Agreement in Principle (AIP)
A document from a lender or mortgage broker giving you an indication of how much you could afford to borrow to buy a home. Also known as a Decision in Principle (DIP) or a Mortgage in Principle (MIP).
Annual percentage rate of charge (APRC)
The Annual Percentage Rate of Charge (APRC) is displayed alongside all advertised mortgage deals. It represents the average interest rate calculated over the entire mortgage term, including the initial rate and the lender’s SVR you’ll be moved onto once the initial period ends.
Appointed representative (AR)
A company that carries out business on behalf of a Financial Conduct Authority-approved firm. For example, Trussle is an authorised representative of Mortgage Advice Bureau Limited, which is approved and regulated by the FCA.
The main fee charged by your mortgage lender when you take out a mortgage. You can usually choose whether to pay upfront or add to your mortgage, in which case you’ll have to pay interest on it.
If you miss one or more monthly mortgage payments, your account will go into ‘arrears’. Depending on your situation and lender, you could be charged a penalty or granted a payment holiday.
Bank of England
The central bank of the United Kingdom that controls the Bank rate (previously, base rate).
Bank rate (previously, base rate)
The Bank rate (previously called the base rate) is the interest rate a central bank like the Bank of England charges to lend money to commercial banks. This is one influencing factor of mortgage rates.
Also known as an “application” or “reservation” fee, this is paid to your mortgage lender and covers the “booking” of the loan for the period of time in which your application is processed. It typically costs between £100 to £200 and isn’t refundable if your mortgage falls through.
All mortgage brokers receive commission from the mortgage lender, but some supplement this income by charging the borrower a fee for using their service. The fee amount varies by broker.
Unlike banks, which are owned by and run for the benefit of their shareholders, building societies are owned by and run for the benefit of their customers. They offer savings, mortgages, and other financial services.
This covers the cost of repairs to the property’s structure or permanent fixtures as a result of damage or theft. Buildings insurance will be a condition of your mortgage and your solicitor will check you have it in place.
Buy to let mortgage
If you're looking to buy a property with the intention of renting it out to earn income, then you'll need to apply for a buy-to-let (BTL) mortgage.
The amount of money you borrow to buy a property.
Some mortgage deals offer money back upon completion.
A mortgage loan secured against a commercial property like an office building, warehouse, or shop.
The day of completion is when all the financial and legal work of buying or selling a home has been completed by the licensed conveyancer or conveyancing solicitors, transferring ownership from the seller to the buyer.
This type of insurance is designed to cover the cost of your home’s contents - including things like furniture, technology and jewellery - as a result of theft, fire, or flooding.
The legalities involved with buying a home, namely the transfer of property ownership from one party to another.
A type of variable rate mortgage that caps the amount your lender can charge, regardless of base rate changes.
County Court Judgement (CCJ)
A CCJ can be registered against you if you don’t repay the money you owe on a loan. It can negatively impact your credit score, and therefore your ability to get a mortgage.
Credit rating (also, credit score)
Your credit rating is based on your ability to make payments, and can be negatively affected by missed payments or hefty debt. Lenders use your credit rating to work out whether you’d be a reliable borrower.
A credit report is provided by a credit agency. It provides you with a score based on your current and historic financial situation. This is used by mortgage lenders to assess how suitable you are to lend to.
Decision in Principle (DIP)
A document stating how much you could afford to borrow (in principle) from a mortgage lender. Otherwise known as a Mortgage in Principle or an Agreement in Principle.
A property’s deeds is a legal document detailing who’s owned it since it was registered, and can be used as proof of ownership.
The lump sum you’re required to put down when buying a property. Usually, you’ll need a deposit of at least 5%, but the higher your deposit, the more competitive deals you’ll have access to.
A type of variable rate mortgage that follows the lender’s Standard Variable Rate (SVR), but at a discount. If the SVR is 3.79%, at a discounted rate of 1%, the interest rate of a discounted rate mortgage would be 2.79%.
Early repayment charge (ERC)
The fees some lenders charge for paying more than your monthly mortgage repayment, therefore paying off your mortgage more quickly. Some mortgages don’t allow overpayments and the fees for doing so can be hefty.
A type of interest-only mortgage whereby the loan amount is paid at the end of the mortgage term via one or more endowment policies.
