Mortgage terminology – glossary and jargon buster - Mortgages - Guides - Moneyfacts


Mortgage terminology – glossary and jargon buster

Mortgage terminology – glossary and jargon buster

Category: Mortgages

Updated: 03/10/2016
First Published: 29/09/2015

Baffled by all the jargon surrounding mortgages? Our comprehensive glossary of mortgage terminology will teach you your LTVs from your HLCs!

But remember, this is just a guide, and if your mortgage adviser or bank uses terms you don't understand, make sure you ask them to explain.



Accident, sickness & unemployment insurance

See "Mortgage Payment Protection Insurance"

Application fee

See "Booking fee"


Mortgage APRC – or Annual Percentage Rate of Charge – is a representative interest rate designed to help you compare mortgages. It takes into account not only the introductory rate of interest you pay, but also the rate you pay when you finish your initial fixed, tracker or discount period , as well as any fees you are required to pay to get the mortgage.

Arrangement fee

This is a fee a mortgage lender may charge for providing you with a mortgage. They are usually paid on completion (although some lenders may let you pay this upfront) and tend to apply when you take out a fixed rate, tracker or discount mortgage. Similar fees may also be called 'completion fees'. Get more information from our fees guide.


See "Mortgage Payment Protection Insurance"


Base rate

Base rate usually refers to the Bank of England Base Rate. It is this rate that is most commonly tracked by tracker mortgages. Some Standard Variable Rates may also be affected by changes to base rate, although this will be down to the individual mortgage lender's discretion.

Booking fee

This is a fee that a mortgage lender may charge for reserving the money you wish to borrow. It's normally paid upfront when you make your mortgage application and is typically around the £99 mark. Find out more information in our fees guide.

Bridging loan

This is a short-term loan that 'bridges' the time period between two property transactions. It is used to cover shortfalls between buying one property and selling another.

Buy-to-let mortgage

Buy-to-let mortgages are for those who wish to rent out their property to somebody else. They are very similar to a mortgage on your own home, except the mortgage lender will usually assess whether you can afford the mortgage based on the projected rental income rather than what you earn. Buy-to-let mortgages are not regulated by the Financial Conduct Authority unless specific criteria apply to the borrower. Find out more information in our buy-to-let guide.


See "Buy-to-let mortgage"

Buildings insurance

Your mortgage lender will require you to have buildings insurance for your property. This protects you both against risks such as your house burning down, being flooded or suffering from a landslip or subsidence.

Building society

A building society is a type of financial institution that provides mortgages and savings accounts to its customers (as well as other banking services). Many of a building society's customers are also members – the society is run for the benefit of members rather than shareholders. Building societies are also limited by law as to how much they can borrow from other financial institutions. This has traditionally seen them regarded as more stable and sustainable than banks.


Capital gains tax

This is a tax on any profit made on the increase in the value of an asset since it was purchased. Capital gains tax isn't payable on any profit you make on your own home; however, it may be payable for profit you make after selling a buy-to-let property.

Capital & interest mortgage

See "Repayment mortgage"

Capped mortgage

A capped rate mortgage doesn't let your repayment rise above a certain level. However, if interest rates go down it will allow your payments to drop as well. Find out more information in our capped mortgage guide.

Cashback mortgage

This gives you a cash rebate on completion of the mortgage. The sum is either a percentage of the amount you borrow, or a fixed sum. Cashback could help you to cover some of the expenses of setting up home, but this bonus often comes at the expense of a higher interest rate, or is subject to a penalty if you repay the mortgage early.


See "Capital Gains Tax"


This is a fee you pay on completion of the mortgage to cover the cost of the mortgage lender sending the funds to your solicitor. The CHAPS fee is normally between £25 and £50 and is paid either by being added to your mortgage balance, or by being deducted from the balance you receive on completion. Find out more information in our fees guide.

Collar rate

A collar rate basically means that your monthly repayment can't go below a certain, minimum level. Collar rates are often put on tracker mortgages by lenders, to make sure that the rate doesn't fall to an amount that's too low (as happened to some fortunate mortgage borrowers when rates fell in the wake of the financial crisis of 2008).


