Mortgage Glossary – Key Terms Explained | Mortgage Bridge
Mortgage terminology can often feel confusing, particularly if you are unfamiliar with the lending process or encountering certain phrases for the first time. Lenders, brokers, solicitors, and estate agents frequently use technical terms that may not always be clearly explained.
This mortgage glossary provides clear, plain-English explanations of key mortgage terms commonly used in the UK. It is designed as a reference guide to help you understand the language used throughout the mortgage process. The explanations below are for general information only.
A
Affordability
Affordability refers to a lender’s assessment of whether mortgage repayments are likely to be sustainable based on income, outgoings, existing debts, and lifestyle costs.
Agreement in Principle (AIP)
An Agreement in Principle is an initial indication from a lender of how much they may be willing to lend. It is subject to full checks and is not a guaranteed mortgage offer.
Arrears
Arrears occur when mortgage payments are missed or not paid in full. Persistent arrears can have serious consequences and are recorded on a credit report.
B
Base Rate
The Bank of England base rate influences many mortgage interest rates, particularly tracker and variable-rate mortgages.
Buy-to-Let Mortgage
A buy-to-let mortgage is used to purchase property intended to be rented out rather than lived in by the borrower. These mortgages are usually assessed based on rental income.
C
Capital
Capital refers to the original amount borrowed on a mortgage, excluding interest.
Capital and Interest Mortgage
A capital and interest mortgage involves monthly payments that gradually repay both the original loan and the interest charged.
CCJ (County Court Judgment)
A CCJ is a court order issued in England and Wales for unpaid debt. CCJs appear on credit reports and can affect mortgage eligibility.
Completion
Completion is the final stage of a property purchase when funds are transferred and ownership legally changes hands.
D
Deposit
The deposit is the upfront contribution made towards a property purchase. It is usually expressed as a percentage of the property value.
Decision in Principle (DIP)
Another term for an Agreement in Principle, providing an initial indication of borrowing potential.
Default
A default is recorded when a borrower fails to meet credit agreement terms over a period of time. Defaults remain on a credit report for up to six years.
E
Early Repayment Charge (ERC)
An early repayment charge may apply if a mortgage is repaid or changed during a fixed or discounted period.
READY TO GET STARTED?
Make a mortgage enquiry with Mortgage Bridge
If this guide relates to your situation, you can make a quick mortgage enquiry and we’ll be in touch to understand what you’re looking to do and how we can help.
Make a mortgage enquiry →No obligation. Mortgage Bridge acts as a mortgage introducer.
Equity
Equity is the difference between the property value and the outstanding mortgage balance.
F
Fixed-Rate Mortgage
A fixed-rate mortgage has an interest rate that stays the same for a set period, such as two or five years.
Freehold
Freehold ownership means owning the property and the land it is built on outright.
G
Guarantor
A guarantor is someone who agrees to be responsible for mortgage payments if the borrower cannot meet them. Guarantor arrangements vary by lender.
Gifted Deposit
A gifted deposit is money given, usually by a family member, towards a property purchase. Lenders typically require confirmation that it does not need to be repaid.
H
Higher Lending Charge
A fee some lenders charge on higher loan-to-value mortgages to offset increased risk.
I
Interest
Interest is the cost charged by a lender for borrowing money.
Interest-Only Mortgage
With an interest-only mortgage, monthly payments cover only the interest. The original loan amount must be repaid separately at the end of the term.
J
Joint Mortgage
A mortgage taken out by two or more people who are all responsible for the repayments and usually all named on the property title.
JBSP Mortgage
A Joint Borrower Sole Proprietor mortgage allows multiple borrowers to be named on the mortgage while only one person owns the property.
L
Leasehold
Leasehold ownership means owning a property for a fixed period while the land remains owned by a freeholder.
Loan-to-Value (LTV)
Loan-to-value is the percentage of the property value being borrowed. For example, a 90% LTV means a 10% deposit.
M
Mortgage Offer
A mortgage offer is the formal confirmation from a lender outlining the terms on which they are prepared to lend.
Mortgage Term
The mortgage term is the length of time over which the mortgage is repaid, commonly 25 to 35 years.
N
Negative Equity
Negative equity occurs when the mortgage balance is higher than the property’s value.
O
Overpayments
Overpayments are additional payments made on top of the required monthly amount. Some mortgages limit how much can be overpaid without charges.
P
Porting
Porting allows an existing mortgage product to be transferred to a new property, subject to lender approval.
Product Fee
A product fee is a charge for arranging a particular mortgage product. It may be paid upfront or added to the loan.
R
Remortgage
A remortgage involves switching a mortgage to a new lender or product, often when an existing deal ends.
Repayment Mortgage
Another term for a capital and interest mortgage, where both the loan and interest are repaid monthly.
S
Standard Variable Rate (SVR)
The lender’s default interest rate, which usually applies when a fixed or discounted period ends.
Stamp Duty Land Tax
A tax payable on property purchases above certain thresholds in England and Northern Ireland. Different systems apply in Scotland and Wales.
T
Tracker Mortgage
A tracker mortgage follows a benchmark rate, commonly the Bank of England base rate, plus a set margin.
Transfer of Equity
A legal process to add or remove someone from a property title and mortgage.
U
Underwriting
Underwriting is the lender’s detailed assessment of a mortgage application, including income, credit history, and property details.
V
Valuation
A valuation is carried out on behalf of the lender to confirm that the property is suitable security for the mortgage.
Variable Rate Mortgage
A mortgage where the interest rate can change over time, usually in line with the lender’s standard variable rate.
W
Weighted Average Cost of Capital
A term sometimes referenced in lender funding models, though not typically relevant to borrowers directly.
Summary
Understanding mortgage terminology can make the mortgage process feel more manageable and transparent. This mortgage glossary provides explanations of commonly used terms so you can better understand conversations, documents, and lender communications throughout a mortgage application.
Having a clear grasp of key terms helps you engage more confidently with the process and reduces the likelihood of misunderstandings.
This article provides general information only. For personalised guidance, regulated mortgage advice is required.
Check your credit in detail
Access your full credit report
See your complete credit information from all three major agencies with Checkmyfile. Try it free, then it’s a paid monthly subscription – cancel online anytime.
Get started now
Important information: Mortgage Bridge provides information only and acts as a mortgage introducer. We do not provide mortgage advice or make lender recommendations. We can introduce you to an FCA-regulated mortgage adviser who can provide personalised mortgage advice.