The amount of the property that you own outright. Your capital is your deposit plus the money you’ve paid off on your mortgage.
European standardised information sheet (ESIS)
The ESIS is a document designed to enable you to reflect on the key features and risks of the mortgage contract before making a final decision, and contains information relating to the potential impact of changes to interest rates.
Exchange of contracts
This is the point at which your legal representative and the seller’s swap signed contracts and you pay a deposit for your new home.
Applying for a mortgage without getting specialist advice from a mortgage adviser is known as an “execution-only” mortgage application.
Financial Conduct Authority (FCA)
A UK regulatory body covering 58,000 financial services firms and markets, designed to protect consumers and maintain high regulatory standards.
Financial Ombudsman Service (FOS)
An impartial ombudsman service that settles disagreements between consumers and companies that provide financial services, such as mortgage lenders, insurers, and banks.
Financial Services Compensation Scheme (FSCS)
A UK statutory scheme designed to protect customers of authorised financial services firms; if a firm is unable to pay claims made against it, the FSCS will step in.
Fixed rate mortgage
A fixed rate mortgage stays the same each month for a fixed period (usually 2, 3, or 5 years, but can be longer) regardless of changes to the bank rate, so you know exactly what you’re paying each month.
A flexible mortgage gives you greater flexibility when it comes to payment, such as allowing overpayments, underpayments, payment breaks, and having interest calculated daily - the least expensive way of calculating mortgage interest.
Owning the property outright, as well as the land it stands on. As the freeholder, you’re responsible for the upkeep of the property. If you’re the freeholder of a group of flats, it falls on you to cover the costs of any structural damage. Read more about freehold mortgages.
When an offer is accepted by a seller, but then another buyer comes in with a higher offer and succeeds in buying the property.
Help to buy ISA
Specifically designed to help first-time buyers purchase a home, the government adds 25% to your savings (up to a maximum of £3,000 on savings of £12,000) on properties worth up to £250,000 outside London and £450,000 in London.
Higher lending charge
You’ll often pay a higher lending charge if you have a high loan to value (LTV) ratio. General Data Protection Regulation (GDPR) A legal framework with set guidelines relating to the way in which companies gather, process, and store EU residents’ data.
In mortgages context, a guarantor is someone who legally commits to covering the mortgage repayments if you can’t.
Higher lending charge
A fee that lenders may apply if the loan exceeds the maximum loan-to-value threshold they’re willing to lend.
Independent mortgage advice
An independent mortgage adviser should provide impartial, unbiased financial advice on the different mortgage options available to you.
Initial term (or, introductory period)
Most mortgages have an initial term, or introductory period, of between one and five years. You’re usually moved onto your lender’s SVR after your initial term, at which point it’s a good idea to remortgage to avoid paying an unnecessary higher rate.
Information Commissioners Office (ICO)
The UK’s independent authority body designed to uphold information rights in the public interest, such as data privacy and protection.
The percentage of interest you pay on top of your mortgage repayments. Interest rates are also based on the base rate.
With an interest-only mortgage, you don’t pay back the money you borrowed to buy the property until the end of the mortgage term. Instead, you only pay back the interest each month, making your monthly payments much lower than with a repayment mortgage.
Key facts illustration (KFI)
A tailored document provided by your mortgage lender or broker at the point at which a mortgage option is recommended, detailing key information about the mortgage.
You own the property and the land for the length of the lease when you own your home as a leasehold. Leases usually range from 80 to 155 years, but in rare cases, they can drop to 0 years. While you own the property for the length of the lease, the communal areas and the ground it stands on are owned by the freeholder.
Designed to help you buy your first home or save for retirement, the government will add a 25% bonus to your Lifetime ISA savings, up to £1,000 per year. You can put in up to £4,000 a year until you’re 50.
Loan to value (LTV)
The percentage of the property price you borrow from the lender. If you have a deposit of 5%, your LTV is 95%. If your deposit is 20%, your LTV is 80%.
London Interbank Offered Rate (LIBOR)
Calculated and published daily by the Intercontinental Exchange (ICE), the LIBOR is a globally accepted benchmark interest rate that indicates borrowing costs between banks.
