Mortgage Glossary – Key Terms Explained
Mortgage language can feel like another world — full of acronyms, industry phrases, and legal terms. But once you understand what they mean, everything becomes much clearer.
This mortgage glossary breaks down the most common terms you’ll come across, explained in simple language to help you feel confident and informed when speaking with lenders or brokers.
Whether you’re buying your first property, remortgaging, or exploring specialist options, this guide covers everything you need to know.
A–B: Key Mortgage Terms
Agreement in Principle (AIP)
A statement from a lender showing how much they may be willing to lend you, based on basic financial checks. It’s sometimes called a Decision in Principle (DIP) and helps show estate agents that you’re a serious buyer.
Annual Percentage Rate of Charge (APRC)
The total yearly cost of your mortgage, including interest and any fees, shown as a percentage. It helps you compare deals more accurately.
Arrears
Payments you’ve missed on your mortgage or other credit accounts. Lenders will ask about any arrears when assessing your application.
Base Rate
The interest rate set by the Bank of England that influences mortgage rates. When the base rate changes, your lender’s rates may also rise or fall — especially if you’re on a variable deal.
Broker
A mortgage adviser (like us at Mortgage Bridge) who compares deals across multiple lenders to find the best option for your situation.
C–D: Credit and Deposits
Credit Report
A record of your borrowing and repayment history, showing how you’ve managed credit accounts. Lenders use this to assess your reliability.
Credit Score
A number based on your credit history that reflects how likely you are to repay credit responsibly. Different lenders use different scoring systems.
Default
A serious missed payment where the lender closes the account. Defaults can stay on your credit file for up to six years but don’t always stop you from getting a mortgage.
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Deposit
The amount you pay upfront when buying a property. Most lenders require at least 5%, but some products allow 2.5% deposits or even 0% through schemes like Shared Ownership or with rental history evidence.
Debt-to-Income Ratio (DTI)
The proportion of your income that goes toward paying debts. Lenders use it to judge affordability.
E–F: Equity and Fixed Rates
Equity
The portion of your property you own outright. It increases as you repay your mortgage or if your home’s value rises.
Early Repayment Charge (ERC)
A fee charged if you repay your mortgage early or switch deals before the fixed or tracker period ends.
Fixed-Rate Mortgage
A mortgage where your interest rate stays the same for a set term (usually 2, 3, or 5 years), providing predictable monthly payments.
First-Time Buyer
Someone purchasing their first property. Many lenders and government schemes offer special deals for first-time buyers.
G–L: Government Schemes and Loan Terms
Guarantor Mortgage
A type of mortgage where a family member or friend agrees to cover payments if you can’t.
Help to Buy (Closed)
A government equity loan scheme that helped buyers purchase new-build homes with a 5% deposit. Although closed to new applicants, similar options exist through Shared Ownership and First Homes.
Interest Rate
The cost of borrowing money, expressed as a percentage of your loan.
Interest-Only Mortgage
A mortgage where you only pay the interest each month, with the loan balance due at the end of the term.
Loan-to-Value (LTV)
The ratio between your mortgage amount and your property’s value. For example, borrowing £180,000 on a £200,000 property equals a 90% LTV.
M–O: Mortgage Types and Overpayments
Mortgage Term
The total length of time you’ll take to repay the loan, usually 25–35 years.
Mortgage Offer
The official document from a lender confirming they’re willing to lend you the stated amount, subject to conditions.
Negative Equity
When your home is worth less than the remaining balance on your mortgage.
Offset Mortgage
Links your savings account to your mortgage, allowing you to reduce interest by offsetting your savings balance against your loan.
Overpayment
Paying more than your required monthly amount to reduce your balance and shorten your term.
P–R: Payments and Remortgaging
Porting
Moving your current mortgage to a new property when you move home, rather than starting a new one.
Product Transfer
Switching to a new deal with the same lender, often at the end of your current fixed term.
Remortgage
Replacing your existing mortgage with a new one, either with your current lender or a new one, to save money, release equity, or adjust your loan.
Repayment Mortgage
A standard mortgage type where you pay both the interest and a portion of the loan each month until it’s fully repaid.
Repossession
When a lender takes possession of a property after missed payments. It’s typically a last resort and can often be avoided with early advice and support.
A government-backed scheme where you buy a percentage of your home (usually between 25% and 75%) and pay rent on the rest. Some shared ownership options allow 0% deposit, depending on the housing association.
Stamp Duty
A tax paid when purchasing property above a certain threshold.
Standard Variable Rate (SVR)
The default rate you move to after your fixed or tracker deal ends, usually higher than introductory rates.
Tracker Mortgage
A mortgage where your interest rate follows (or “tracks”) the Bank of England’s base rate, so payments can rise or fall.
U–Z: Underwriting and Valuations
Underwriting
The lender’s process of assessing your financial details, credit history, and documentation before approving a mortgage.
Valuation
An inspection carried out by the lender to confirm the property’s market value before approving the loan.
Variable Rate Mortgage
A mortgage where your interest rate can change depending on market conditions or lender decisions.
Vendor
The person selling the property.
Yield
A term mainly used for buy-to-let properties — it measures rental income as a percentage of the property’s value.
Why Understanding Mortgage Terms Matters
Knowing what key mortgage terms mean helps you:
- Compare deals accurately
- Understand lender decisions
- Communicate confidently during the process
- Avoid surprises or misunderstandings
💡 The clearer you are about the terminology, the easier it becomes to make informed, confident decisions.
How Mortgage Bridge Can Help
At Mortgage Bridge, we believe mortgages shouldn’t be complicated — and neither should the language that surrounds them.
We explain everything clearly, help you understand your options, and guide you from first conversation to final approval with confidence and care.
Whether you’re self-employed, have complex income, or have faced credit challenges, we’ll help you find a solution that fits your situation.
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Important information: Mortgage Bridge provides information only and acts as a mortgage introducer. We do not provide mortgage advice or make lender recommendations. Where appropriate, we can introduce you to an FCA-regulated mortgage adviser.