Once the purchase or remortgage of a property is complete and you are legally the new owner, or the new mortgage has formally begun.

Completion fee

See "Arrangement fee"

Consent to let

If you already have a mortgage on your property and you wish to rent it out, you must get a "consent to let" from your mortgage lender. You will be charged a fee for getting this permission and it may mean your interest rate changes. However, if you fail to notify your mortgage lender, you will be in breach of your mortgage conditions.


The legal process involved in buying, selling or remortgaging your property.

Conveyancing fee

The fee that your solicitor or licensed conveyancer will charge for undertaking the legal work involved in buying, selling or remortgaging your property. Find out more information in our fees guide.

Current account mortgage

A current account mortgage allows you to link your current account to your mortgage. This method enables you to save mortgage interest as your normal cashflow can reduce the outstanding debt. However, you will probably be required to pay your salary into the current account.


Deed of Consent

When you mortgage or remortgage a property, anyone who lives in your home other than you (over the age of 17) could claim squatter's rights if the mortgage lender has to repossess the property. To protect against this, mortgage lenders will ask for all people over the age of 17, such as your children, to sign a Deed of Consent to say that they will not be able to claim squatter's rights in the event of repossession.

Deed of Postponement

If you want to remortgage and have both a mortgage and a secured loan on the property, your new mortgage lender will insist on you getting a Deed of Postponement from your existing secured loan provider. This is because your mortgage lender wants to have first legal charge (or claim) on your property in the event you can't repay your debts and your house has to be repossessed. Because financial charges or claims normally take precedence in order of the date they are registered, the secured loan provider will need to postpone their claim until after the new mortgage lender has made theirs – that's what a Deed of Postponement does.

Deeds sealing fee

This fee may be charged for your lender closing down your mortgage account and posting your title deeds to you. See also "Redemption administration fee".


The amount of money that you can put down towards the purchase of a property. Typically you'd need at least 10% of the property's value as a deposit, although there are a growing number of lenders that will let you have a mortgage for a deposit of less than 10%. See also "Equity".

Discounted mortgage

Discounted rate mortgages offer a discount on another interest rate – usually a lender's Standard Variable Rate (SVR). So if an SVR is currently 5% and the discounted rate is 1% below SVR, you'd pay a rate of 4%. Discounted rates are still variable, so your payments can go up as well as down. Find out more information in our discounted mortgage guide.


Drawdown refers to when you actually physically borrow the money from your mortgage lender. Sometimes you may not want all of the money you borrow at the outset of your mortgage, for example if you intend to use £30,000 to build an extension to your property. Instead, you keep a portion of the loan in your mortgage account where you can later withdraw it, or draw it down. Although this extra money is in your mortgage account you don't pay interest on it, which will mean lower monthly repayments.


Droplock is where a lender offers you an option to later change from a tracker rate to a fixed rate without having to pay an Early Repayment Charge (although you may have to pay other fees). This gives you the flexibility to make the most of low interest rates, while having the option to fix later if rates go up.


Early repayment charges

If you repay (redeem) your mortgage at any time before the end of the mortgage term, you may have to pay certain fees and an early repayment charge. This charge is usually a percentage of the amount remaining on the mortgage, or the original amount you borrowed. Early repayment charges often go down the further you are into a mortgage and most of the time they aren't payable after an introductory fixed, tracker or discount period ends. Find out more information in our fees guide.


All homes that are sold need to have an EPC or Energy Performance Certificate. This certificate tells prospective buyers how energy efficient a home is currently, as well as what can be done to improve energy efficiency in the future.


The amount (or percentage) of the property that you actually own. For example, if you have a £90,000 mortgage on a property worth £100,000, the amount of the property you actually own is £10,000 or 10%. See also "Deposit".


