Jargon Buster!

Agreement in Principle – an AIP (also referred to as a DIP) is an indication from a lender that they can, in principle, consider supporting you with a mortgage. 

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Affordability Check – to determine how much money a lender will consider offering you.

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Annual Percentage Rate of Charge – APRC is the interest rate which refers to the total cost of borrowing including any fees. It should not be the sole reason for choosing one mortgage over another as it is calculated across the whole mortgage term and will include the lenders variable rate, and it is not good practice to stick on a variable rate.

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Arrears - if you fall behind with your mortgage repayments you are 'in arrears'.

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Bank Base Rate – BBR is a variable rate set by individual lenders, with some simply calling it their ‘standard variable rate’.

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Broker / Intermediary - that's us 👍

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Buy To Let - a BTL mortgage that is secured against a property for investment purposes.

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Capital & Interest – more commonly known as a Repayment Mortgage where you agree to pay both capital and interest to your lender, so your balance reduces each year. Regarded as a safer way to repay a mortgage as, providing you meet all your monthly repayments during the whole term, your mortgage will be cleared in full.

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Capped Rate – where your mortgage interest rate will not go above a certain level if interest rates increase but can come down should interest rates decrease.

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Cash Back – lenders can offer various incentives to make their deals more attractive, offering you a cash back on completion (towards your Conveyancing costs) is one way of doing so.

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Chaps Fee – charged by the lender to electronically transfer mortgage funds to you / your Conveyancer.

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Chain – a group of buyers and sellers that are connected. In most cases the longer the chain the longer it may take for you to move.

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Completion Date – the date which is agreed by all parties as ‘moving day’.

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Conveyancing – this the legal process for buying and selling property, typically completed by a Solicitor or Conveyancer.

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County Court Judgment (CCJ) – a CCJ signifies an inability to repay debt, which may adversely affect mortgage applications.

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Credit Check - A credit check occurs when a bank or building society reviews your credit report to evaluate your financial management history. It is also referred to as a credit search. 

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Critical Illness Cover – CIC is a type of insurance that pays out if you survive a critical illness or injury. (Conditions will apply)

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Daily Interest – your mortgage interest will be calculated on a daily basis, the most efficient way of repaying a mortgage.

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Debt to income ratio – he proportion of your monthly debt payments relative to your gross monthly income.

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Decision in Principle – a DIP (also referred to as an AIP), is an indication from a lender of how much you can borrow.

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Decreasing Life Insurance / Cover – the cheapest form of life insurance and can be set up to protect a repayment mortgage, as the amount of cover reduces each year just like your mortgage. (Conditions will apply)

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Deposit – refers to the amount you intend to put down when purchasing a property, usually expressed as a percentage of the purchase price with the minimum typically being 5%. Increasing your deposit will usually result in a better deal being offered by lenders.

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Disbursements – these are the fees your conveyancer pays to third parties on your behalf, such as Stamp Duty Land Tax (in England), Land Registry fees, and search fees.

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Discounted Rate – this is where your lender offers you a discount off their standard variable rate for a specific period, with the only drawback being that your mortgage payments may go up as well as down.

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Early Repayment Charge – an ERC is typically charged by a lender if you exit your mortgage agreement early. So, if you have signed up to a lower rate for a predetermined period (so a fixed, discounted or tracker rate for example), you are likely to incur an ERC if you need to redeem your mortgage early.

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Energy Performance Certificate - an EPC is required by law for all homes bought, sold, or rented to provide information on how to make your home more energy efficient.

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Equity – refers to the difference between the outstanding mortgage and current value of the property. For example, if you owe 100k and you sell your home for 200k, you will have 100k ‘equity’.

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Exchange of Contracts – the date you become legally committed to purchasing your home and finally setting your completion (move) date.

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Exit Fee – this is a further admin fee a lender can charge when you close your mortgage with them.

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First Mortgage Payment – your first payment will be higher than your usual payment as it is likely to include ‘initial interest’ for the month your mortgage completed. (Some lenders will collect payments in arrears, so nothing to pay during the first month following completion)

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Fixed Rate – if you require stability with your mortgage payments you should consider a fixed rate mortgage, whereby your monthly payments will be ‘fixed’ for a specific period, usually 2 or 5 years.

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Freehold Property – where you own both the property and the land that it sits on.

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Further Advance – this is where you raise some additional funds from your current lender.

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Gazumping – when another interested party comes through with a higher offer on a property being purchased despite a deal being formally agreed beforehand.

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Gifted Deposit – this is where someone else, usually a family member, provides you with funds towards purchasing a property.

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Ground Rent – is an annual charge payable by leaseholders to the freeholder.

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Guarantor Mortgage – is most common for first time buyers, where a third party, usually a family member, agrees to meet your mortgage repayments if you are unable to. 

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Income Protection Insurance – this insurance policy will pay out a proportion of your income if you are unable to work due to illness or injury. (Certain conditions will apply).

Initial Interest – is interest charged from the day funds are released to your Solicitor to the end of that month – hence why your First Payment will often be higher.

