Mortgage glossary

Buying a home, investing in property, or financing a development can involve a lot of unfamiliar wording. This glossary explains common mortgage and property terms in plain English, helping you understand what lenders, brokers, and solicitors may be referring to.

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A

Adverse credit

A credit history that includes events such as missed payments, defaults, CCJs, or other negative markers. This can affect both eligibility and the pricing of a mortgage.

Affordability assessment

A lender’s review of your income, outgoings, and financial commitments to decide how much you can borrow and on what terms.

Agreement in Principle (AIP)

A conditional indication from a lender of how much they may lend, based on initial information. It is not the same as a full mortgage offer.

Annual Percentage Rate (APR)

A measure of the overall cost of borrowing over a year, designed to make comparisons easier by including interest and certain fees.

Arrangement fee

A fee charged for setting up a mortgage. It may be paid upfront or added to the loan balance, depending on the product.

Auction property

A property bought at auction, often with shorter timescales and specific mortgage considerations.

Automated Valuation Model (AVM)

A computer-based method lenders use to estimate property value using data and algorithms.

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B

Base rate

The Bank of England’s official interest rate. Many variable mortgage rates are influenced by changes to the base rate.

Balloon payment

A large payment due at the end of a loan term. It is uncommon in typical UK residential mortgages but can appear in some specialist or commercial structures.

Bridging loan

A short-term loan used to “bridge” a gap between buying and selling. These are typically more expensive than longer-term mortgages.

Buy-to-let mortgage

A mortgage designed for purchasing property to rent out. Lenders usually apply different affordability and deposit requirements compared with residential mortgages.

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C

Capital and interest

A repayment mortgage structure where monthly payments cover both the interest and part of the loan balance.

Capitalisation

When unpaid interest or fees are added to the mortgage balance, increasing the total amount owed (and potentially the future interest).

Capped rate

A variable rate with a maximum limit. Your rate can move, but it will not exceed the cap.

Chain

A sequence of linked property transactions where each buyer depends on another sale completing.

Completion

The stage when ownership legally transfers and mortgage funds are released, allowing the purchase to complete.

Conditional sale / subject to contract

A sale that is not legally binding until contracts are exchanged.

Conveyancing

The legal process of transferring property ownership, typically handled by solicitors or licensed conveyancers.

Credit score

A numerical representation of your credit history produced by credit reference agencies. Lenders use it as part of their decision-making.

Credit reference agency

Organisations such as Experian, Equifax, and TransUnion that compile credit information used by lenders.

Cash back

A lump sum paid by a lender on completion, usually linked to the mortgage product and sometimes subject to conditions.

Charging order

A court order that secures a debt against property. It can affect your ability to remortgage or sell.

Completion date

The date on which the purchase completes and the mortgage funds are used to pay the seller.

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D

Deposit

The amount you pay towards the purchase price. The required deposit depends on the property and the mortgage type.

Decisioning

An automated or semi-automated process some lenders use to assess applications before human review.

Deed of trust

A legal document used in some joint ownership arrangements that sets out responsibilities and beneficial interests.

Declined application

When a lender does not approve a mortgage application. This can influence future applications and may require specialist options.

Discount rate

A variable rate that offers a discount relative to a lender’s standard variable rate (SVR) for a set period.

Disbursements

Third-party costs paid by your solicitor on your behalf during the conveyancing process.

Down valuation

When a lender’s valuation comes in below the agreed purchase price, which can require renegotiation or additional funding.

Dual tracking (context-dependent)

A process where parties proceed with more than one option at the same time (for example, in complex sales). Mortgage implications depend on the circumstances.

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E

Early repayment charge (ERC)

A fee payable if you repay your mortgage early or overpay beyond permitted limits during the initial deal period.

Equity

The difference between the property’s value and the outstanding mortgage balance.

Equity release

Products that allow older homeowners to access some of the equity without moving, such as lifetime mortgages.

Exchange of contracts

The point at which both parties become legally committed to the sale, once contracts are exchanged.

Ex-council property

A property previously owned by a local authority and sold under schemes such as Right to Buy. Some lenders apply restrictions.