See "Early repayment charges"

Estate agent

You'd employ an estate agent to help you sell your property. They advertise your property, show people around and act as a go-between for you when communicating with a buyer. Fees can vary so you'd be wise to look around before choosing.

Exit fees

See "Redemption administration fees"


First-time buyer

A first-time buyer is someone who has never bought a property before.

Fixed mortgage

A fixed mortgage is where your mortgage payments stay exactly the same for an initial period. They're great if you have a tight budget and want to know what you'll be paying, or if you're worried about interest rates going up. Find out more information in our fixed mortgage guide.

Flexible mortgage

The main feature of a flexible mortgage is the facility to make extra payments when you have the money. You may also be able to reduce monthly repayments or even take payment holidays, although you will normally have to build up a reserve through making overpayments before this arrangement is allowed. Find out more information in our flexible mortgage guide.

Freedom of agency fee

See "Own buildings insurance fee"


Freehold means that you own both the building and the land it is on.

Full structural survey

A full structural survey is the most in-depth form of property survey. It should be thorough enough to uncover any major structural problems with a property and is particularly useful when purchasing an older house or flat. If you subsequently find that the property has major problems not unearthed by the survey, you may be able to claim compensation from the surveyor. A full structural survey is the most expensive form of survey. However, it does not include a mortgage valuation - so you'll also need to have one of these if you're buying a property with a mortgage or if you're remortgaging.

Further advance

This is where you borrow additional money from your mortgage lender. The extra money you borrow will also form part of the mortgage balance.



Gazumping is where the seller of a property accepts a higher purchase offer when they have already accepted a lower offer from another potential buyer.


Gazundering is where the prospective buyer of a property makes a lower purchase offer after they have already made a higher offer previously. This is normally done later on in the property buying process, when the seller is committed and it would take a long time for them to get to the same stage with a new buyer.

Ground rent

See "Leasehold"


A guarantor is someone who guarantees that the payments will be made on someone else's mortgage. Usually a guarantor is the parent or guardian of the mortgage holder. If the mortgage holder can't repay, the guarantor is then responsible for making the payments.


Higher lending charge

This charge can be made by a mortgage lender when you are borrowing a high amount in relation to what your property is worth. It is to cover the increased risk to the lender if you fail to repay the mortgage. Find out more information in our fees guide.


See "Higher lending charge"

Homebuyer's survey

A homebuyer's survey is a little more in-depth than a mortgage valuation, but not as extensive as a full structural survey. Because of this, a homebuyer's survey is priced between the two. The survey will uncover any problems with the property that are visible to the surveyor, although they will not make a more detailed investigation to find out if there are any hidden problems – that would be something for a full structural survey.


Income multiple

This is a calculation used by mortgage lenders to determine the maximum they will lend you. This is typically four times your income, or three and a half times a joint income. However, lenders now base this on your ability to make repayments, taking into account your income and outgoings. Find out more information in our guide: "How much mortgage can you borrow?".

Interest-only mortgage

With an interest-only mortgage your monthly mortgage payments only pay the interest element of the loan and not any of the amount you borrowed. To repay the mortgage some borrowers pay into an investment such as an ISA, pension or an endowment. Others sell their property at the end of the mortgage term. Find out more information in our interest-only guide.


Joint tenants

This is where you hold property ownership rights equally with another person or persons. If one of the joint tenants dies, ownership reverts entirely to the surviving tenants. This legal agreement supersedes any Will the deceased may have made.

Jointly and severally liable

When you take a joint mortgage you will usually be "jointly and severally liable" for making the repayments. This means that if one of you does not pay or is unable to pay (due to death, illness, unemployment or abandonment), the other person is still fully responsible for paying the mortgage.


Key Facts Illustration

A Key Facts Illustration should be given to you by your lender or mortgage broker before you make a mortgage application. It describes the key things you need to know about your mortgage, such as payments and fees.


See "Key Facts Illustration"


Land registration

The Land Registry keeps a record of who owns plots of land. The register also contains details of any legal charges on the property. Your mortgage lender will put a legal charge on your property when you complete the mortgage. It is this charge that allows them to repossess the property if you later can't meet your monthly repayments.

