Your Complete Mortgage Glossary

Mortgage acronyms

AIP

Agreement in Principle (also known as a Decision in Principle): is a certificate from the lender confirming how much they may be willing to lend.

APR

Annual percentage rate (current interest rate).

APRC

Annual percentage rate of charge: This is the fixed rate and today’s variable rate, averaged over the mortgage term, to give you the APRC rate.

AVM

Automated valuation model: An auto-generated valuation takes place with the lender.

BOE

Bank of England – The bank that sets the base rates.

BTL

Buy to let: Purchasing a house to rent it out (excluding family members).

COT

Certificate of Title: A document your solicitor sends to the lender to request the funds once enquiries are satisfied and a completion date has been agreed.

DIP

Decision in Principle (also known as an Agreement in Principle): Certificate from the lender confirming how much they may be willing to lend.

ERC

Early Repayment Charge: This is a charge by the lender when you have overpaid or paid the mortgage in full during the fixed period.

HMO

House of multiple occupancy: This is usually on a rental property where the landlord has one house/building with multiple tenants, each with their own bedroom and usually a shared lounge/kitchen space.

HPI

House price index: This calculates the percentage change in house prices based on a set period of time.

JBSP

Joint borrow sole proprietor: You can get a family member (usually a parent) to be named on the mortgage with you to increase the borrowing amount you are eligible for. The parent will not be named on the deeds to the house; these will be in your sole name.

SDLT

Stamp duty land tax: You may be eligible to pay stamp duty, but your solicitor will advise on this. You can also use the government’s SDLT calculator to estimate what you may owe.

SVR

Standard variable rate: This is the lender's variable rate that you will automatically move onto at the end of your fixed term if you don’t do anything when your tie-in period ends.

Mortgage Terms

Adverse credit

This refers to things such as late or missed payments, defaults, county court judgements, Bankruptcy, involuntary arrangements, arrangements to pay, debt management plans, and even payday loans taken in the last 3 years.

Arrangement fee

This is a fee that the lender charges, either added to the mortgage or paid upfront. It usually means you obtain a lower interest rate than their no-fee products.

Buy to let

A type of mortgage for both first-time landlords and existing landlords. Some mortgages do not require proof of income as they can be classed as self-funding, provided the rental income is sufficient.

Capital and Interest

(Also known as repayment) Paying the interest as well as the mortgage balance.

Cash-back

Some lenders will offer cash-back on completion. Traditionally paid to your solicitor on completion; however, some lenders will pay this directly to the homeowner’s bank account using the pre-agreed direct debit details (payment within 30 days of completion).

Completion

The day you get the keys and move in!

Contents insurance

This is a recommendation, not a legal requirement. This will protect the personal belongings in your home from such events as fire, theft, storm, and flooding.

Conveyancer

A solicitor that deals with house sales and purchases.

Covenant

A condition within the title deeds that your solicitor will make you aware of prior to exchange.

Credit score

Some lenders use this to determine whether or not they will lend to you. Recognised agencies used are Experian, Equifax, and Transunion.

Deposit

The amount you need to put in on top of the mortgage to buy the house. This can vary depending on individual circumstances, typically starting from 5% on a standard purchase.

Discounted mortgages

A mortgage type usually a certain percentage below the lender’s current standard variable rate. Payments could go up or down during the term.

Equity

This is the current value of your house minus any mortgage owed; the difference is your equity.

First time buyer

You are classed as a first-time buyer if you have never owned any property before, whether in the UK or overseas.

Fixed rates

Once completed, your mortgage will be fixed for a set period (typically two, three, five, or ten years).

Freehold

You purchase a house and own the house and the land.

Types of House Purchasing Schemes

RTB

Right to buy scheme: After a period of time you can buy your council home at a discounted rate. The discount depends on the length of time you have lived there, and other T&Cs may apply.

Shared ownership

You buy a percentage of the home usually between 25%-75%. The remaining share is owned by a housing association. Along with the monthly mortgage payment, you will usually have a rent payment on the part you don’t own.

Discounted market sale

You purchase a house at a discounted rate to the current market value (usually 20%). When selling in the future, you must sell at the same discounted rate.

First home scheme

This scheme is for local first-time buyers who cannot afford to buy on the open market. The discount is usually between 30%-50% of the full market value.

All schemes have different T&C’s it is important you fully look into these before buying to ensure you choose the right scheme for you – contact us for further information and advice

Protection Terms

Life insurance

A lump sum paid out upon death.

Critical illness cover

A lump sum will be paid out upon being diagnosed with a specified critical illness.

Income Protection

If a doctor declares you unfit to work, Income Protection pays out around 60%-65% of your gross annual income on a monthly basis until you can return to work.

Family Income Benefit

This replaces the deceased partner’s income for a set period of time.

Accident and sickness cover

If you have an accident or become sick and are unable to work, this cover will pay out a set monthly amount.

Private medical

(Also known as Health Insurance) A private alternative to the UK’s public National Health Service (NHS), which will open your options further.