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F

Flexible mortgage

A mortgage that may allow features such as payment flexibility, overpayments, underpayments, or payment holidays (subject to product rules).

Freehold

Ownership of both the property and the land it stands on, without a time limit.

Further advance

Additional borrowing secured against the same property with the existing lender, often for home improvements or other purposes.

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G

Gifted deposit

A deposit provided by family or friends. Lenders typically require evidence that it is genuinely a gift and not repayable.

Ground rent

A payment leaseholders make to the freeholder under the lease terms.

Guarantor

A person who agrees to support the mortgage repayments if the borrower cannot. This can sometimes help borrowers access lending with a smaller deposit.

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H

Halifax House Price Index

A widely followed measure of UK house price movement published by Halifax.

Help to Buy

A government scheme (or related variants) designed to help eligible buyers purchase with a smaller deposit, typically involving an equity loan.

Help to Buy ISA

A savings account that previously offered a government bonus for eligible first-time buyers (now closed, but may still be referenced for older accounts).

Higher Lending Charge

An additional cost applied when borrowing above a certain loan-to-value threshold.

Home Buyers Report

A survey level between a basic valuation and a full structural survey, often used for certain property types.

Housing association

A not-for-profit organisation that provides affordable housing. Mortgage availability can vary depending on the property and lease terms.

HMO (House in Multiple Occupation)

A property rented to multiple tenants who share facilities. HMOs often require specialist lending and licensing considerations.

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I

Interest only

A mortgage where monthly payments cover only the interest. A separate plan is needed to repay the capital at the end of the term.

Income multiple

A measure of how much a lender may lend based on your income (for example, a multiple of annual income). The exact approach varies by lender and product.

Impaired credit

Credit issues such as defaults, missed payments, or bankruptcy. Specialist lenders may consider these, but terms can differ.

Islamic mortgage

Sharia-compliant financing that avoids traditional interest. Structures may include diminishing musharaka or ijara.

Lender’s margin

The percentage added to a base rate to determine the actual interest rate on some variable products.

Initial rate

The interest rate charged during the introductory period before reverting to another rate.

Instalment

A regular payment schedule for repaying the mortgage, typically monthly in the UK.

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J

Joint mortgage

A mortgage taken out by two or more people, with shared responsibility for repayments.

Joint and several liability

A legal principle where each borrower can be held responsible for the full mortgage debt, depending on the arrangement.

Joint tenants / tenants in common

Two ways of owning property with others. They differ in how ownership shares pass on death.

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L

Leasehold

Ownership of a property for a fixed period under a lease, rather than owning the land.

Lease extension

Extending the remaining term of a leasehold property, which may be relevant for mortgageability.

Legal charge

The formal legal security a lender takes over the property until the mortgage is repaid.

Life assurance

Insurance that pays out on death, sometimes used to protect mortgage repayments.

Lifetime ISA

A savings account that can include a government bonus for eligible first-time buyers or retirement saving (subject to rules).

LTV (Loan-to-Value)

The percentage of the property value being borrowed. For example, a 90% LTV means a 10% deposit.

Loan-to-income (LTI)

A ratio comparing the mortgage amount to annual income. Regulators and lenders use it to manage affordability risk.

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M

Margin

The amount added to a base rate to calculate a variable mortgage rate.

Maturity

The end date of the mortgage term when the loan must be repaid or refinanced.

Mortgage deed

The legal document that creates the mortgage and gives the lender security over the property.

Mortgage in principle (MIP)

A conditional indication of how much a lender may lend based on initial information.

Mortgage capacity

The maximum amount a lender will consider based on affordability and lending criteria.

Mortgage exit fee

A fee charged by some lenders when you repay the mortgage in full or move to a new deal.

Mortgage redemption

The process of paying off the mortgage balance in full.

Mortgage payment protection insurance (MPPI)

Insurance designed to help cover mortgage payments if you cannot work due to illness or unemployment (product terms vary).

Negative equity

When the property value is lower than the outstanding mortgage balance.

Net income

Income after tax and deductions. Some lenders use net income in affordability calculations.

