What is a mortgage? Mortgage terms A-F


Deciphering the jargon will help you understand how your mortgage works

Understand the mortgage jargon with our definitions of mortgage terms beginning with A - F.


Annual percentage rate. The overall cost of a mortgage, including the interest and fees. It assumes you will have the mortgage for the whole term, so may not be a useful way to compare deals.

For more information, see our What is APR? video guide, which explains APR in relation to credit cards and loans as well as mortgages.

Arrangement fee

A set-up fee for your mortgage.

Most mortgage lenders will allow you to add this fee to the loan, but you should avoid this as you will end up paying interest on it for the life of the loan. Read more on mortgage fees in our guide to how to get the best mortgage deal.


If you go into arrears it means you have 'defaulted' at least once on your mortgage repayments, i.e. you have missed a month's payment.

Contact your lender as soon as possible if you think you may go into arrears.

Base rate

A rate of interest set by the Bank of England, which tracker rates and lenders’ standard variable rates usually follow.

Booking fee

A type of mortgage set-up fee.

Buildings insurance

Insurance which covers you for damage to the structure of your home. A lender will require you to have buildings insurance in place when you take out a mortgage.

Buy to let

A buy to let property is bought with the sole intention of letting it to tenants. Most mortgage lenders offer special 'buy-to-let' mortgage deals for this purpose.

As this type of lending poses a greater risk to the lender, it is usually more expensive than a residential mortgage. Read more on buy to let mortgages.


The amount of money you borrow to buy a property.

Capped rate

The mortgage interest rate charged by your lender will never exceed the upper 'capped' limit, regardless of increases to the Bank of England base rate.

Cashback mortgage

Your lender gives you a certain amount of cash on completion, which could be useful to spend on decorating, for example. You should factor this money into the total cost of your mortgage over the initial period to decide whether it’s a good deal.


County Court Judgement. These are made against you for non-payment of debt, and could make it harder for you to get a mortgage.


If your mortgage deal has a collar, your interest rate will not fall any lower than the specified amount. So if rates drop to 3.75% and your deal is collared at 4%, you'll miss out on the savings this lower rate will bring.


The legal process of buying and selling property. This can be done by a solicitor or specialist licensed conveyancer. Read our conveyancing guide for more information.

Current account mortgage (Cam)

Your mortgage, credit card and loan debts, and your current account and savings balances are combined into one account. Your credit balances offset your debts so you only pay interest on the difference.

These are usually more expensive than conventional mortgages, so whether they are worth it for you depends on your circumstances.


This is the amount you are required to put down yourself towards the cost of the property. The minimum deposit you will usually need is 5%. The cheapest deals are available if you can pay a deposit of at least 40%. Read our guide for more informtaion on how much deposit you need for a mortgage.

Discounted-rate mortgage

A discounted-rate deal is one where the interest rate you are charged is a set amount less than your mortgage lender's standard variable rate (SVR). For example, if the lender has an SVR of 5.5% and the discount is 1%, then you will pay 4.5%. Read more on discount mortgages.

Early repayment charges (ERCs)

Penalty fees you have to pay if you want to leave your mortgage during a specified period, usually the period of the initial deal. They can be charged at around 1-3% of the amount of the loan you have left to pay off.

Endowment mortgage

A form of interest-only mortgage where you also pay money into a type of investment called an endowment to pay off the mortgage at the end of the term. There is a risk that the endowment may not grow enough to pay off the mortgage, leaving you with a shortfall.


The amount of money you would have left after subtracting the amount outstanding on your mortgage from the value of your property.

Equity release scheme

There are two types: lifetime mortgages and home-reversion schemes.

An equity release scheme allows older homeowners to release the cash tied up in their property. There is a minimum age limit to take out one of these products - usually between 55 and 65 years old, depending on the provider.

These schemes should only be taken out after getting independent financial advice. Read our equity release guide for more information.

Fixed-rate mortgage

The mortgage interest rate stays the same for the initial period of the deal, usually two to five years. This means you can be sure of exactly what you will be paying on your mortgage each month, as your rate won't go up - or down - with the Bank of England base rate as it would with a variable-rate mortgage. Read our guide for more information about fixed-rate mortgages.

Flexible mortgage

A flexible mortgage deal allows you to overpay, underpay or even take a 'payment holiday' from your mortgage. This can help you pay your mortgage off early and save money on interest, but flexible mortgages are usually more expensive than conventional ones.

Read about the different types of mortgage deal in our guide.


You own the property and the land it stands on. Find out more about buying a freehold property.

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Which Ltd is an Introducer Appointed Representative of Which? Financial Services Ltd, which is authorised and regulated by the Financial Conduct Authority. Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited. Your home may be repossessed if you do not keep up repayments on your mortgage.