Terminology

Understanding mortgage terminology is important for anyone who is considering taking out a mortgage to purchase a property. The mortgage process can be complex and confusing, and there are many terms that are specific to the industry. Having a good understanding of these terms can help borrowers make informed decisions about their mortgage and avoid any misunderstandings or confusion.

APRC
The Annual Percentage Rate is the overall cost of a mortgage, expressed as an annual percentage of the amount borrowed.

Arrangement fee
The fee charged by a lender for arranging a mortgage.

Base rate
The interest rate set by the Bank of England, which influences the interest rates charged by lenders.

Bridging loan
A short-term loan used to bridge the gap between the purchase of a new property and the sale of an existing one.

Buy-to-let mortgage
A mortgage used to purchase a property with the intention of renting it out.

Capital
The amount of money borrowed on a mortgage, excluding interest.

Capital repayment mortgage
A mortgage where the monthly payments cover both the capital and the interest.

Cashback mortgage
A mortgage that offers a cash lump sum back to the borrower upon completion of the mortgage.

Completion
The final stage of the mortgage process, where the funds are transferred to the borrower and ownership of the property is transferred.

Conveyancing
The legal process of transferring ownership of a property from the seller to the buyer.

Credit score
A numerical value assigned to an individual based on their credit history and financial behavior, used to assess their creditworthiness.

Deposit
The amount of money the borrower puts towards the purchase of a property, typically expressed as a percentage of the purchase price.

Early repayment charge
A fee charged by the lender if the borrower pays off all or part of the mortgage early.

Equity
The value of the property minus the outstanding mortgage balance.

Fixed-rate mortgage
A mortgage where the interest rate is fixed for a set period of time.

Flexible mortgage
A mortgage that allows the borrower to overpay, underpay, or take payment holidays.

Interest-only mortgage
A mortgage where the monthly payments cover only the interest, with the capital paid back at the end of the mortgage term.

Lender
The financial institution or company that provides the mortgage.

Loan-to-value (LTV)
The ratio of the amount borrowed on a mortgage to the value of the property, expressed as a percentage.

Mortgage broker
An intermediary who arranges mortgages between borrowers and lenders.

Mortgage deed
The legal document that transfers ownership of the property to the borrower.

Mortgage payment protection insurance (MPPI)
Insurance that covers the borrower’s mortgage payments if they are unable to work due to illness, accident or redundancy.

Mortgage term
The length of time over which the mortgage is repaid.

Negative equity
When the outstanding mortgage balance exceeds the value of the property.

Offset mortgage
A mortgage that allows the borrower to offset their savings against their mortgage balance, reducing the interest paid.

Overpayment
Paying more than the required monthly payment towards the mortgage, reducing the overall interest paid.

Portability
The ability to transfer a mortgage to a new property when moving home.

Product fee
A fee charged by the lender for a particular mortgage product.

Remortgage
Switching to a new mortgage with a new lender or the same lender at the end of an existing mortgage term.

Repayment mortgage
A mortgage where the monthly payments cover both the capital and the interest.

Right to Buy
A government scheme that allows council tenants to purchase their council house at a discounted price.

Shared ownership
A scheme that allows the borrower to purchase a percentage of the property and pay rent on the rest.