A
- Agreement in Principle (AIP / DIP)
- A lender's initial indication of how much they might lend you, based on a soft credit check and self-declared income. Usually valid 30–90 days. Estate agents often require one before putting an offer to the seller. An AIP is not a formal mortgage offer — that comes later after valuation and underwriting.
- Affordability assessment
- The checks a lender uses to decide whether a mortgage looks affordable. They usually review income, regular spending, credit commitments, dependants, the mortgage term, and how payments could change if rates rise. Our borrowing calculator can give an estimate, but lenders make their own decisions.
- APRC (Annual Percentage Rate of Charge)
- The total cost of borrowing expressed as a single annual percentage, including the initial rate, the lender's SVR after the fix ends, and most fees. The APRC assumes you stay on the mortgage for the full term, which may not match how long you keep a specific product.
- Arrangement fee (product fee)
- A fee charged by the lender for setting up the mortgage product. It may be added to the loan, meaning you pay interest on it, or paid upfront. A lower rate with a high fee is not always the lowest-cost option, especially on smaller loans.
- Arrears
- Missed mortgage payments. Even a single month in arrears can affect your ability to remortgage. Lenders are required by the FCA to treat customers in arrears fairly and offer forbearance options before repossession.
B
- Bank of England base rate
- The interest rate set by the Bank of England's Monetary Policy Committee. Tracker mortgages move with it directly. SVRs are influenced by it. Fixed-rate mortgages are unaffected during the fixed period but will reset when you remortgage.
- Buildings insurance
- Insurance for the structure of the property, such as walls, roof, and permanent fixtures. Most lenders require suitable buildings insurance to be in place from exchange of contracts on a purchase, because the property is their security for the loan.
- Buy-to-let (BTL)
- A mortgage for a property you intend to rent out. Most BTL mortgages are interest-only, and lender stress tests focus on rental income covering 125–145% of mortgage interest at a stressed rate rather than your personal income.
C
- Capital and interest (repayment)
- The default residential mortgage type — each monthly payment covers interest plus a slice of capital, so the balance reduces over the term. At the end of the term the loan is fully repaid.
- CIS (Construction Industry Scheme)
- A UK tax scheme for contractors and subcontractors in construction. Some lenders may assess CIS income differently from standard self-employed net profit, but the approach and evidence required vary by lender.
- Completion
- The legal moment the property changes hands. Funds transfer from the lender via your solicitor to the seller's solicitor, you collect the keys, and the mortgage starts. Typically 4–6 weeks after exchange of contracts.
- Completion statement
- A statement from your conveyancer showing the money needed to complete the purchase or remortgage. It can include the deposit, mortgage advance, legal fees, searches, SDLT or Land Transaction Tax where relevant, and any balance due from you.
- Conveyancer / solicitor
- The legal professional who handles the property transaction — searches, checking title, drawing up contracts, transferring funds. Most remortgages with free legals use a lender-appointed conveyancer; purchases usually use your own.
- Credit search
- A check against your credit file. A soft search is invisible to other lenders and used for AIPs. A hard search leaves a footprint and is used at full application. Too many hard searches in a short window flag as risk.
D
- Daily interest
- Most UK lenders calculate mortgage interest daily on the outstanding balance. This means overpayments take effect immediately — you don't need to wait for month-end.
- Deposit
- The cash contribution you put down toward the property price. The remainder becomes the mortgage. A larger deposit means a lower LTV, which can affect the mortgage products available to you.
- Discharged bankruptcy
- A bankruptcy that has formally ended (usually 12 months after the bankruptcy order). Some specialist mortgage lenders consider applicants who have been discharged for 3+ years.
E
- Early Repayment Charge (ERC)
- A penalty fee — typically a tapering percentage (5% in year 1, down to 1% in year 5) — for repaying or remortgaging away from your lender during the fixed/incentive period. Most lenders allow up to 10% overpayment per year without triggering ERC.
- EPC (Energy Performance Certificate)
- A rating of a property's energy efficiency (A to G). Required to sell or let a property in England, Wales, and Northern Ireland. Buy-to-let landlords currently need an EPC of at least E to rent legally.
- Equity
- The portion of your property you own outright (property value minus mortgage balance). Equity grows as you repay capital and/or the property appreciates. You can release equity via remortgage or equity release products.
