Jargon explained

If you feel like you need to learn a new language to get a mortgage then we agree.

To save you the time and the headspace, we have explained below all the major terms you will come across in your mortgage journey, in simple terms.

95% Mortgage

A mortgage which allows a lender to borrow up to 95% of the property's value. These are usually aimed at first-time buyers, and offer the choice of a fixed or variable rate.

Agreement in Principle

A confirmation that a lender is prepared to lend, based on basic information submitted before a full mortgage application. Alternatively known as a ‘Decision in Principle' or a ‘Mortgage in Principle'.

Annual Percentage Rate (APR)

The annual rate charged for a mortgage repayment, reflecting not just interest rates but mortgage broker fees and other charges. An APR will typically be higher than an interest rate.

Appointed Representative Broker

This type of mortgage broker works under the umbrella of a ‘network' of mortgage brokers (as opposed to working for themselves as a ‘Directly Authorised' broker, please see below). Joining a large network can give brokers access to preferential rates from lenders and they may have more time to speak directly with you as the network will complete all of their back-office paperwork in the background. However, their fees may be higher as a result.

Arrangement Fee

A fee paid to lenders to cover the setting up and administration of a mortgage. They can be paid as an initial flat fee or charged as a percentage of the loan.


A payment that is overdue or a payment that is to be made at the end of a period. An account is in arrears if a payment has been missed when regular payments are contractually obliged.

Base Rate

Issued by the Bank of England, it is the official interest rate that lenders use to calculate interest rates on their mortgage offerings.

Booking Fee

A upfront fee which pays for the ‘booking' of a loan whilst a mortgage application is processed. It is alternatively known as an ‘application' or ‘reservation' fee.


An intermediary that works with a lender and a borrower to negotiate a mortgage and qualify the borrower. A broker will gather credit reports and other relevant documentation to assess the borrower's suitability, and guide them through the process.

Buildings Insurance

Insurance that covers rebuilding cost should a home suffer structural damage, such as fires, vandalism and burst pipes. It is usually compulsory when buying a home with a mortgage.


A buy-to-let mortgage is a loan for purchasing or refinancing residential property which is let to tenants rather than lived in by the borrower. Rates are typically higher than those for standard mortgages.


The money a lender borrows, which is returned through repayments.

Capped Rate

A type of variable rate mortgage with an interest rate ceiling, beyond which repayments cannot rise. These are typically only for an introductory period, such as the first two to five years of a repayment.

Cashback Mortgage

A mortgage in which the lender gives a one-off payment to the borrower at the beginning. The sum is dependent on the size of the mortgage and is funded by the mortgage interest rate paid by the borrower.

Credit Score

A credit score or credit rating is a collection of data about an individual's borrowing and loan repayment history, that is synopsized in a score out of 999 i.e. a score of 920 means you are highly likely to repay a loan, so a lender may offer you a preferential rate to someone with a score of 520. MortgageGym has partnered with Experian to provide you access to your credit score – and to match it to a range of lenders' internal lending criteria, so the interest rate offered by them is affordable and one you have a high probability of getting. Essentially, the rate is matched to your individual finances.


The minimum rate of interest that can be charged for a specific period; the opposite of a capped rate (see above), which is the maximum rate.


The legal and administrative work associated with transferring the ownership of property from one person to another. This process begins after having an offer is accepted on a property, and ends when the final contracts have been signed and money transferred.

County Court Judgements (CCJs)

An order issued by a court on behalf of a lender, which compels the borrower to repay debt in the case of a missed repayment. This will have a negative impact on your credit rating (see above).


A legally-binding guarantee made by a borrower to a mortgage lender. For example, a borrower will be required to guarantee that they are legally entitled to own a property, and that no competing title claims exist.

Current Account Mortgage

A mortgage that allows the borrower to offset all savings and debts into one single account. One's mortgage account and bank account are merged, and a cash card is issued as in the case of an ordinary current account.


The initial funds used as an upfront payment to a lender in the purchase of a property. They are also known as Down Payments and Home Loan Deposits.

Directly Authorised Broker

A broker that is independent from mortgage networks (a group of brokers) and, essentially, works for themselves. This means they may have lower fees than a broker attached to a network (or an ‘Appointed Representative' of a network, see above), but may not have access to as many lenders – and better rates – than a network. As they have to do all their own back-office paperwork, they may also have less time to provide you with face-to-face advice.

Discounted-rate Mortgage

A type of variable rate mortgage in which the interest rate is set at a ‘discount' below the lender's standard variable rate for a set period. They comprise approximately 4% of mortgages issued in the UK.