A loan provided by a mortgage lender that you use to buy a property; it’s usually paid back, along with interest, in monthly installments over a set number of years.
A mortgage adviser provides impartial information and advice on the most suitable mortgage options available to you, based on your financial circumstances. They may work independently or for a mortgage broker.
A comprehensive application process that, if successful, will enable you to borrow money for a mortgage on a new home.
A third party that compares different mortgages from different lenders to find you a suitable mortgage deal. Some mortgage brokers compare deals from a small number of lenders, while some search a much larger share of the market.
An automated tool to help you understand how much you could borrow for a mortgage based on your current circumstances.
Mortgage in Principle (MIP)
A document from a lender or mortgage broker giving you an indication of how much you could afford to borrow to buy a home. Also known as a Decision in Principle (DIP) or an Agreement in Principle (AIP).
The bank or building society lending you the money required to purchase a property.
The mortgage term is the length of time between your mortgage starting and making the final payment, most commonly between 25 and 35 years.
If the value of your home falls below the amount of money remaining on your mortgage, you’ll be in negative equity.
A type of mortgage that enables you to link your savings to your mortgage to reduce the level of interest on the mortgage.
Online mortgage broker
A service that allows you to secure a mortgage completely online; avoiding trips to a high street office, lengthy paperwork, and long phone calls. Trussle was the first online mortgage broker to launch in the UK and is known for being free, quick, and simple to use.
A mortgage overpayment is simply a matter of paying more than your required monthly amount. Doing this can reduce the total interest or the time it takes to pay off your mortgage. Learn more with our mortgage overpayment guide.
A feature offered by some mortgage lenders that allows you to skip or reduce mortgage payments for a limited period if money is tight.
A fee a mortgage lender pays to a mortgage broker on completion of a successful mortgage application, usually around 0.3% of the value of the mortgage.
Prudential Regulation Authority (PRA)
The PRA are one of two UK regulators (FCA being the second) that provide oversight of financial services in the UK. They create policies designed to promote good practice and protect policyholders for financial services firms.
Remortgaging is the process of switching from one mortgage to another, either with your current lender (also called a ‘product transfer’) or a new one. This is often done to avoid lapsing onto the current lender’s higher-interest SVR.
The majority of mortgages in the UK are repayment mortgages. With a repayment mortgage, you’ll pay back a portion of the money you borrowed to buy the property, plus interest. You’ll have paid back the entire amount borrowed and you’ll own your home outright by the end of your mortgage term.
The medium through which an interest-only mortgage loan is repaid. This may include ISAs or endowments, for example.
A loan provided on a residential property such as a house or apartment, where the owner lives in the property.
Right to buy
Right to buy allows most council tenants to buy their home at a discount.
A mortgage loan taken out on a property that you’re planning to build yourself. Unlike regular mortgages that provide a lump sum, you’ll usually receive the money in stages.
With a shared equity mortgage, your lender will agree to give you a loan to form part of your deposit. Your specialist shared equity mortgage then covers the remainder of the property’s value. Your lender will then receive a share of any profits when you either sell the property or repay the loan.
Shared ownership gives you the opportunity to own a part of your home. You buy a share of the property and pay reduced rent on the remainder at a discounted rate. Shared ownership is most popular with first-time buyers.
A tax applied to residential property or land costing over £125,000 (£40,000 for second homes) in England and Northern Ireland. There are exceptions for first time buyers and those buying additional properties.
Standard Variable Rate (SVR)
A Standard Variable Rate (SVR) is a mortgage lender’s default higher-interest rate, which you’ll usually be moved onto once your initial mortgage deal has ended.
A kind of variable rate mortgage. A tracker mortgage tracks a rate - usually the Bank of England’s Bank rate, meaning your monthly payments will change with changes to the Bank rate.
The cost of a valuation typically ranges from £250 to £600, depending on the type of survey carried out.
When you apply for a mortgage, the lender seeks an independent opinion on how much the property is worth. The property valuation generally involves a review of market values and a quick check of the property. This helps the lender decide whether they’re willing to go ahead with the mortgage.
Variable rate mortgage
A mortgage rate that changes depending on another rate, usually the Bank of England’s Bank rate. Tracker mortgages and the SVR are both types of variable rate mortgage.