Navigating the mortgage world can feel overwhelming, especially with all the jargon thrown around. Whether you're a first-time buyer, remortgaging, or investing in property, understanding the key terms can help you feel more in control.
This A–Z mortgage glossary is here to give you clarity and confidence at every step of your home-buying journey.
A
Additional Borrowing – Extra funds you can borrow on top of your existing mortgage, often used for home improvements or large expenses.
Agreement in Principle (AIP) – A certificate from a lender showing how much you can borrow, subject to full checks. Helps you house-hunt with confidence.
Arrangement Fee – The fee charged by the lender to set up your mortgage. It can be paid upfront or added to the loan (which means you’ll pay interest on it).
Affordability – How lenders assess how much they’re happy to lend you, based on income and outgoings.
Adverse Credit – A poor credit history (missed payments, CCJs, IVAs, etc.). Often requires a specialist lender.
Arrears – Missed mortgage payments. If unresolved, can lead to repossession.
ASU (Accident, Sickness & Unemployment Insurance) – Covers your mortgage payments if you're unable to work for one of these reasons.
B
Bank of England Base Rate – The rate set by the Bank of England. Most mortgage rates are influenced by it.
Booking Fee – A non-refundable upfront fee charged by some lenders (see also Arrangement Fee).
Buy-to-Let Mortgage – A mortgage used to buy a property you intend to rent out.
Buildings Insurance – Covers the structure of your home. Required by lenders before completion.
C
Credit Score – A rating based on your financial history, used by lenders to assess risk. Higher scores may mean better rates.
CCJ (County Court Judgment) – A legal record of unpaid debts that affects your credit score. Visible for 6 years, even if repaid.
Capital and Interest Mortgage – Also known as a repayment mortgage. Your monthly payments reduce both the debt and the interest.
Cashback – A cash incentive offered with some mortgage deals, sometimes instead of free legal or valuation services. Can also be offered to make your home more energy efficient.
Completion – The final stage in buying a property. Money is transferred, and you get the keys!
Conveyancing – The legal process of transferring property ownership.
Contents Insurance – Covers your belongings (e.g., furniture, clothing, gadgets). Not mandatory but highly recommended.
Critical Illness Cover – Insurance that pays a lump sum or monthly income if you're diagnosed with a serious illness covered by your policy.
D
Deposit – The money you put down upfront towards your home purchase. The bigger the deposit, the better your mortgage rates usually are.
Debt Consolidation – Using a mortgage to pay off other debts. Can reduce monthly payments but may increase total interest paid over time.
Decision in Principle – See Agreement in Principle.
Default – When a lender closes your account due to missed payments. Stays on your credit file for six years, even once repaid.
E
Early Repayment Charge (ERC) – A fee for paying off your mortgage or switching deals before your term ends.
Equity – The portion of your property you own outright (property value minus what you owe on the mortgage).
Equity Release Mortgage – Allows homeowners aged 55+ to release cash from their property, typically with no repayments until death or long-term care.
Endowment – An older savings/investment plan used to repay interest-only mortgages.
Exchange of Contracts – The legal stage when both buyer and seller commit to the purchase and a completion date is set.
F
Fixed Rate Mortgage – Your interest rate and monthly payments stay the same for a set period (e.g., 2 or 5 years).
Flexible Mortgage – Allows overpayments, underpayments, or payment holidays (subject to terms).
Freehold – You own both the property and the land it’s on.
Family Help – Mortgage schemes that allow relatives to gift or loan a deposit, or act as guarantor.
G
Guarantor – Someone who agrees to cover your repayments if you can’t.
Graduate Mortgage – Mortgages tailored for those starting careers, with flexible criteria or lending based on future income.
Ground Rent – An annual fee paid to the freeholder if your property is leasehold.
Gifted Deposit – A deposit gifted by a family member, with no expectation of repayment. Lenders require a letter confirming this.
H
Homebuyer’s Report – A mid-level survey identifying visible issues in a property (e.g., damp, subsidence).
Help to Buy – A now-closed government scheme offering equity loans to first-time buyers.
HMO (House in Multiple Occupation) – A rental property shared by three or more unrelated people. Requires special licensing.
I
Interest-Only Mortgage – You only pay the interest monthly. The full loan is due at the end of the term.
Interest – The cost of borrowing money from your lender.
Income Multiples – Old-school way to calculate borrowing, e.g., 4x salary. Now replaced by affordability checks.
Income Protection Insurance – Pays a monthly benefit if you can’t work due to illness or injury.
Intermediary – Another word for a mortgage broker or adviser.
Impaired Credit – See Adverse Credit.
J
Joint Tenants – Each person owns 100% of the property. If one dies, their share automatically passes to the other.
Tenants in Common – Each person owns a fixed share, which can be passed on in a will.
K
Key Facts Illustration – (Also called a Mortgage Illustration or ESIS. A document outlining all the key details of your mortgage deal.
