Plain-English mortgage glossary.

AIP / DIP— Agreement / Decision in Principle

An indicative statement from a lender that they would, subject to a full application and checks, be willing to lend a certain amount. Not a binding offer.

APRC— Annual Percentage Rate of Charge

The total yearly cost of a mortgage, including interest and most fees, expressed as a percentage. Useful for comparing deals over the full term.

Arrears

Money owed because one or more mortgage payments have been missed. Being in arrears can affect your credit file and your home.

Base rate

The interest rate set by the Bank of England that influences the rates lenders charge, especially on tracker and variable mortgages.

Bridging loan

Short-term finance used to bridge a gap, for example when you need to buy a new home before your current one sells. Usually more expensive than a normal mortgage.

BTL— Buy-to-let

A mortgage on a property you intend to rent out rather than live in. Most, but not all, buy-to-let mortgages are unregulated by the FCA.

Capital & interest

The standard repayment method where each monthly payment covers both interest and part of the loan balance, so the mortgage is fully repaid by the end of the term.

CCJ— County Court Judgment

A court order in England, Wales or Northern Ireland confirming you owe money. It appears on your credit file and can affect mortgage options.

Commercial mortgage

A mortgage for a property used for business purposes, such as a shop, office, or mixed-use building. Not the same as a residential or buy-to-let mortgage.

Conveyancing

The legal work involved in transferring property ownership from seller to buyer, carried out by a solicitor or licensed conveyancer.

Deposit

The cash contribution you put towards the property purchase. The rest is covered by the mortgage. The bigger the deposit, the lower the LTV and usually the better the rate.

ERC— Early Repayment Charge

A fee charged by the lender if you repay all or part of your mortgage — usually during a fixed or discount period — earlier than agreed.

Equity

The difference between your property's market value and the balance outstanding on your mortgage. Equity grows as you repay the loan or as the property increases in value.

Equity release— Lifetime mortgage

A way for older homeowners to access money tied up in their property without having to sell it. The loan is usually repaid when the property is sold.

ESIS— European Standardised Information Sheet

A standard document a lender must provide before you accept a mortgage offer, showing the key features, costs and risks of the deal.

Fixed rate

A mortgage where the interest rate is locked for a set period (commonly 2, 3, 5 or 10 years), giving you certainty over monthly payments during that time.

Freehold

Ownership of a property and the land it stands on outright, with no time limit. Usually applies to houses rather than flats.

Gazumping

When a seller accepts your offer but then accepts a higher offer from another buyer before exchange of contracts.

Gazundering

When a buyer lowers their offer just before exchange of contracts, putting the seller under pressure to accept less.

Ground rent

A regular payment made by a leaseholder to the freeholder, normally for a flat or leasehold house. The amount and review terms should be checked before buying.

Guarantor

Someone who agrees to be responsible for the mortgage payments if the borrower cannot make them. Often a parent supporting a first-time buyer.

Help to Buy

A government-backed equity loan scheme that helped buyers purchase a new-build home with a smaller deposit. It is now closed to new applicants in England.

HMO— House in Multiple Occupation

A rental property let to three or more tenants forming more than one household, sharing facilities such as kitchen or bathroom. Requires specialist lending.

Income multiples

A simple way lenders estimate how much they might lend, based on a multiple of your annual income. Final lending is decided by full affordability checks.

Indemnity policy

An insurance policy that covers a specific legal defect in a property transaction, such as missing building regulations or a narrow access right.

Interest-only

A mortgage where monthly payments cover only the interest. The full loan balance is still owed at the end of the term and must be repaid separately.

Joint borrower sole proprietor

A mortgage where someone else's income is included in the affordability check, but they are not named on the property title. Often used by parents helping a child buy.

KFI— Key Facts Illustration

An older name for the document now called an ESIS. It sets out the mortgage amount, monthly payments, fees and important terms.

Land Registry

The government office that records ownership of land and property in England and Wales. Your solicitor will register the new mortgage and owner details.

