Mortgages & Insurances Glossary of Terms

The world of mortgages and insurance can involve unfamiliar wording. This glossary brings together many of the common terms you may see across mortgage applications, lender documents, and protection policies—so you can understand what they mean and how they may affect your decisions.

Important note: Your mortgage adviser will explain any jargon in plain English for your specific circumstances.

A

Additional Security Fee

Often linked to Higher Lending Charge. This is a fee lenders may apply where the loan-to-value (LTV) is higher, to help manage risk.

Agreement in Principle (AIP)

A first-stage indication of how much you could borrow. It’s sometimes called a Mortgage Promise or Decision in Principle (DIP). An AIP is not the same as a full mortgage offer.

B

Base Rate

The Bank of England’s Base Rate, which influences many mortgage products. Some mortgages track it directly (for example, tracker mortgages), while others move in relation to it.

Booking Fee / Arrangement Fee

A fee that may be charged when setting up a mortgage. Depending on the lender it may be:

• paid upfront,
• added to the loan, or
• deducted from the amount advanced.

If it’s added to the loan, it can increase the amount you borrow and therefore the interest you pay.

Buildings and Contents Insurance

Insurance that can cover:

• damage to the property (buildings), and/or
• damage to belongings inside the property (contents).

Many lenders require buildings insurance. Some may also require specific policy terms.

Broker Fee

A fee charged by a mortgage broker for arranging a mortgage.

C

Capital and Interest (Repayment) Mortgage

A repayment method where your monthly payments reduce both:

• the interest charged, and
• the original loan balance.

At the end of the mortgage term, the mortgage is intended to be repaid in full, provided payments are made as agreed.

Capital Raising Mortgage

A remortgage used to borrow additional funds. The extra borrowing might be used for a range of purposes, such as home improvements or other financial goals.

Capital Rest Period

The frequency a lender uses to calculate the outstanding balance for interest purposes (for example, annually, monthly, or daily). This can affect how interest is calculated.

Cashback Mortgage

A mortgage where the lender refunds a sum of money on completion (either as a fixed amount or percentage). Cashback deals can involve conditions such as Early Repayment Charges if you repay within a set period.

Capped / Collared Rate Mortgage

A variable-rate mortgage with limits:

• Capped: the rate won’t rise above a set “cap”.
• Collared: the rate won’t fall below a set “collar”.

If the rate moves outside the cap/collar boundaries, the mortgage rate is constrained accordingly. Early repayment charges may apply depending on the product.

Completion

The point at which the property transfer legally takes place after contracts are signed and funds are exchanged.

Conveyancing (Legal Fees)

Conveyancing is the legal process of transferring property ownership.

• Purchase: typically involves exchange of contracts (when the deal is legally committed) and completion (when ownership transfers).
• Remortgage: involves closing the existing mortgage and moving to the new lender.

Legal fees are usually paid to the solicitor handling the work.

Critical Illness Insurance

A protection policy that can pay out if you’re diagnosed with a specified illness or meet the policy’s definition of a condition.

Key points often include:

• cover is based on the exact conditions listed,
• payout is typically a one-off lump sum,
• definitions and exclusions vary between insurers.

Current Account Mortgage (Offset-style features)

A mortgage structure that links a mortgage to a current account so that balances in the account may be set against the mortgage balance for interest calculation purposes. This can reduce the interest charged on the net balance.

D

Decision in Principle (DIP)

Another name for Agreement in Principle (AIP)—an early indication of borrowing capacity.

Debt Consolidation Mortgage

A mortgage used to combine multiple debts into one loan. This can simplify monthly payments, but it may extend the time to repay and can increase total cost depending on interest rates and term.

E

Early Repayment Charge (ERC)

A penalty that may apply if you repay your mortgage (or repay more than allowed) within a specified period. ERCs can be linked to fixed, discounted, capped, or other initial deal periods.

Also known as: Early Redemption Penalty (ERP).

Equity (Property)

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

Endowment

A repayment vehicle sometimes associated with interest-only mortgages. The intention is that the endowment policy value may cover the mortgage balance at the end of the term, but values can fluctuate.

Exchange of Contracts

The stage where both parties become legally committed to the sale, and the deposit is typically paid.

F

Flexible Mortgage

A mortgage designed to offer more flexibility than traditional repayment structures. Features can vary by lender, but may include options such as:

• making overpayments without penalty (subject to product rules),
• payment holidays (where allowed),
• the ability to underpay within limits (often linked to prior overpayments),
• daily or monthly interest calculation.

Freehold

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

G

Gazumping

When a seller accepts a higher offer from another buyer after you have had an offer accepted.

Higher Lending Charge

A fee lenders may apply where LTV is higher, to help manage risk. It’s often associated with Mortgage Indemnity Guarantee (MIG) concepts.