L
Loan to Value (LTV) – The percentage of the property’s value you're borrowing. A 75% LTV means a 25% deposit.
Lender – The bank or provider offering your mortgage.
LIBOR – Formerly used interbank lending rate, now largely replaced in UK mortgages.
Leasehold – You own the property but not the land. Common with flats. Lease length affects value and mortgage options.
Lifetime Mortgage – See Equity Release.
Let-to-Buy – When you rent out your current home to buy a new one.
Land Registry Fee – A fee to register the ownership of land and property.
Local Authority Searches – Checks for planning, environmental or enforcement issues with a property.
M
Mortgage – A loan secured against your home. If you don’t keep up repayments, your property may be repossessed.
Mortgage Payment Protection Insurance (MPPI) – Covers mortgage payments for up to 12 months if you can’t work.
Mortgage Term – The length of time your mortgage runs for (e.g., 25 years).
Mortgage Offer – Confirmation from a lender that they’ll lend you the agreed amount.
N
Negative Equity – When your mortgage balance is higher than the property’s value.
No-Deposit Mortgage – Rare mortgage where you borrow 100% of the property value. Often needs a guarantor.
O
Overpayment – Paying more than your monthly payment. Reduces interest paid and shortens your mortgage term.
Offset Mortgage - Lets you reduce interest by ‘offsetting’ savings against your mortgage balance.
Offer - Formal document from a lender confirming your mortgage terms.
P
Porting - Taking your existing mortgage deal with you to a new property.
Payment Holidays – A short break from regular mortgage payments. Usually only available to borrowers who have previously overpaid but during the Covid19 pandemic they were available to all.
Product Transfer - Switching to a new deal with your current lender.
Product Fee – A charge for setting up a new mortgage, which can often be added to the loan.
Property Chain – A sequence of property buyers and sellers linked together, where each transaction depends on the other.
R
Repayment Mortgage - Monthly payments cover both interest and part of the loan. Also called capital & interest.
Remortgage – Moving to a new mortgage deal with a new lender without changing property..
Right to Buy - A scheme allowing eligible tenants to purchase their home, often at a discount.. Previously associated with Council homes, This is now being opened up to some Housing Association tenants too.
Repayment Vehicle – Required with interest-only mortgages to show how you’ll repay the loan at the end.
Repossession – If you are in arrears on your mortgage, the lender can apply to the courts to take possession of the property and sell it to re-coup their losses. This means you will have lost your home.
S
Stamp Duty - A tax paid when buying property over a certain price threshold.
Shared Ownership - you buy a share of a property (usually between 25% and 75%) and pay rent on the remaining share, which is owned by the housing association.
SVR (Standard Variable Rate) - The default interest rate your lender charges when your fixed or tracker deal ends. It’s often higher than other mortgage deals.
Secured Loan – Otherwise known as a second charge mortgage. A way to borrow further on your property without changing the original mortgage.
T
Term – The overall number of years your mortgage runs for.
Tie in Period - This is the period during which you are 'locked in' to your mortgage deal. You will have to pay an early repayment charge if you leave your mortgage during this period
Tracker Mortgage - The interest rate on your mortgage tracks the Bank of England base rate at a set margin above or below it.
U
Underwriting – The process lenders use to assess your application and documents.
Unencumbered – This is where the property is owned outright, with no mortgages or loans secured against it.
Unacceptable Properties – Properties that may be hard to get a mortgage on (e.g., non-standard construction, poor condition, or listed buildings). This could be Non-standard construction such as Post War prefabs, Mundic concrete, kit houses or log cabins.
Grade 1 listed buildings. Properties with poor EPC ratings. Properties in extremely poor condition, or that have dry rot or Japanese knotweed. Properties without working kitchens or bathrooms
V
Valuation – The lender’s assessment of your property’s value for mortgage purposes.
Variable rate - The interest rate the lender charges. it goes up and down and your repayments change accordingly.
Understanding mortgage terms can take the stress out of homebuying or remortgaging. If anything’s still unclear or you want to chat through your options, I’m here to help.
At Willow Tree Financial Services, we offer personalised advice on mortgages, investments, pensions, insurance, and estate planning — tailored to your goals and circumstances.
📞 Call us on 01323 436680, Get in contact here https://www.willowtree-fs.co.uk/contact or book a free appointment https://link.willowtree-fs.co.uk/widget/booking/bTqxLB9krrLFeNpyHaYd to get started.
We’re based in Polegate, East Sussex, and support clients across the South East and beyond.
For help with your mortgage, with us book directly onto my calendar here. https://link.willowtree-fs.co.uk/widget/bookings/30-min-initial-appointment
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Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep repayments on your mortgage.
Equity Release will reduce the value of your estate and can affect your eligibility for means tested benefits.
Some Buy to Let Mortgages, some individual Voluntary Arrangements and Conveyancing are not Regulated by the Financial Conduct Authority.
Conveyancing, Individual Voluntary Arrangements and Second charge Mortgages are by referral only.