Leasehold

Ownership of a property for a fixed number of years, subject to a lease. The land remains owned by the freeholder. Common for flats and some newer houses.

Lifetime ISA

A savings account for first-time buyers or retirement where the government adds a 25% bonus on contributions, up to set limits each tax year.

LTV— Loan-to-value

The size of the mortgage expressed as a percentage of the property's value. £180,000 borrowed on a £200,000 home is 90% LTV. Lower LTV usually means better rates.

Mortgage offer

The lender's formal, binding offer to lend a specific amount on specific terms once underwriting and valuation are complete.

Negative equity

When the amount owed on a mortgage is greater than the property's current market value. This can make moving or remortgaging more difficult.

Offset mortgage

A mortgage linked to a savings account. Your savings balance is offset against your loan balance, so you only pay interest on the difference — while keeping access to the cash.

Overpayment

Paying more than your required monthly payment. Overpayments reduce the balance faster, cut total interest paid and can shorten the term. Some products cap overpayments before an ERC applies.

Payment holiday

An agreed pause in mortgage payments for a short period, usually in exceptional circumstances. Interest normally continues to build, so the total owed can increase.

Portability

A feature that lets you move your existing mortgage deal (rate and terms) from one property to another when you move home, subject to lender approval.

Product transfer

Switching to a new deal with your existing lender when your current rate is ending, without moving the mortgage to a different lender.

Proof of funds / source of deposit

Documents showing where your deposit money comes from, such as savings, a gift or a sale. Lenders and solicitors require this to prevent money laundering.

Remortgage

Moving your mortgage to a new lender, usually to get a better rate, change the term, or release equity. Not the same as a product transfer.

Repayment vehicle

A plan or investment used to repay the capital balance on an interest-only mortgage, such as savings, investments, pension lump sums or sale of the property.

Right to Buy

A scheme that allows qualifying council tenants in England to buy their home at a discount. Different rules apply in Wales, Scotland and Northern Ireland.

Service charge

A regular payment by leaseholders towards the upkeep of shared parts of a building, such as hallways, lifts, gardens and roofs.

Shared ownership

A scheme where you buy a share of a property and pay rent on the rest, often from a housing association. You can usually increase your share over time.

SPV— Special Purpose Vehicle

A limited company set up solely to hold rental property. Often used by landlords for tax planning; requires specialist buy-to-let lending.

Stamp Duty (SDLT)

A tax paid to HMRC when buying property in England or Northern Ireland above certain thresholds. Rates differ for first-time buyers, movers and additional properties.

Standard Variable Rate (SVR)

The lender's default rate you move onto when your fixed or introductory deal ends. SVRs are usually higher than deal rates, which is why remortgaging or a product transfer often saves money.

Stress test

Lender affordability check that models whether you could still afford payments if interest rates rose. Required by regulation for most residential and buy-to-let mortgages.

Subject to contract

A term used when an offer on a property is agreed in principle but not yet legally binding. Either party can still withdraw until contracts are exchanged.

Survey

An inspection of a property's condition, separate from the lender's valuation. A Homebuyer Survey or Building Survey can identify problems before you commit.

Term

The length of time over which the mortgage is repaid — typically between 5 and 40 years for residential loans.

Tie-in period

The length of time during which an early repayment charge may apply if you repay or switch your mortgage. Often matches the fixed or discount rate period.

Title

The legal right to own a property. Your solicitor checks the title deeds or Land Registry records before you buy.

Tracker

A variable-rate mortgage where the rate tracks the Bank of England base rate plus a set margin. Payments move up or down when the base rate changes.

Underwriting

The lender's internal assessment of your application — income, credit, affordability and property — before deciding whether to issue a mortgage offer.

Valuation

The lender's assessment of the property's value, used to decide how much they will lend. Different from a survey, which assesses condition.

Variable rate

A mortgage rate that can go up or down, usually in line with the lender's SVR or the Bank of England base rate.

Vendor

The person selling a property. Also called the seller.

Missing a term? Email enquiries@equationfinancial.com and we will add it.