Glossary
46 mortgage terms, in plain English
Lenders and brokers use a lot of shorthand. Here is what the terms actually mean, without the jargon.
A
- Adverse credit
A history of missed or late payments, defaults, County Court Judgments, or insolvency showing on your credit file. Mainstream lenders often decline it, but specialist lenders may still consider you depending on how recent and severe it is.
- Affordability assessment
The lender's check on whether you can realistically afford the monthly repayments, now and if rates rise. It weighs your income against your regular outgoings, debts, and commitments.
- Agreement in PrincipleAgreement in Principle (AIP)
An early indication from a lender of roughly how much it might lend you, based on a quick look at your details. It is not a formal offer and can still be declined once full checks are done.
- Arrears
Payments you have fallen behind on, such as missed mortgage, rent, or loan instalments. Recent arrears can make borrowing harder, though some specialist lenders look at how long ago they happened.
B
- Bankruptcy
A formal insolvency process for people who cannot pay their debts, usually lasting about twelve months before discharge. It stays on your credit file for six years and severely limits borrowing during and shortly after.
- Base rate
The interest rate set by the Bank of England that influences the cost of borrowing across the UK. When it changes, tracker and variable mortgage rates usually move with it.
- Bridging loan
A short-term loan used to cover a gap, such as buying a new property before selling your current one. It tends to carry higher interest and fees, so it is usually a temporary measure.
- Buy-to-let
A mortgage for a property you intend to rent out rather than live in yourself. Lending usually depends on the expected rental income as well as your own finances.
C
- CCJCounty Court Judgment
A court order confirming you owe a debt that you have not paid. It stays on your credit file for six years and can make mainstream lenders cautious, though specialist lenders may still consider you.
- Cladding / EWS1External Wall System form
Concerns about unsafe external cladding on flats can leave a property hard to mortgage. An EWS1 form records a fire-safety assessment of the external walls, which many lenders now ask to see before lending.
- Concrete construction
Homes built largely from concrete panels or frames, including some post-war and pre-fabricated types. Many lenders treat them as non-standard and either decline them or lend at a lower loan to value.
- Conveyancer
The legal professional who handles the transfer of property ownership when you buy or sell. They carry out searches, check the title, and manage the exchange and completion.
- Credit score
A number credit reference agencies use to summarise how you have managed borrowing. Lenders do not all use the same score and each has its own criteria, so a low number does not automatically mean you cannot borrow.
D
- Debt Management PlanDebt Management Plan (DMP)
An informal arrangement to repay non-priority debts at a reduced monthly amount, often set up through a debt advice provider. Lenders vary in how they view an active plan, and some prefer it to be settled first.
- Default
A mark on your credit file when an account is treated as broken because payments were missed for a sustained period. It stays for six years and can affect borrowing, though its impact usually fades as it ages.
- Deposit
The share of a property's price you pay yourself, with the mortgage covering the rest. A larger deposit lowers the loan to value and can open up more lenders and better rates.
- Down-valuation
When a lender's surveyor values a property below the price you agreed to pay. It can shrink how much the lender will offer, leaving you to find a larger deposit or renegotiate.
E
- Early Repayment ChargeEarly Repayment Charge (ERC)
A fee some lenders charge if you repay or leave your mortgage deal before the end of a fixed or discounted period. It is usually a percentage of the balance and falls over time.
- EPCEnergy Performance Certificate
A rating of how energy efficient a property is, from A down to G, that is required when a home is sold or let. A very poor rating can affect some lending, particularly for rental properties.
- Equity
The part of your property's value that you actually own, worked out as its worth minus what you still owe on the mortgage. As you repay or the value rises, your equity grows.
- Execution-only
Taking out a mortgage without receiving advice, where you choose the product yourself and the lender simply processes it. You give up the protection that comes with an advised recommendation.
F
- Flying freehold
Where part of a freehold property sits above or below land or a building someone else owns, such as a room over a shared passage. Some lenders limit or decline these because of the legal and repair complications.
