Jargon Buster

Jargon Buster | Favourite Mortgages

• Agreement in Principle (AIP): A statement from a lender saying how much they might lend you — useful when making offers on properties. Also called a Decision in Principle (DIP).
• APR (Annual Percentage Rate): Shows the true cost of borrowing — includes the interest rate plus any fees.
• Arrangement Fee: A fee your lender may charge for setting up your mortgage (often added to the loan or paid upfront).
• Base Rate: The interest rate set by the Bank of England (or central bank). Lenders use it to set their own mortgage rates.
• Buy-to-Let Mortgage: A mortgage used to buy a property that you plan to rent out rather than live in yourself.
• Capital: The original amount of money you borrow to buy the property.
• Conveyancing: The legal process of transferring ownership of a property from the seller to the buyer.
• Deposit: The cash amount you put down when buying a home — usually a percentage of the property price (e.g., 5%, 10%, or 20%).
• Early Repayment Charge (ERC): A fee you may have to pay if you repay your mortgage early or switch deals before the fixed or discounted period ends.
• Equity: The portion of your property that you own outright — it's your home's value minus what you still owe on the mortgage.
• Fixed-Rate Mortgage: Your interest rate stays the same for a set period (e.g., 2, 3, or 5 years), making payments predictable.
• Guarantor: Someone (usually a family member) who agrees to cover your repayments if you can't.
• Interest-Only Mortgage: You only pay the interest each month — not the original loan. The balance must be repaid later (e.g., from savings or selling the property).
• Loan-to-Value (LTV): The percentage of the property's value that you borrow. Example: A £180,000 mortgage on a £200,000 home = 90% LTV.
• Mortgage Term: The total length of time you'll take to repay the mortgage.
• Overpayment: Paying more than your required monthly amount — helps you clear the loan faster and reduce interest.
• Porting: Transferring your current mortgage deal to a new property when you move house.
• Remortgage: Switching to a new mortgage deal — either with your existing lender or a new one.
• Stamp Duty (or Land Tax): A tax paid when you buy a property above a certain price threshold.
• Tracker Mortgage: A mortgage where the interest rate moves in line with the Bank of England's base rate — so it can go up or down.
• Valuation Survey: An inspection by the lender to check the property's value before approving your mortgage.