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A-Z mortgages jargon-buster

From agreements in principle and arrangement fees to porting and variable rates, our A-Z glossary explains all the words you'll hear during the mortgage application process.

Agreement in principle (AIP)

A document from a mortgage lender confirming that you will be able to borrow a certain amount. You can use this to prove to a seller that you can afford to buy their property.


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.

Arrangement fee

A set-up fee for your mortgage. Most mortgage lenders will allow you to add this fee to the loan, but this will mean you pay interest on it for the whole mortgage term.


If you go into arrears, it means you have 'defaulted' at least once on your mortgage repayments, ie 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 mortgages and standard variable rate mortgages usually follow.

Booking fee

A type of mortgage set-up fee. 


An adviser who can help you arrange a mortgage. Be aware that some brokers will get paid more commission for recommending certain deals than others; also, some of the best mortgage deals are only available if you apply directly.

Buildings insurance

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


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.


The amount of money you borrow to buy a property.

Capped rate

If your mortgage deal has a capped rate, the 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

With this type of mortgage, your lender gives you a certain amount of cash on completion. You should factor this 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 that this lower rate would bring.


The legal process you must go through when you buy or sell property. This can be done by a solicitor or licensed conveyancer. Read more about conveyancing.

Current account mortgage (Cam)

Your mortgage, credit card and loan debts and your current and savings account 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.


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%, but the cheapest deals are available to people who can pay a deposit of at least 40%. Read more about mortgage deposits.

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%, you will pay 4.5%. Read more about 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. 

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. Read more about interest-only mortgages.


The amount of the property that you own outright, ie your deposit plus the capital you've paid off on your mortgage.

Equity release scheme

An equity release scheme allows older homeowners to release the cash tied up in their property. There are two types: lifetime mortgages and home-reversion schemes. These schemes should only be taken out after getting independent financial advice. Read more about equity release schemes.

Family offset mortgage

Used by family members (usually parents) who want to help first-time buyers get onto the property ladder. Your savings are balanced against your child (or family member)'s debt, so the amount they owe and pay in interest is reduced. Find out more about family offset mortgages.

Fixed-rate mortgage

The mortgage interest rate stays the same for the initial period of the deal, which can be anything from one to 10 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. Read more 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 off your mortgage early and save money on interest, but flexible mortgages are usually more expensive than conventional ones. Read more about different types of mortgage deal.


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


When an offer has been accepted on a property but a different buyer then makes a higher offer, which the seller accepts. Read more about gazumping.


A third party who agrees to meet the monthly mortgage repayments if you are unable to. This is most common with first-time buyers, and the guarantor is usually their parent or guardian. Read more about guarantor mortgages.

Help to Buy

The government has launched a number of different Help to Buy schemes, including equity loans, mortgage guarantees, Isas and specific schemes for Scotland and Wales. They all aim to make home-buying easier. Find out more about the different forms of Help to Buy.

Help To Buy Isa

A tax-free savings account, into which the government pays first-time buyers a cash bonus towards the purchase of a property. For every £200 saved, the government will deposit an additional £50, up to a maximum of £3,000. Read more about Help to Buy Isas.  

Higher lending charge (HLC)

This is sometimes charged by your mortgage lender if you are borrowing more than 75% of the property’s value. It protects the lender against you defaulting on your mortgage.

Interest-only mortgage

You only pay the interest on your mortgage each month, without repaying any of the capital loan itself. The idea is that you build up enough money to be able to pay off the mortgage at the end of the term in other ways - for example through investing in stocks and shares, pension endowment or the sale of another property. Read more about interest-only mortgages.


An adviser who can help you arrange a mortgage. Be aware that some intermediaries will get paid more commission for recommending certain deals than others; also, some of the most competitive mortgage deals are only available if you apply directly.

Joint mortgage

A mortgage taken out by two or more people. This might be used if you buy a house with a partner or friend, and can also be used by parents who want to help their children buy a property. Read more about joint tenancy or how parents can help first-time buyers.

Land Registry

The official body responsible for maintaining details of property ownership.