Landlord insurance

Landlords need to have a different kind of insurance to normal buildings insurance. This specialist cover is called Landlord insurance.


Leasehold means that someone else owns the land the building is on. So with leasehold you are only buying the right to live in the property for a certain length of time. Many leasehold properties will be subject to "ground rent", which is basically a maintenance charge for the upkeep of any communal areas. Ground rent can sometimes include buildings insurance as well. Sometimes the rent due is a nominal amount, for instance £50 per year. This is sometimes referred to as "peppercorn rent". When a property is leasehold your solicitor may make an additional charge to deal with the conveyancing.

Legal fees

See "Conveyancing fees"

Let-to-buy mortgages

Let-to-buy mortgages allow a landlord to borrow some money on their rental property to help them buy their own home.


LIBOR stands for London Inter-Bank Offered Rate – the rate that banks charge each other for lending to them. This rate is sometimes linked to some tracker mortgages.

Life insurance

A type of insurance that pays either a lump sum or an income if you die within a set term. You can set up life insurance to repay the mortgage if you die, so that your family aren't forced to move out of their home if they can't afford the repayments.


This refers to the amount of mortgage you have in relation to how much your home is worth. So if you have a mortgage for £90,000 on a property worth £100,000, the loan-to-value would be 90%. Find out more information in our loan-to-value guide.


See "Loan-to-value"


Mortgage account fee

This fee can be charged by the mortgage lender for setting up, maintaining and closing your mortgage account. Find out more information in our fees guide.

Mortgage deed

This is the legal document that you sign to formalise the mortgage agreement.

Mortgage payment protection insurance

This insurance covers you if you can't work due to an accident or sickness, or are made redundant. It works by making a monthly payment to you to cover your mortgage and essential bills. This is a short-term insurance that normally only pays out for a maximum of 24 months per claim.

Mortgage valuation

A mortgage valuation is the most basic form of survey undertaken by a surveyor. Some mortgage lenders will not even physically visit a property to perform a valuation for low loan-to-value mortgage applications, relying on an automated system or a "drive by" valuation instead. The basic mortgage valuation will value your property as well as giving a rebuild value (the amount your home would need to be insured for to cover if it needed to be completely rebuilt). The valuation will uncover any obvious defects with the property, although it is not as thorough as a homebuyer's or full structural survey.


See "Mortgage payment protection insurance"


Negative equity

This is when the amount you owe on your mortgage is greater than the amount your property is worth.


Offset mortgage

An offset mortgage allows you to use your savings to reduce the amount of interest you pay on your mortgage. The effect is that you can either finish your mortgage earlier by having a shorter term, or make lower monthly payments. Find out more information in our offset mortgage guide.


This is when you pay extra, over and above your monthly mortgage payment. You could choose to make a one-off lump sum overpayment or overpay a regular amount with your normal mortgage payment. Overpayments save you interest and will shorten your mortgage term. Find out more about overpayments in our flexible mortgage guide.

Own buildings insurance fee

If you choose to arrange your buildings insurance through a provider other than your mortgage lender, they may charge you an administration fee of around £25. It's charged for the work involved in checking that your buildings insurance is sufficient. Find out more information in our fees guide.


Payment holiday

This is a period during which you make no payments on your mortgage. Interest will continue to be charged during this time. This feature is usually only available on a flexible mortgage. Find out more about payment holidays in our flexible mortgage guide.


This is where a mortgage can be transferred between properties when you move house. Find out more about portability in our flexible mortgage guide.



Remortgaging is where you switch your current mortgage to a new lender without moving home.


This is where you pay off your mortgage at or before the end of the mortgage term. See also "Early repayment charges".

Redemption administration fee

A mortgage lender charges this fee for closing your mortgage account when you have repaid your mortgage. Find out more information in our fees guide.

Repayment mortgage

With a repayment mortgage, the money you pay each month repays both the interest and the amount you borrowed. This means that at the end of the term your mortgage is fully repaid. Find out more information in our repayment guide.