H

Holiday Let Mortgage

A mortgage for a property intended to be let to holiday guests. Lenders may assess affordability using projected rental income rather than standard income multiples.

Homebuyers’ Report

A type of valuation/survey report (often less detailed than a structural survey). The exact terminology can vary.

I

Income Multiples

The multiple of your income a lender may use to estimate the maximum loan you can borrow.

Income Protection Insurance

A policy that can provide regular payments if you’re unable to work due to illness or injury.

Common features include:

• a waiting period before payments start,
• payments that may be level or increasing,
• cover that can be subject to insurer definitions of incapacity.

It’s different from Critical Illness Insurance, which is typically a one-off payout for specific conditions.

L

Leasehold

Ownership of a property for a set number of years, rather than ownership of the land indefinitely.

Let to Buy (LTB) Mortgage

A mortgage where you buy a new home while letting your existing property. Lenders may consider projected rental income as part of affordability.

LIBOR-Linked Mortgage

A type of variable rate linked to LIBOR (historically). LIBOR has been replaced by other reference rates in many contexts.

Life Insurance Policy

A policy designed to provide financial support to dependants if you die during the policy term.

Term life insurance policies typically pay out if death occurs within the agreed period.

Loan to Value (LTV)

The loan amount expressed as a percentage of the property value.

Example: a £70,000 mortgage on a £100,000 property is 70% LTV.

Higher LTV can affect pricing and may trigger additional charges.

Mortgage Offer

A formal document from the lender confirming the mortgage terms after full approval. Offers usually have an expiry date.

Mortgage Term

The total length of the mortgage agreement.

Mortgage Valuation

A lender’s assessment of the property’s value and suitability as security for the loan. This is not the same as a survey report on the property’s condition.

M

Non-Conforming

A term sometimes used to describe borrowers who don’t fit standard lending criteria, often linked to adverse credit.

Offset Mortgage

A flexible mortgage where savings/current account balances are set against the mortgage balance for interest calculation. Interest is typically charged on the net balance.

Overpayment

An extra payment made to reduce the mortgage balance sooner than planned. Some mortgages allow overpayments without penalty, while others may apply ERCs if you exceed permitted limits.

Part and Part Mortgage

A mortgage split between different repayment methods (for example, part repayment and part interest-only).

Pension

A repayment vehicle sometimes associated with interest-only mortgages.

Personal Equity Plan (PEP)

A historical type of investment vehicle that may be referenced as a repayment strategy for interest-only mortgages.

Portability

A feature that may allow certain mortgages to be moved to a new property during an early repayment charge period, subject to lender criteria and product rules.

P

Procuration Fee

A fee that may be paid by lenders to intermediaries for introducing and managing applications.

Redemption Penalty

Another term used for Early Repayment Charge (ERC).

Repayment Mortgage

Another term for Capital and Interest mortgages.

Right to Buy (RTB)

A scheme that can allow eligible tenants to buy their home from the landlord (often with a discount).

S

Self-Build Mortgage

A mortgage designed for property under construction, often released in stages as the build progresses to help manage LTV at each stage.

Shared Ownership

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

Split Payment Mortgage

A mortgage that combines repayment and interest-only elements.

Stamp Duty

A government tax charged on property purchases. It is generally not payable on remortgages.

Standard Variable Rate (SVR)

A variable rate set by the lender. After an initial deal period ends, the mortgage may revert to the SVR (unless you switch to another product).

Survey

A survey is an inspection of a property’s condition by a qualified surveyor.

Common survey types include:

• RICS Home Survey Level 1: a basic report for conventional properties in reasonable condition.
• RICS Home Survey Level 2: a more detailed report, often including checks in roof spaces and cellars.
• RICS Home Survey Level 3: the most thorough option, suitable for older or unusual properties, listed buildings, or where there are concerns about condition.

T

Term Assurance

A protection policy that can pay out if the insured person dies (and sometimes if specified conditions are met), depending on the policy structure.

Tracker Mortgage

A variable-rate mortgage that moves in line with a reference rate (such as the Bank of England Base Rate) plus or minus a set margin. Payments can therefore rise or fall.

U

Underwriting (Mortgage)

The lender’s process of assessing your application details—such as income, debts, assets, and the property—to reach a final lending decision.

Underwriting (Insurance)

The insurer’s risk assessment process, which may include reviewing medical history and other relevant information.

V

Valuation Fee

A charge for the lender’s valuation process. The level of valuation required can affect cost.

W

What to do if you see a term you don’t recognise

Mortgage and insurance documents can be dense. If you come across unfamiliar wording, it’s often helpful to:

• note the exact term as written,
• check whether it relates to pricing (rates/fees), repayment structure, or protection cover,
• ask for a plain-English explanation of how it applies to your mortgage or policy.