Notice account

A savings account linked to certain offset mortgages, where withdrawals may require notice.

Offset mortgage

A mortgage linked to savings where savings can reduce the interest calculated on the mortgage balance.

Overpayment

Paying more than the required monthly amount. This can reduce interest and shorten the term (subject to product rules).

Open market value

The estimated price a property would achieve if sold normally between willing buyer and seller.

Outstanding balance

The amount still owed on the mortgage at a given point in time.

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P

Payment holiday

A temporary pause from mortgage payments offered by some flexible products, with interest typically continuing to accrue.

Portable mortgage

A mortgage feature that allows you to move an existing deal to a new property, subject to lender rules.

Product transfer

Switching to a new deal with the same lender, often used when the current fixed period ends.

Principal

The original amount borrowed, excluding interest.

Procuration fee

A fee sometimes paid by lenders to brokers. How it works can vary by lender and arrangement.

Property chain

A sequence of linked transactions where each sale depends on another completing.

Redemption

Paying off the mortgage in full, either when you sell or at the end of the term.

Repayment mortgage

A mortgage where monthly payments cover both interest and capital, typically clearing the balance by the end of the term.

Right to Buy

A government scheme allowing eligible tenants to buy their home at a discount.

Right to Manage

A right for leaseholders in some circumstances to take over management of a building.

Shared ownership

A scheme where you buy a share of the property and pay rent on the remaining share.

Stamp Duty Land Tax (SDLT)

A tax paid when buying property in England and Northern Ireland, based on purchase price and other factors.

Service charge

Payments leaseholders make towards the maintenance and management of communal areas.

Solicitor’s undertaking

A professional promise by a solicitor to carry out certain actions, such as registering the mortgage charge.

Specialist lender

A lender that focuses on particular markets, such as adverse credit, self-employed borrowers, or non-standard property types.

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S

Second charge mortgage

An additional loan secured against the property that ranks behind the first mortgage.

Sitting tenant

A tenant already living in the property. This can affect valuation and lending considerations.

SVR (Standard Variable Rate)

The lender’s default variable rate that can change after a fixed or discounted period ends.

Stress testing

Affordability calculations to assess whether you could still manage payments if interest rates rise or circumstances change.

Structural survey

A detailed survey focusing on the structure and condition of a property.

Subject to contract

An agreement that is not legally binding until contracts are exchanged.

Tracker rate

A variable interest rate that moves in line with a reference rate (often the Bank of England base rate) plus or minus a margin.

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T

Tenants in common

A form of joint ownership where each person owns a defined share, which can be left to beneficiaries.

Term

The length of time over which the mortgage is repaid (commonly 25–35 years, though other terms exist).

Title deeds / title register

Documents or records showing ownership of a property. In many cases, ownership is held electronically via the Land Registry.

Underwriting

The detailed process lenders use to assess applications, including credit history and property suitability.

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U

Underpayment

Paying less than the contractual amount on a flexible mortgage (where permitted), with rules about how the shortfall is handled.

Unencumbered property

A property owned outright with no mortgage or other charges secured against it.

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V

Valuation

A lender’s assessment of the property’s market value, often carried out by a surveyor.

Variable rate

An interest rate that can change over time, often linked to base rate movements or lender decisions.

Yield (buy-to-let context)

A measure of rental income relative to property value, used in buy-to-let affordability considerations.

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W

Water search

A legal search that can reveal information about water and drainage services and related charges.

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X–Z (additional terms you may see)

Yielding

In buy-to-let contexts, the annual rental income expressed as a percentage of property value or purchase price.

Negative amortisation

A situation where payments are not enough to cover the interest due, causing the loan balance to increase over time.

Offset vs repayment vs interest-only (quick orientation)

• Repayment: monthly payments reduce the balance.
• Interest-only: monthly payments cover interest only; capital repayment is planned separately.
• Offset: savings can reduce the interest calculated on the mortgage balance.

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How to use this glossary

If you come across a term in mortgage illustrations, lender communications, or property documents, search for it here to understand what it means and how it may affect the mortgage structure, costs, or process.