Reference
Mortgage & Finance Glossary
Plain-English explanations of the terms that come up in mortgage and protection conversations — written by our advisers, not copied from a textbook.
Mortgage Terms
Adverse Credit
Adverse credit (also called bad credit or impaired credit) refers to a history of missed payments, defaults, County Cour…
AIP (Agreement in Principle)
Agreement in Principle is another name for a Decision in Principle (DIP). It is a written statement from a lender confir…
Bank of England Base Rate
The Bank of England base rate (also called the bank rate) is the interest rate set by the Bank of England's Monetary Pol…
Buy to Let Mortgage
A buy-to-let mortgage is specifically designed for properties you intend to rent out rather than live in. Lenders assess…
Credit Check (Hard vs Soft)
A credit check is a search of your credit file by a lender. A soft search does not leave a visible mark on your credit f…
DIP (Decision in Principle)
A Decision in Principle (DIP) — also called an Agreement in Principle (AIP) or Mortgage in Principle — is a conditional …
Equity Release
Equity release allows homeowners aged 55+ to access some of the value tied up in their property without selling or movin…
ERC (Early Repayment Charge)
An Early Repayment Charge (ERC) is a fee charged by a lender if you repay your mortgage — or a substantial part of it — …
Expat Mortgage
An expat mortgage is for UK nationals living and working abroad who want to purchase or remortgage a UK property. Mainst…
First-Time Buyer
A first-time buyer is someone who has never previously owned a residential property anywhere in the world. First-time bu…
Fixed Rate Mortgage
A fixed rate mortgage locks your interest rate — and therefore your monthly payment — for a set period, typically 2, 3 o…
Foreign National Mortgage
A foreign national mortgage is for non-UK nationals purchasing or remortgaging property in the UK. Eligibility depends s…
Formal Mortgage Offer
A formal mortgage offer is the lender's written confirmation that they will lend you a specific amount on specific terms…
Gifted Deposit
A gifted deposit is a deposit — or part of a deposit — given to a buyer by a family member as a gift, not a loan. Most l…
Help to Buy
Help to Buy was a UK government scheme offering an equity loan to first-time buyers purchasing new-build homes. The main…
Income Multiple
Income multiple is a shorthand for how much a lender will lend relative to your annual income. Most standard lenders cap…
Interest-Only Mortgage
With an interest-only mortgage, your monthly payments cover only the interest on the loan — you do not repay the capital…
Lifetime Mortgage
A lifetime mortgage is the most common form of equity release for homeowners aged 55+. You borrow against the value of y…
LTV (Loan to Value)
Loan to Value (LTV) is the size of your mortgage expressed as a percentage of the property's value. A £180,000 mortgage …
MIP (Mortgage in Principle)
Mortgage in Principle is a common alternative name for a Decision in Principle (DIP) or Agreement in Principle (AIP). It…
Mortgage Affordability
Mortgage affordability refers to a lender's assessment of whether you can sustain the mortgage payments both now and if …
Mortgage Deposit
The deposit is the portion of the property's purchase price you pay from your own funds — the remainder is funded by the…
Mortgage Overpayment
An overpayment is any amount you pay above your contractual monthly mortgage payment. Most lenders allow overpayments of…
Mortgage Stress Test
A mortgage stress test is part of the affordability assessment — lenders check whether you could still afford your mortg…
Offset Mortgage
An offset mortgage links your savings account to your mortgage. Instead of earning interest on your savings, the balance…
Porting a Mortgage
Porting means taking your existing mortgage deal with you when you move to a new property. This avoids paying an ERC on …
Product Fee (Arrangement Fee)
A product fee — also called an arrangement fee or booking fee — is charged by the lender for a specific mortgage product…
Product Transfer
A product transfer is moving to a new deal with your existing lender — as opposed to remortgaging to a new lender. It is…
Remortgage
Remortgaging means switching your existing mortgage to a new deal — either with your current lender (a product transfer)…
Repayment Mortgage
A repayment mortgage (also called a capital and interest mortgage) means each monthly payment covers both the interest c…
SA302