Early Repayment Charges

A charge incurred for repaying a mortgage early. It is typically charged as a percentage of the loan.

Endowment Mortgage

This was a mortgage popular in the 1980s, which became the basis of a mis-selling scandal and are no longer offered to borrowers today. The mortgage was arranged on an interest-only basis, which had typically low monthly repayments as only the mortgage interest is repaid. The capital was supposed to be eventually repaid by an ‘endowment policy' or insurance policy taken out with an insurer, to whom borrowers paid a separate payment or premium. The aim was to have a surplus on the mortgage at the end of the term, as investments underpinning the endowment were expected to increase as well as the value of the property. However, this did not happen in many cases and borrowers ended up with a significant shortfall.


The value of ownership in a home or property. It is measured by the difference between the balance of your home loan and the market value of the property.

Equity Release Scheme

These schemes take two forms: ‘lifetime mortgages' and ‘home reversion' schemes. The former allows you to borrow a proportion of your home's value, upon which interest is charged, but nothing typically is repaid until you die or sell your home. The latter allows you to sell a share of your property to an equity release provider for less than its market value. When you die and the property is sold, the provider gets a proportional share of the profit from the eventual sale price.

Family Offset Mortgage

A mortgage that allows parents or grandparents to use their savings to help their children or grandchildren to repay it. The cash is put into a linked savings account and acts as a deposit that lowers the monthly mortgage repayments. The parents or grandparents retain ownership of the deposit, but it must be locked up in the account for several years.

Fixed-rate Mortgage

A fixed-rate mortgage is a mortgage which has a fixed interest rate for the duration of the loan.

Flexible Mortgage

A mortgage which offers flexibility in the requirements for monthly repayment. For example, a flexible mortgage may allow overpayments.


A property whose owner owns the property outright, as well as the land that it is built on.


The process whereby a seller accepts a higher offer from a second source after they have already accepted a previous offer.


A type of mortgage in which a parent or close family member guarantees the mortgage debt. If a buyer fails to make a repayment, the guarantor is obliged to cover them.

Hard Search

This is when a lender takes a full look at your credit score during an application for some form of credit – such as a mortgage. This type of credit check leaves a mark on your credit report so that future prospective lenders can see when you applied and whether your application was accepted. A hard check is carried out by some lenders – particularly when you have reached a late stage in your application, beyond an initial check. Having multiple hard searches or ‘hard footprints' on your credit file will negatively impact your ability to gain a mortgage in future – as it tells lenders you have applied multiple times and been denied.


A Government scheme available to buyers hoping to buy a property priced up to £600,000. The Government loans the buyer up to 20% of the purchase price if he or she has at least 5% of the purchase price as a deposit and a mortgage of up to 75% to cover the rest.

Higher Lending Charge

Formerly known as a mortgage indemnity guarantee (MIG), this is a fee charged by a mortgage lender when the loan-to-value ratio (see below) on a mortgage is high – and the lender is not prepared to lend on standard rates. For example, some charge a higher lending charge when the loan is over 90% of the property's value. Others do not levy a higher lending charge as such, but just have higher interest rates for higher loan-to-value ratios.

Interest-only Mortgage

A type of mortgage in which the buyer is only required to pay off interest each month. This means that the lender does not pay off any of the capital that is borrowed until the end of the mortgage term.


A mortgage intermediary is someone who brokers mortgage loans on behalf of individuals or businesses, typically known as a broker.

Joint Mortgage

A mortgage with more than one borrower. All of the borrowers involved are equally liable for making repayments, but they typically allow buyers to borrow more.

Land Registry

A Government department which safeguards land and property ownership. Anyone buying or selling land or property, or taking out a mortgage, must apply to register.


A temporary right to occupy land or property. A person who owns the freehold of a property can grant a lease on it to another person, for a fixed term. You will find properties are sold on either a freehold (see above) or leasehold basis.

Lifetime Mortgages

A long-term loan secured against one's home, which is repaid when you die or go into long-term care. Interest is charged on an increasing sum, which means debt can rise quickly. As you do not make any repayments, interest on the loan is added to the debt continually.

Loan to Value (LTV)

A figure established by lenders to express the ratio of a loan to the value of a purchased asset. For example, if someone borrows £200,000 to purchase a home for £240,000, the LTV will be 83%.

Monthly Repayment

The amount that a borrower is required to pay each month until the debt is paid off.

