Understanding mortgage jargon can simplify the process. Here’s a detailed breakdown of the most common terms, including those related to adverse credit, mortgage applications, and property transactions.
A
Adverse Credit
A term used to describe a poor credit history, including missed payments, defaults, CCJs, IVAs, and bankruptcy. It can affect mortgage approval but doesn’t make it impossible.
AIP (Agreement in Principle)
A conditional offer from a lender stating how much they might lend you, based on a soft credit check. Also known as a DIP (Decision in Principle).
APR (Annual Percentage Rate)
The total cost of borrowing a mortgage, including interest and fees, expressed as an annual percentage.
Arrears
Missed mortgage or loan payments. Falling into arrears can negatively affect your credit score and lead to repossession if unresolved.
B
Bankruptcy
A legal status for individuals who cannot repay outstanding debts. It remains on your credit file for six years and can impact mortgage eligibility.
Base Rate
The interest rate set by the Bank of England, influencing mortgage rates offered by lenders.
Bridging Loan
A short-term loan used to “bridge” the gap between buying a new property and selling your current one.
Buy-to-Let Mortgage
A mortgage specifically for properties purchased to be rented out. Lenders usually require a larger deposit, typically 25%.
C
Capital
The amount you borrow to purchase a property, excluding interest.
CCJ (County Court Judgment)
A court order issued for unpaid debts. It stays on your credit file for six years and can affect your ability to secure a mortgage.
Completion
The final stage of the house-buying process, when funds are transferred, and you receive the keys.
Conveyancing
The legal process of transferring ownership of a property from the seller to the buyer.
Credit Report
A record of your borrowing history, including loans, credit cards, and missed payments. Lenders use this to assess your mortgage application.
D
DIP (Decision in Principle)
Another term for an Agreement in Principle (AIP). It gives you an idea of how much you could borrow.
Default
A missed payment that remains unpaid for an extended period. Defaults stay on your credit file for six years, but mortgages are still possible with specialist lenders.
DMP (Debt Management Plan)
An informal agreement with creditors to repay debts at an affordable rate. It can affect mortgage eligibility, but some lenders will still consider applications.
DRO (Debt Relief Order)
A formal debt solution for individuals with low income and little disposable income. It stays on your credit file for six years and can affect mortgage applications.
Deposit
The upfront amount you pay towards the property, usually at least 5% of the purchase price.
Discount Mortgage
A variable-rate mortgage where the interest rate is set below the lender’s standard variable rate (SVR) for a set period.
E
Early Repayment Charge (ERC)
A fee charged by lenders if you pay off your mortgage early, usually during a fixed or discount period.
Equity
The difference between the property’s value and the amount you owe on your mortgage. It represents the portion you own outright.
Experian, Equifax, and TransUnion
The three main credit reference agencies in the UK. Lenders use their reports to assess your creditworthiness.
F
Fixed-Rate Mortgage
A mortgage where the interest rate stays the same for a set period, typically 2, 3, or 5 years.
Freehold
Owning both the property and the land it stands on, with no time limit on ownership.
G
Gazumping
When a seller accepts a higher offer from another buyer after already agreeing to your offer.
Guarantor Mortgage
A mortgage where a family member or friend guarantees the loan, reducing the risk for the lender.
H
Help to Buy
A government scheme aimed at helping buyers purchase a property with a smaller deposit.
HMO (House in Multiple Occupation)
A property rented by three or more people from different households, often requiring a specific mortgage.
I
Income Booster Mortgage (JBSP)
Also known as a Joint Borrower, Sole Proprietor (JBSP) mortgage, this allows family members to contribute their income to help with affordability without owning the property.
Interest-Only Mortgage
A mortgage where you only pay the interest each month. The original loan amount is due at the end of the term.
IFA (Independent Financial Adviser)
A professional who provides impartial advice on mortgages, insurance, and other financial products.
J
Joint Mortgage
A mortgage taken out by two or more people, usually partners, friends, or family members.
JBSP (Joint Borrower, Sole Proprietor)
A mortgage where multiple incomes are used to increase borrowing potential, but only one person owns the property.
L
LTV (Loan-to-Value)
The percentage of the property’s value you are borrowing. For example, borrowing £180,000 on a £200,000 property means an LTV of 90%.
Leasehold
Ownership of a property for a set number of years, but not the land it stands on. Ground rent and service charges may apply.
M
MIP (Mortgage in Principle)
Another term for an Agreement in Principle (AIP) or Decision in Principle (DIP). It shows sellers you’re a serious buyer.
Mortgage Offer
A formal offer from a lender confirming they will lend you the agreed amount under specific terms.
Mortgage Term
The length of time you agree to repay your mortgage, often 25 to 35 years.
N
Negative Equity
When the value of your property falls below the outstanding balance of your mortgage.
O
Offset Mortgage
A mortgage linked to a savings account. The savings balance offsets the amount of interest charged on the mortgage.
P
Porting
Transferring your existing mortgage to a new property if you move home.
Product Fee
A fee charged by the lender for arranging a particular mortgage deal.
Product Transfer
Switching your existing mortgage to a new deal with the same lender, often without a full application or affordability check.
Product Transfer Valuation Fee
A fee charged by some lenders to reassess the property’s value when switching to a new deal with the same lender.
R
Remortgage
Switching your mortgage to a new deal, either with your current lender or a new one, often to get a better interest rate or release equity.
Repayment Mortgage
A mortgage where you pay back both the capital and interest each month, reducing the loan balance over time.
S
Secured Loan
A loan secured against your property. If repayments are missed, the lender can repossess the home.
Shared Ownership
A scheme allowing you to buy a share of a property (usually 25%-75%) and pay rent on the remaining share.
Soft Credit Check
A credit check that doesn’t affect your credit score, often used for pre-approval or an Agreement in Principle.
Stamp Duty Land Tax (SDLT)
A tax paid when purchasing property above a certain value in England and Northern Ireland. First-time buyers often get reduced rates or exemptions.
T
Tracker Mortgage
A mortgage where the interest rate follows the Bank of England base rate, meaning your payments can go up or down.
Title Deeds
Legal documents proving property ownership.
U
Underwriting
The process where a lender assesses your mortgage application, checking your financial situation and property details.
V
Valuation Survey
A lender’s assessment of the property’s value to ensure it’s worth the loan amount.
Variable-Rate Mortgage
A mortgage where the interest rate can change, often linked to the lender’s standard variable rate (SVR).
Y
Yield (Rental Yield)
The annual rental income expressed as a percentage of the property’s value. Important for buy-to-let investors.
Still Have Questions?
If you’d like further clarification or need help with your mortgage application, get in touch with the Mortgage Bridge team. We’re here to make the process as straightforward as possible.