- Equity release
- A later-life mortgage where homeowners (usually 55+) borrow against their property without monthly payments. Interest typically rolls up and the loan is repaid when the property is sold, downsized, or the borrower passes away. Requires specialist equity release guidance.
F
- First-time buyer (FTB)
- Someone who has never owned a residential property. FTBs get SDLT relief (no tax to £300k, 5% to £500k) and can use the Lifetime ISA. Many lenders also have FTB-specific products at higher LTV bands.
- Fixed-rate mortgage
- The interest rate is locked for an agreed period — usually 2, 3, 5 or 10 years. Monthly payments don't move during the fix. After the fix ends you drop onto the SVR unless you remortgage. The most common UK mortgage type.
- Freehold
- A form of ownership where you own the property and the land it stands on outright, subject to any mortgage secured against it. Freehold is common for houses. Your solicitor checks the title before completion.
G
- Gifted deposit
- Cash provided by family (most commonly parents) toward the buyer's deposit. Most lenders accept this with a signed gift letter confirming the funds are non-refundable and the gifter has no claim on the property.
H
- Help to Buy
- A name used for several government-backed home ownership schemes. The Help to Buy equity loan closed to new applicants in October 2022, and the Help to Buy ISA is closed to new accounts. Check current scheme rules before relying on a product or relief.
- HMO (House in Multiple Occupation)
- A property let to 3+ tenants forming 2+ households who share facilities. HMOs need specialist BTL mortgages and may require landlord licensing depending on the local authority.
I
- Interest-only mortgage
- Monthly payments cover only the interest, leaving the loan balance unchanged. The loan must be repaid in full at the end of the term, usually via savings, investments, or sale. Common for buy-to-let; restricted for residential.
J
- Joint Borrower Sole Proprietor (JBSP)
- A mortgage where up to 4 people's incomes are used for affordability but only one (usually the buyer) is on the property deeds. Common for parents helping adult children buy without becoming legal owners.
L
- Leasehold
- A form of ownership where you own the right to occupy a property for the remaining lease term, rather than owning the land outright. Flats are commonly leasehold. Lenders review lease length, ground rent, service charges, and any unusual clauses.
- LTV (Loan-to-Value)
- The mortgage as a percentage of the property value. For example, a £180,000 mortgage on a £200,000 property is 90% LTV. Lower LTV bands can give access to different lender products. Our mortgage calculators can help with related estimates.
M
- Mortgage broker
- A regulated intermediary who recommends mortgages from across the market (whole-of-market) or a panel of lenders. Brokers may charge a fee, take lender commission, or both. They handle the application and chase the lender.
- Mortgage offer
- The formal commitment from the lender to provide a specific loan on specific terms after underwriting and valuation. Usually valid 3–6 months. Distinct from an Agreement in Principle.
- Mortgage term
- The length of time over which the mortgage is scheduled to be repaid. A longer term can reduce monthly repayments but usually increases total interest paid if the rate and balance are unchanged. Compare examples with our repayment calculator.
N
- Negative equity
- When the mortgage balance is higher than the property value. It can make selling or remortgaging more difficult because the sale proceeds may not fully repay the loan.
- New-build mortgage
- A mortgage for a newly built property. Lenders may apply specific rules for deposits, incentives, warranties, and offer validity because completion dates can move during construction.
O
- Offset mortgage
- A mortgage linked to a savings account. The savings balance is offset against the mortgage balance for interest calculation, so you may pay interest on a lower net amount. You usually do not earn separate savings interest on the offset balance.
- Overpayment
- Paying more than your contractual monthly amount. Most lenders allow 10% of the outstanding balance per year during a fixed deal without ERC. Outside the fixed period, unlimited overpayment is usually allowed.
P
- Porting
- Transferring your existing mortgage product to a new property (often when moving home) without triggering ERCs. Subject to a new affordability check and the lender approving the new property.
- Product transfer
- Switching to a new mortgage product with your existing lender, often near the end of a deal period. It may involve fewer checks than moving lender, but you are limited to that lender's available products and criteria.