Mortgage Deed

A legal document that gives a mortgage lender the right to keep possession of a property until the debt is paid off. Borrowers will sign a mortgage deed to give the lender security in case of a default on the repayment of a loan.

Mortgage Market Review

This is a piece of regulation brought in by the Government in 2014, which makes it harder to get a mortgage. Following its introduction, lenders need to assess whether you can afford to repay a mortgage before they offer you one and they must prove that you have been advised on the most appropriate mortgage applicable to you. Previously, some borrowers could ‘self-certify' themselves for a mortgage; in other words, they could just promise that they were able to repay. This lead to many people securing a mortgage that they could not afford to repay.
Now you need to show lenders that you can repay by proving your income and expenditure.

Mortgage Payment Protection Insurance

Insurance which covers monthly repayments if the borrower is unable to make them. These policies typically cover people inhibited by illness, disability and unexpected redundancy.

Mortgage Term

The length of time that a mortgage lasts, agreed by the lender and borrower.

Negative Equity

A property is said to be in negative equity if it is worth less than the mortgage secured on it. For example, if you buy a £300,000-valued property with a £250,000 mortgage, you would be in negative equity if the property's worth fell to £230,000.

Offset Mortgage

A mortgage that allows you to link your mortgage to your savings, allowing you to pay less interest. The savings will be ‘offset' against the total value of the mortgage, meaning that you will only pay interest on the difference between your mortgage balance and savings balance. For example, if you have borrowed £100,000 and have £10,000 in savings, you will only pay interest on £90,000 by ‘offsetting' your savings against the mortgage.

Portable Mortgage

A portable mortgage is one that allows the borrower to transfer their mortgage balance to a new property with the same lender without penalties. However, porting a mortgage is, in effect, re-applying, therefore you may not qualify to do so.

Rebuild Cost

The rebuild cost is the amount that is required to completely rebuild a home if it was destroyed beyond repair, including the price of labour and materials.


A borrower remortgages when they seek out a new mortgage. You can either seek a new deal with your existing lender or move to a new lender. Some people do this to get a lower rate, therefore saving money; others do it because the value of their property has gone up and they want to ‘release capital or equity' from it by getting a new mortgage.

Repayment Mortgage

A mortgage in which regular repayments repay both the capital borrowed and the accrued interest.

Service Charge

If you are buying a leasehold property, this is a charge outlined in a lease which covers maintenance and repair work on communal areas.

Shared Ownership

Shared ownership properties require you to buy a stake of between 25-75% in the property, and are sold through housing associations or local authorities. You buy a portion and pay rent on the remaining share to the authority or association.

Soft Search

This is a preliminary check of your credit file or credit score, that allows lenders to see that information you have provided is accurate without leaving a mark on your file that other lenders will see. They will be visible to you, but they will not lower your credit score or impact your ability to get a mortgage (or other loan) in future.

Stamp Duty

A tax paid when you purchase a property over the value of £125,000. The rate paid varies based on the price of the property and can be quote confusing, so it's best explained using an example. Let's say you buy a property for £350,000:

  • You don't pay anything on the value below £125,000.
  • Then you pay 2% on the value between £125,000 and £250,000.
  • Then you pay 5% on the value of the property above £250,000 (which in this case is £100,000).
  • Therefore, your entire stamp duty payment will be £7,500 (£0 + £2,500 + £5,000).

Standard Variable Rate (SVR) Mortgages

An SVR mortgage is a type of variable rate mortgage. The SVR is a lender's ‘default' rate, without any discounts or limited-term deals included. The average standard variable rate is around 4.5%.

Sub-Prime / Non-Conforming mortgage

A type of mortgage granted to borrowers with poor credit histories, who would otherwise struggle to be approved for conventional mortgages. These typically carry higher interest rates to compensate for the increased risk.

Tie-in Period

As part of a mortgage deal, a borrower may have to agree to stay with the lender for a period after the deal has ended. If a borrower changes mortgage agreement within this period, he or she will likely be subject to fees, sometimes known as ‘early redemption penalties'.

Tracker Mortgage

A type of variable rate mortgage in which the rate correlates directly to another rate. This is typically the Bank of England Base Rate.

Valuation Fee

The fee you will pay for a valuation survey (see below), which can vary considerably. However, some mortgages will come with a free valuation.

Valuation Survey

Otherwise known as a mortgage valuation, a valuation survey is undertaken by a surveyor on behalf of a lender to independently confirm a property's value. It also informs the lender of any defects that could affect its value.

Variable-rate Mortgage

A type of mortgage in which the interest rate is not fixed.