You own the building but not the land it stands on, and only for a certain period (anything up to 999 years). You may find it hard to get a mortgage if there are fewer than 70 years left on the lease of the property you want to buy. Find out more about buying a leasehold property.

Lifetime mortgages

See 'equity release schemes'.

Loan-to-value (LTV)

The size of your mortgage as a percentage of the property’s value. The cheapest deals tend to be available to people who are borrowing 60% or less.

Monthly repayment

The amount you pay your mortgage lender each month. If you're on a repayment mortgage (the most common kind), the payment will cover a percentage of your mortgage plus interest.

Mortgage agreement in principle (AIP)

See 'agreement in principle'.

Mortgage deed

A formal contract between lender and borrower, outlining the legal obligations of the borrower and the rights the lender has if the borrower fails to make a repayment.

Mortgage payment protection insurance (MPPI)

Insurance that covers your mortgage, usually for a year, if you are unable to work due to accident, sickness or unemployment. It is also know as ASU insurance. Read more about mortgage insurance.

Mortgage term

The amount of time you are taking the mortgage out for – 25 years, for example.

Negative equity

When the value of your home falls to a level that is below the amount remaining on your mortgage.

Offset mortgage

An offset mortgage links your mortgage with your savings and, sometimes, your current account. Your credit balances are offset against your mortgage debt so you only pay interest on the difference, while also paying off the capital. Read more about offset mortgages.


A portable mortgage allows you to transfer your borrowing from one property to another if you move, without paying arrangement fees. Read more about porting your mortgage.

Rebuild cost

For insurance purposes: the cost of rebuilding your home if it is destroyed.


When you change your mortgage without moving house. You can do this to save money, to change to a different type of mortgage or to release equity from your home. Read more about  remortgaging.

Repayment mortgage

You pay off the mortgage interest and part of the capital of your loan each month. Unless you miss any repayments, you are guaranteed to have paid off the mortgage by the end of the term. Read more about repayment mortgages.

Repayment vehicle

Required by lenders if you take out an interest-only mortgage, this is the means by which you're intending to pay off your mortgage at the end of the term - for example, another property, or a stocks and shares portfolio. Read more about interest-only mortgages.

Right to Buy scheme

Originally intended to enable tenants of council houses to buy the homes they lived in, this is now being opened up to housing association tenants too. Read more about the Right to Buy scheme.

Service charge

The fee paid to a managing agent for the ongoing maintenance of a leasehold property. Read more about the costs of home ownership.

Shared ownership

You buy a share of a property (usually between 25% and 75%) and pay rent on the remaining share, which is owned by the local housing association. Read more about shared ownership.

Stamp duty

Stamp duty land tax (SDLT) is payable when you buy a property for more than £125,000 (or £40,000 if it's a buy-to-let property or second home). Read more about stamp duty.

Standard variable rate (SVR)

The default mortgage interest rate that your lender will charge after your initial mortgage deal period ends. This could be higher or lower than your original rate. Read more about standard variable rate mortgages.

Starter Homes Initiative

An as-yet-unrealised government scheme that promised to build 200,000 new homes for first-time buyers aged under 40. Buyers were to be given a minimum discount of 20%. Read more about the Starter Homes Initiative.

Sub-prime/non-conforming mortgage

A sub-prime, or non-conforming, mortgage is geared towards people who have had credit problems. It is now much harder to get a sub-prime mortgage than before the credit crunch. Read more about mortgages for people with bad credit.

Tie-in period

This is the period during which you are 'locked in' to your mortgage deal. You'll have to pay an early repayment charge if you leave your mortgage during this period. Avoid mortgages that tie you in after your introductory rate has ended.

Tracker mortgage

The interest rate on your mortgage tracks the Bank of England base rate at a set margin above or below it. Read more about tracker mortgages.

Valuation survey

Lenders always carry out a valuation survey to check whether the property is worth roughly the amount you're paying for it. You should always have your own survey done too, to check for structural problems. Read more about property surveys.

Variable-rate mortgage

The interest rate on your mortgage can go up or down according to your lender’s standard variable rate. Read more about standard variable rate mortgages.