R
- Repayment vehicle
- The plan for repaying an interest-only mortgage at the end of the term. Examples may include investments, savings, pension lump sums, or sale of a property. Lenders decide which repayment strategies they will accept.
- Retirement Interest-Only (RIO)
- A mortgage for older borrowers where monthly interest is paid and the loan is repaid on sale, downsizing, or death. Underwritten on income (including pension) rather than future repayment plans.
- Remortgage
- Replacing your existing mortgage with a new one — either with your current lender (a product transfer) or by switching to a new lender. Usually done when your fixed deal ends or when you want to release equity.
- Right to Buy
- A government scheme that may allow eligible council tenants in England to buy their home at a discount. Eligibility, discounts, and local rules can change, so check current scheme guidance before relying on an estimate.
- Rental yield
- The annual rent expressed as a percentage of the property value. Gross yield = annual rent ÷ value. Net yield deducts management, maintenance, and mortgage interest. See our BTL yield calculator.
S
- Standard Variable Rate (SVR)
- The lender's default variable rate that may apply when a fixed, tracker, or discounted deal ends. It can be higher than other available products, but this depends on the lender and market conditions.
- SA302 (Tax Calculation)
- HMRC's annual statement showing your self-employed income and tax for a given tax year. Most lenders want 2 years of SA302s alongside the matching Tax Year Overviews for self-employed mortgage applications.
- Second charge mortgage
- A secured loan that sits behind your main mortgage on the property title. It can be used instead of remortgaging, but it adds another secured debt and may cost more than alternatives. Missing payments could put your home at risk.
- Self-build mortgage
- A mortgage that releases funds in stages as the build progresses, secured against the land and the completed value. Specialist lenders only. Different LTV and survey approach to standard mortgages.
- Stamp Duty (SDLT)
- The tax paid on property purchases in England and Northern Ireland. Banded by price. First-time buyer relief can apply on properties up to £500,000. Additional properties usually attract a 5% surcharge. See our SDLT calculator.
- Stress test
- An affordability calculation lenders may run using a higher interest-rate assumption to check whether payments could remain affordable if rates changed. Each lender sets its own approach within regulatory rules.
T
- Tracker mortgage
- A mortgage where the rate moves with the Bank of England base rate plus a fixed margin (e.g. base + 0.79%). Payments rise and fall with the base rate. Many trackers have no ERCs, giving flexibility.
U
- Underwriting
- The lender's detailed review of your application — checking documents, credit history, affordability, and property valuation. Some lenders use automated underwriting; others have human underwriters who can use judgement on edge cases.
V
- Valuation
- The lender's assessment of the property's market value, used to confirm the LTV. Most are desktop or drive-by valuations; some lenders use a full surveyor visit. Distinct from a buyer's survey (Homebuyer Report or full structural).
- Variable rate
- Any mortgage where the interest rate can change during the deal — including trackers (linked to base rate), discount rates (linked to the lender's SVR), and the SVR itself.
Mortgage glossary FAQs
What is the difference between an AIP and a mortgage offer? +
An Agreement in Principle is an early indication of what a lender may be prepared to lend. A mortgage offer is the formal offer issued after underwriting, valuation, and document checks.
Which mortgage terms should first-time buyers understand first? +
Start with deposit, loan-to-value, affordability assessment, fixed rate, mortgage term, valuation, conveyancer, exchange, completion, and Stamp Duty. These terms affect the buying process and the likely cost of borrowing.
Can mortgage jargon affect the amount I pay? +
Yes. Fees, mortgage term, early repayment charges, interest type, and loan-to-value can all affect monthly payments or total cost. Calculator results are estimates, and the exact cost depends on the product and lender.
Are glossary definitions mortgage guidance? +
No. This glossary explains common UK mortgage terms in general language. It does not recommend a mortgage or say whether a product is suitable for you.
Where can I estimate mortgage payments or Stamp Duty? +
Use the repayment calculator for monthly payment estimates, the borrowing calculator for an affordability guide, the overpayment calculator for overpayment examples, and the Stamp Duty calculator for SDLT estimates in England and Northern Ireland.
Helpful next pages
Rate comparison with context
Compare Mortgage Rates is built around comparing mortgage costs beyond the headline rate. Product fees, term, loan-to-value and lender criteria can all change what is appropriate for a borrower.