An SA302 is a summary of your income as recorded by HMRC from your Self Assessment tax return. Most lenders require two …
Second Charge Mortgage
A second charge mortgage is a secured loan taken out against a property that already has a mortgage on it. The second ch…
Self-Employed Mortgage
Self-employed borrowers — including sole traders, partners and limited company directors — face more complex mortgage ap…
Shared Ownership
Shared ownership allows buyers to purchase a share of a property (typically 25–75%) and pay rent on the remaining share,…
SVR (Standard Variable Rate)
The Standard Variable Rate (SVR) is a lender's default interest rate, which your mortgage automatically moves to when yo…
Tracker Mortgage
A tracker mortgage has an interest rate that follows an external rate — almost always the Bank of England base rate — pl…
Underwriting
Mortgage underwriting is the process by which a lender's underwriter assesses the full risk of a mortgage application — …
Whole of Market Broker
A whole-of-market mortgage broker has access to products from across the entire mortgage market — not just a panel of se…
Protection & Insurance
Critical Illness Cover
Critical illness cover pays a tax-free lump sum if you are diagnosed with a specified serious illness — typically includ…
Income Protection Insurance
Income protection insurance replaces a percentage of your income (typically 50–70%) if you are unable to work due to ill…
Life Insurance
Life insurance pays a lump sum (or regular income) to your beneficiaries if you die during the policy term. It is common…
Property
Freehold
A freehold property means you own both the building and the land it sits on outright, with no lease or time limit on you…
Ground Rent
Ground rent is an annual fee paid by a leaseholder to the freeholder for the use of the land. Following the Leasehold Re…
HMO (House in Multiple Occupation)
A House in Multiple Occupation (HMO) is a property rented by three or more unrelated people who share common facilities …
Leasehold
A leasehold property means you own the property for a fixed period (the lease term) but not the land it sits on, which i…
Mortgage Valuation
A mortgage valuation is carried out by a surveyor on behalf of the lender to confirm the property is worth at least what…
Property Survey
A property survey is an independent inspection of a property's condition, commissioned by the buyer. The three main type…
Legal & Conveyancing
CCJ (County Court Judgement)
A County Court Judgement (CCJ) is a court order issued when a debt has not been repaid. CCJs appear on your credit file …
Completion
Completion is the final stage of a property transaction. Funds are transferred from the buyer's solicitor to the seller'…
Conveyancing
Conveyancing is the legal process of transferring ownership of property from seller to buyer. A conveyancing solicitor o…
Exchange of Contracts
Exchange of contracts is the point at which a property sale becomes legally binding. Both parties sign the same contract…
ILR (Indefinite Leave to Remain)
Indefinite Leave to Remain (ILR) is an immigration status granting permission to live and work in the UK without any tim…
Mortgage Default / Credit Default
A default is recorded on your credit file when you fail to maintain agreed payments on a credit account and the creditor…
SDLT (Stamp Duty Land Tax)
Stamp Duty Land Tax (SDLT) is a tax payable to HMRC when purchasing property in England or Northern Ireland above a cert…
Finance & Investment
Bridging Loan
A bridging loan is a short-term, secured loan typically used to 'bridge' a gap between buying a new property before sell…
Interest Coverage Ratio (ICR)
The Interest Coverage Ratio (ICR) is the metric buy-to-let lenders use to assess whether rental income adequately covers…
Limited Company Buy to Let
A limited company buy-to-let mortgage is taken out in the name of a Special Purpose Vehicle (SPV) — a company set up spe…
Procuration Fee
A procuration fee (proc fee) is the commission paid by a lender to a mortgage broker when a mortgage completes through t…
Rental Yield
Rental yield is the annual rental income from a property expressed as a percentage of its value or purchase price. Gross…
SPV (Special Purpose Vehicle)
A Special Purpose Vehicle (SPV) is a limited company created solely to hold investment property. When applying for a buy…
Swap Rate
Swap rates are the interest rates at which banks lend to each other over fixed periods. Fixed mortgage rates are largely…
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