayment
The amount that a mortgage borrower will be committed to pay each month on their mortgage.
Mortgage application fees
Charges that borrowers may need to pay when applying for a mortgage. These fees cover the administrative costs associated with processing the mortgage application.
Mortgage deed
A legal document that details the mortgage lender’s interest in the property.
Mortgage illustration
This is another term for a Key Facts Illustration (KFI) or European Standardised Information Sheet (ESIS), which is a document provided by a mortgage lender detailing information about a mortgage product.
Mortgage lender
A mortgage lender is a financial institution that provides funds to people who want to buy a property.
Mortgage offer
A formal document confirming acceptance/approval of a mortgage application. It will also outline the mortgage product details, terms and conditions.
Mortgage protection
Mortgage protection refers to insurance policies designed to provide financial protection for borrowers and their family.
Examples may be life insurance, income protection, critical illness cover and family income benefit.
Mortgage term
A mortgage term is the length of time that a mortgage runs for, such as 25 years.
Negative Equity
This occurs where the value of a property falls below the amount outstanding on the mortgage. If a property is sold when in negative equity, money will still be owed to the mortgage lender.
For example, if you buy a property for £400,000 with a mortgage of £360,000, and the property value falls and is sold for £350,000 in the following month, you would still owe around £10,000 on your mortgage.
New build
This typically refers to properties that have been recently built but not yet occupied. However, some mortgage lenders may also class properties that have been newly converted/refurbished in a similar category for mortgage purposes.
New build developer
A new build developer will buy land, obtain necessary permissions and permits, build properties and sell these on.
NHBC Warranty
A National House Building Council (NHBC) warranty provides cover against major structural defects for 10 years for new build residential properties.
Offset mortgage
An offset mortgage allows you to have a linked bank account with the same provider that the mortgage is with, which can be utilised to lower the overall interest charged on your mortgage.
For example, if you have a mortgage of £250,000, and you have £100,000 in the linked bank account, you would only be charged interest on the remaining £150,000.
Ombudsman
An independent and impartial authority that helps resolve disputes between consumers and companies.
There are various ombudsman services, such as the Financial Ombudsman and Property Ombudsman.
Overpayment
Overpayments, in relation to mortgages, are additional payments over and above your committed monthly payments.
Overpayments can help reduce the overall interest payable on a mortgage, but it’s important to check the terms and conditions to see whether any charges would be applicable.
Payment holiday
A temporary break from making monthly mortgage payments, which is previously agreed between the borrower and the mortgage lender.
This arrangement would run for a specified amount of time, typically due to financial difficulties or unforeseen circumstances.
This is also referred to as a mortgage holiday or a repayment holiday.
Planning permission
Official consent from the local planning authority for a proposed construction, renovation or change in land use.
Portable mortgage
A portable mortgage is a product that you can transfer from one property to another, subject to meeting eligibility criteria.
This can be beneficial if you have a good rate that you want to keep, and/or to avoid potential early repayment charges.
Private sale
Buying or selling a property without the use of an estate agent.
Product fee
A fee charged by some mortgage lenders when you apply for a specific mortgage product or deal.
Property chain
A property chain relates to the number of property transactions that are dependent on each other.
For example, if you are buying from someone who is buying from someone else, you will be in a chain (assuming they need to sell the property to you to buy their new home).
Rebuild cost
This is the estimated cost to rebuild a particular property. This is the minimum amount that properties should be insured for in a buildings insurance policy.
This is also referred to as a ‘reinstatement cost’.
Redemption
Redeeming a mortgage means paying off a mortgage in full.
Remortgage
The process of switching an existing mortgage to a new deal, either with the same lender or a new lender.
This is also referred to as ‘refinancing’.
Repayment mortgage
A repayment method whereby your payments contribute partly towards the mortgage debt (the capital) and the interest charged by the lender. This is also referred to as a ‘capital and interest mortgage’.
Retention
A retention refers to circumstances where a mortgage lender will hold back a specific amount of money until certain conditions are met, such as repairs being carried out.