This is the legal process by which a borrower who has been unable to make mortgage repayments has the property taken away from them. This usually involves a forced sale of the property at public auction. Repossession is only ever used as a last resort by mortgage lenders.

Right to buy

This is where tenants in local authority housing are given the option to buy their home at a reduced cost.


Sealing fee

See "Redemption administration fee"


When undertaking the legal work, your solicitor will need to carry out several searches to make sure the property has no restrictions or hidden legal problems. The most common search is with the Land Registry, but this can also include mining searches or, if the property is near an old church, a chancel repair search (some older properties are obliged to maintain the local church!).

Second charge mortgage

Also referred to as a secured loan, you can take this loan out in addition to your mortgage. It's called a second charge mortgage because the secured loan lender must wait until after your mortgage lender is repaid in the event that you can't make payments and the property has to be repossessed.

Secured loan

See "Second charge mortgage".

Self build mortgages

This is a specialist type of mortgage designed for people who are building their own home. The mortgage is normally released in stages to coincide with important points in the build.

Shared ownership

This scheme is where you buy part of a property from a local authority or housing association, and rent the remaining part. Find out more information in our shared ownership guide.


See "Support for mortgage interest"

Stage payment

A stage payment is where the mortgage is released to you in parts, to help with a self build. Typically, the mortgage lender will release the stage payments at important points in the build and will inspect the property before releasing each payment.

Stamp Duty

This is a tax that is payable when you buy a property. Stamp Duty is charged as a percentage of the purchase price. Depending on which banding your property falls in, the percentage you pay can vary.

Stamp Duty Land Tax Rates

Up to £125,000


Over £125,001 to £250,000


Over £250,001 to £925,000


Over £925,001 to £1.5 million


Over £1.5 million


Stamp Duty rates are charged on the relevant portion of the purchase price. So for a house purchased for £280,000, stamp duty is charged as follows:

  • First £125,000 = Nil
  • Next £125,000 @ 2% = £2,500
  • Next £30,000 @ 5% = £1,500
  • Total = £4,000

Standard Variable Rate

A Standard Variable Rate is a type of mortgage interest rate that you are most likely to go onto after finishing an introductory fixed, tracker or discounted deal. Find out more information in our Standard Variable Rate guide.

Support for mortgage interest

This scheme is aimed at homeowners who are on certain income-based benefits, such as Income Support or income-based Jobseeker's Allowance. It is paid to the mortgage lender by the Government 13 weeks after the initial claim and covers interest due on the first £200,000 of the mortgage at the Bank of England's published monthly average mortgage interest rate. It is paid for the first two years for those claiming income-based Jobseeker's Allowance. Find out more by contacting Jobcentre Plus or the Pension Service.


A surveyor is a person who is qualified to carry out valuations and surveys of properties.


See "Standard Variable Rate"


Telegraphic transfer fee

See "CHAPS fee"

Tenants in common

Tenants in common is where each party owns a percentage of a property. In contrast to joint tenants, when you are a tenant in common you can pass on your portion of the property on death. This option is good if several friends are buying a home together, or if you wish to protect yourself if you are making the lion's share of the mortgage payment or deposit .

Title Deed

A legal document that formally states who the owner of a property is, as well as details about the property and the land upon which it is built.

Tracker mortgage

A tracker mortgage is a type of variable rate that follows (or tracks) the movements of another rate – most commonly the Bank of England Base Rate. Find out more information in our tracker mortgage guide.

Transfer of equity

This applies when you transfer part of the property ownership. For instance, you may wish to add/remove a spouse or partner from your mortgage. A transfer of equity is the legal document that confirms the switch.


Valuation administration fee

This fee is charged by a mortgage lender for them to deal with the administrative costs of processing the mortgage valuation. Find out more information in our fees guide.

Valuation fee

The fee charged by your mortgage lender for commissioning a valuation of the property. Find out more information in our fees guide.

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Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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