G
- Gifted deposit
Money given to you, usually by family, to put towards your deposit with no expectation of repayment. Lenders normally ask for written confirmation that it is a genuine gift.
- Guarantor mortgage
A mortgage where someone else, often a parent, agrees to cover the repayments if you cannot. The guarantor's own income or property helps support the application.
H
- Help to Buy
A former government scheme that helped buyers purchase with a smaller deposit, now closed to new applicants. Existing borrowers still repay any equity loan taken out under it.
I
- IVAIndividual Voluntary Arrangement
A formal agreement to repay part of your debts over a set period, usually around five years, as an alternative to bankruptcy. It appears on your credit file and limits borrowing while it is active and for a time afterwards.
J
- Joint borrower sole proprietorJoint borrower sole proprietor (JBSP)
An arrangement where someone helps you qualify by adding their income to the mortgage, but does not go on the property's ownership. It is often used so a family member can boost borrowing without owning a share.
L
- Leasehold
Owning the right to live in a property for a fixed number of years, while someone else owns the freehold and often the land. Ground rent and service charges usually apply, and the lease length matters to lenders.
- Loan to valueLoan to value (LTV)
The size of the mortgage compared with the property's value, shown as a percentage. A lower loan to value usually means more lenders will consider you and better rates are available.
M
- Mortgage prisoner
A borrower stuck on their current deal, often paying a high rate, who cannot switch because they no longer meet standard lending rules. Many ended up this way when their original lender stopped offering new deals.
N
- Negative equity
When your property is worth less than the amount you still owe on the mortgage. It can make selling or remortgaging difficult until values recover or the balance is reduced.
- Non-standard construction
Property not built with the usual brick or stone walls and a tiled or slate roof, such as timber frame, steel frame, or concrete. Fewer lenders offer mortgages on these, and some ask for a larger deposit.
O
- Offset mortgage
A mortgage linked to your savings, where the savings balance reduces the interest charged on the loan. You give up interest on the savings in exchange for paying less on the mortgage.
P
- Payment holiday
An agreed pause or reduction in mortgage payments for a short period, arranged with your lender. It can ease pressure temporarily, but interest usually still builds and it may show on your record.
- Procuration fee
A commission a lender pays a mortgage broker for arranging a mortgage. It is paid by the lender, and a good broker will explain how they are paid.
R
- Remortgage
Moving your existing mortgage to a new deal, either with your current lender or a different one, usually to get a better rate or release equity. Timing it around any early repayment charge can save money.
- Retained profit
Profit a limited company keeps rather than paying out to its directors. Some lenders will take retained profit into account when assessing a company director's income, which can help self-employed applicants.
- Right to Buy
A scheme letting eligible council tenants buy their home at a discount. Not all lenders offer Right to Buy mortgages, and the discount can often be used in place of a cash deposit.
S
- Self-employed mortgage
A mortgage for someone whose income comes from their own business rather than a salaried job. Lenders usually ask for a couple of years of accounts or tax records, though some accept a shorter history.
- Short lease
A leasehold with a relatively low number of years left, often under about eighty. Many lenders limit or decline mortgages on short leases, and extending the lease can be costly.
- SICSpecialist lender
A lender that considers cases mainstream banks tend to decline, such as adverse credit, unusual income, or non-standard property. Their rates are often higher to reflect the added risk they take on.
- Soft search
A credit check that lets a lender give an early indication without leaving a visible mark that other lenders can see. It is a useful way to gauge your chances before a full application.
- Stamp DutyStamp Duty Land Tax (SDLT)
A tax on property purchases above certain price thresholds in England and Northern Ireland, with separate systems in Scotland and Wales. Higher rates usually apply to additional properties such as buy-to-lets.
- Standard Variable RateStandard Variable Rate (SVR)
The default rate a lender charges once your fixed or discounted deal ends. It is usually higher than deal rates and can change at the lender's discretion, so many borrowers look to remortgage before landing on it.
U
- Underwriting
The lender's detailed assessment of your application, checking income, credit history, and the property before deciding whether to lend. This is where evidence such as payslips, accounts, and bank statements is examined.
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