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Interest Coverage Ratio – a lender will apply their ICR to determine how much they will lend towards purchasing a property for investment purposes. (Buy to Let)

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Interest Only Mortgage – this is where you elect to pay just the interest due and therefore none of the original amount borrowed. You will need to ensure that you have adequate means to repay your mortgage at the end of your term – i.e. pension, investments or downsizing the process of selling your home to purchase a cheaper one. Although this can be a riskier way of repaying a mortgage it can work very well, particularly if you have variable income throughout the year, maybe if you are self-employed for example.

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Joint Borrower Sole Proprietor – a JBSP mortgage allows someone else to be on a mortgage to help boost affordability whilst not being noted on the property title deeds.

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Key Facts Illustration (KFI) – the lender (or your broker) will provide a KFI to outline the full terms of the mortgage product you are applying for.

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Land Registry – this is the official organisation that holds details in relation to the ownership of land and property.

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Leasehold Property – this is where you own the property but not the land it sits on, so typically most flats. If you require a mortgage, it is advisable to avoid properties being sold with less than 75 years remaining on the lease, otherwise you may need to consider extending the lease during your ownership, which can be a costly thing to do. As lenders like to avoid properties with shorter leases, it will become increasingly more difficult to obtain a mortgage as the years tick by, which could then hinder any future sale.

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Let to Buy – a LTB mortgage is where you re-mortgage your current home onto a Buy to Let mortgage to then enable you to purchase your next home.

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Level Term Insurance / Cover – this offers you a fixed amount of life insurance, typically used to protect your mortgage and family. (Conditions will apply).

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Loan to Value – LTV is the mortgage amount as a percentage of a property’s value or purchase price. So, if you are purchasing a property for 200k and borrowing 150k, you are raising a mortgage that is 75% LTV.

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Local Authority / Environmental Search – an enquiry submitted to the local authority in relation to any proposed road building, planning permission for previous building work, environmental and mains sewer connection etc.

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Mortgage Deed – is a legally binding document confirming you are entering into a contract with your mortgage provider and one that is secured against your property.

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Mortgage Offer – once your application has been approved your lender will issue a mortgage offer which outlines their full terms and conditions.

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Negative Equity – this is where your property value falls below the mortgage amount left to repay.

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Offset Mortgage – whereby you can offset your savings against your mortgage, therefore only paying interest on the amount borrowed minus any savings which are linked to your mortgage.

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Overpayment – an additional amount paid off your mortgage, which could be a lump sum or a monthly amount over and above your normal monthly repayment. Making overpayments is a wonderful way to repay your mortgage sooner.

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Part and Part Mortgage – this type of mortgage blends features of capital & interest (Repayment) and interest-only mortgages. For example, with a £200,000 loan, you might have £100,000 as repayment and £100,000 as interest-only. This means you'll need to pay back the £100,000 interest only balance, plus any fees and charges, at the end of the mortgage term.

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Payment Holiday – this is where your lender agrees a payment free period. It is important to remember that interest will continue to be charged with any ‘holiday’ months potentially added onto the term of your mortgage.

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Porting / Portability – this is where you are moving and your lender allows you to move your current mortgage to your next home. (This is not a given so Terms and Conditions will apply)

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Rebuild Costs – this is the amount needed to rebuild your home if it's destroyed, such as by fire. It's important for insurance purposes.

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Reflection Period – this is a set time for you to carefully review a binding mortgage offer. The reflection period does not affect how long your offer remains valid.

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Re-mortgage – is the process of transferring your mortgage from one lender to another. This occurs at the end of any special rate with your lender. An early repayment charge may apply if you exit / change before your current deal ends.

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Repayment Mortgage – refer to Capital & Interest Mortgage.

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Serious Illness Cover – like CIC in that this type of insurance pays out if you survive a serious illness or injury. (Conditions will apply).

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Service Charge – normally applies to leasehold properties and is charged to help maintain the freehold building along with any shared / communal areas, such as stairways / grounds etc.

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Shared Ownership –through the government Shared Ownership Scheme, you can purchase a portion of a property (typically between 25% and 75%) while renting the remaining share from a housing association.

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Stamp Duty Land Tax – SDLT is payable when you purchase land or property over a certain threshold.

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Standard Variable Rate – SVR is the interest rate you will revert to once your initial rate (for example fixed) has expired. As these rates are generally higher it is advisable to engage with a mortgage broker to review your options well beforehand.

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Survey – a report on the general condition of the property you are purchasing. In addition to a basic valuation there are two upgrades available to you 1) Homebuyers Report 2) Building Survey.

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Term – is the period you agree to repay your mortgage over, ranging from 5 to 40 years with most lenders.

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Title Deeds – are legal documents which record the ownership of property / land, details of which are held electronically by the Land Registry.

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Tracker Rate – this is where your mortgage interest rate will follow the Bank of England base rate. These types of mortgages often provide greater flexibility as many do not tie you into Early Repayment Charges.

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Transfer Deed – the legal document that officially transfers ownership of registered land.

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Transfer of Equity – the process of adding or removing an individual from an existing mortgage account and property ownership.

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Valuation – lenders will conduct their own valuation before they offer you a mortgage, basically to ensure it is worth the level stated.

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Vendor – is the person selling a property.