Right to Buy
This is a government initiative that helps eligible tenants, renting through the local council, to purchase the property they’re renting at a discounted price.
Searches
The conveyancer will carry out various searches an enquiries to gather information about a property.
Second charge loan
A type of loan which is secured against a property that already has an existing mortgage.
The second charge loan ranks behind the first mortgage in terms of priority, meaning that the first mortgage lender has the primary claim on the property’s value in the event of a default.
Security
In simple terms, this is the asset (the property) that the loan is arranged for.
As a mortgage is secured against your home or property, it may be repossessed if you do not keep up the mortgage repayments.
Self certification mortgage
Also known as a ‘self cert mortgage’, this was a type of mortgage that allowed people to state their income without providing proof of this income.
Service charge
A fee typically paid by owners of a leasehold property. This will cover the costs of maintaining and managing shared areas and services.
Shared ownership
Shared ownership is a housing scheme designed to help those who are struggling to buy.
It allows people to buy between a percentage of a property (typically 25% to 75%) from a housing association.
Rent is then payable on the share that is not owned.
Sole agency
Relating to the sale of a property, this is where only 1 estate agent is instructed to sell a property.
Solicitor
The legal professional who will handle the legal aspects of a property purchase or remortgage.
Stamp duty
A tax payable when purchasing a property. The amount payable will depend on the property value and the position of the buyer.
This must be paid on completion.
Standard variable rate
This is the lender’s default rate that you will typically fall onto after your initial mortgage deal period comes to an end, if you do not remortgage.
Subject to contract (STC)
A common term used by estate agents, which indicates that a sale is agreed but is not yet legally binding. In other words, the transaction has not yet exchanged.
Surveyor
A qualified professional who can carry out different surveys or reports, detailing the condition of a property.
Tenants
A person who lives in a property that is owned by someone else.
Tenants in common
A type of property ownership whereby each owner has a percentage share. For example, it can be arranged that one person owns 70% and the other owns 30%.
Unlike with ‘joint tenants’, tenants in common allows each owner’s share to be passed under their Will.
Title deeds
The legal document providing evidence of ownership or interest in a property, and general property information.
Total amount payable
The total amount that a person will pay over the entirety of their mortgage.
This is usually shown on mortgage illustrations, but will assume that you do not remortgage.
Tracker mortgage
A type of mortgage product with a variable interest rate. This will be a specified percentage above or below the Bank of England Base Rate, so will move directly up and down in line with changes to the Base Rate.
Under offer
A term used where a seller has received an offer on their property from a potential buyer, which has been provisionally accepted.
Underwriting
In terms of a mortgage, this is where the lender’s underwriter carries out an assessment of the mortgage application and associated documents in order to decide whether an application is acceptable.
Valuation
An assessment of the worth or market value of a property. This would be carried out by a qualified surveyor.
Valuation fee
This is a fee that may be payable to a mortgage lender to cover the cost of them instructing a surveyor. This is typically payable on submission of the mortgage application.
Variable rate mortgage
This is a type of interest rate that can change (vary) over time. There are different types of variable rate mortgages, such as discount rates, tracker rates and the lender’s standard variable rate.
Vendor
The person selling a property.
We focus on building long-lasting relationships with clients.
We therefore charge a reduced fee for our existing client remortgages.
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As a mortgage is secured against your home or property, it may be repossessed if you do not keep up the mortgage repayments. Think carefully before securing any other debts against your home or property. The Financial Conduct Authority does not regulate commercial buy to lets and some forms of commercial mortgages. You may have to pay an early repayment charge to your existing lender if you re-mortgage
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Rose Hill Financial Services Ltd is authorised and regulated by the Financial Conduct Authority. You can find us on the Financial Services Register https://register.fca.org.uk/ under reference 912303. Registered office address: 1 Bell Street, 2nd Floor, London, England, NW1 5BY. Registered in England and Wales. Company registration no: 11997519.
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