Mortgage jargon made easy

Mortgage language can make an important decision feel harder than it needs to be. This plain-English UK glossary explains the terms you are likely to meet when comparing a mortgage, buying a property or speaking with an adviser.

Table of contents

Mortgage types

Interest rates and APRC

Joint mortgages

Fees and charges

People involved in a purchase

Other key terms

Mortgage types

There is no single mortgage that suits everyone. The right product depends on your circumstances, the property and the lender’s criteria.

Repayment and interest-only mortgages

• Repayment mortgage: Each monthly payment covers interest and repays part of the capital borrowed. If you make all required payments, the mortgage is repaid at the end of its term. Owning the property is separate from repaying the mortgage: the lender has security over it while the loan remains outstanding.

• Interest-only mortgage: Your regular payments usually cover interest only, so the capital does not reduce. You need a credible repayment plan that the lender accepts to clear the capital at the end of the term. Switching products or refinancing later is not automatic and may not be available.

Other mortgage types

• Lifetime mortgage: A type of equity-release borrowing secured on your home, usually for older homeowners. You continue to own the home; interest may be paid or rolled up, depending on the product. The loan is usually repaid when the home is sold after the last borrower dies or moves permanently into long-term care. It can affect inheritance and means-tested benefits, so specialist advice is important. MoneyHelper explains lifetime mortgages.

• Buy-to-let mortgage: Finance used to buy or refinance a property that will be let out. Expected rental income can help a lender assess affordability, but monthly payments depend on the balance, interest rate and repayment method. Rates, fees and deposits vary by lender and product. Read MoneyHelper’s buy-to-let guide.

• Consent to Let: If you have a residential mortgage and want to let the property, speak to your lender first. Consent to Let is discretionary and may have conditions or charges, or the lender may require a different mortgage. It does not automatically permit every type of letting.

• Holiday-let mortgage: Finance designed for a property let as short-term holiday accommodation. The lender’s rules, including permitted use and any personal-use restrictions, vary. Do not assume that a residential or standard buy-to-let mortgage permits short-term lets.

• Cashback mortgage: Some products offer a cashback incentive. Compare it with the interest rate, fees and total cost of the deal rather than treating the payment as a saving in itself.

• Second-charge mortgage: An additional loan secured on a property which ranks behind the first mortgage. Eligibility depends on available equity, affordability and lender criteria. It can involve extra costs and puts the home at risk if payments are not maintained; it is worth comparing alternatives carefully. MoneyHelper has more on second mortgages.

• Retirement interest-only (RIO) mortgage: A mortgage for older borrowers where monthly payments usually cover interest only. The lender will assess affordability and apply its own age, equity and other criteria. Repayment is commonly triggered by sale, death or a move into long-term care under the contract; it is not simply a mortgage that lasts until death. Read MoneyHelper’s RIO guide.

Interest rates and APRC

Interest rates affect your payments and the cost of borrowing, but they are only part of the comparison. MoneyHelper’s guide to mortgage rate options can help when comparing deals.

• Bank Rate: The Bank of England’s policy interest rate. It can influence mortgage pricing, but it is not the same as every lender’s mortgage rate.

• Tracker rate: A rate that follows a stated benchmark, often Bank Rate, plus or minus a specified margin, subject to the mortgage terms. Your payment can rise or fall when the benchmark changes.

• Fixed rate: A rate fixed for an agreed deal period, such as two, three or five years. The deal period is not the same as the total mortgage term. At the end of the deal, you may move to another rate unless you arrange a new deal.

• Standard variable rate (SVR): A lender-set variable rate that often applies when an introductory deal ends. The lender can change it; it does not have to move by the same amount as Bank Rate.

• Discount rate: A variable rate set at a discount from a lender’s SVR for a stated period. Payments may change if the lender changes its SVR.

• APRC (annual percentage rate of charge): An annualised whole-term comparison measure that includes interest and relevant charges using stated assumptions. It is not a forecast of your future payments or the rate you will necessarily pay after an introductory deal. Compare the deal-period rate, fees and costs as well as APRC.

Joint mortgages

A joint mortgage is borrowing by more than one person. Lenders set their own limits on the number of applicants. Each borrower can be liable for the whole debt, so contributing half of the payment does not limit liability to half of the mortgage.

How a property is owned, and in what shares, is a separate legal matter from the mortgage. Discuss the arrangements with your conveyancer, particularly where the owners contribute different amounts or the property is in more than one UK jurisdiction.

Fees and charges

The interest rate is not the only cost to consider. Charges vary by lender, product and transaction, so check the illustration and terms for the mortgage you are considering.

• Product or arrangement fee: A charge for a particular mortgage product. It may be payable upfront or added to the loan; adding it usually means paying interest on it.

• Booking or application fee: A separate charge which some lenders use when reserving a product or processing an application. Its timing and refundability depend on the lender’s terms.

• Early repayment charge (ERC): A charge which may apply if you repay or overpay during a specified period. The allowance, calculation, exemptions and length of the ERC period are set out in the contract; some products allow a limited annual overpayment, for example, but this is not universal.

• Lender valuation: A valuation helps the lender assess the property as security for the loan. It is not the same as a buyer’s survey and may not be a full physical inspection.

• Survey: A survey is commissioned for the buyer and looks at the property’s condition. A RICS home survey can identify issues that a lender valuation may not cover.

• Broker fee or commission: A broker may charge a fee, receive commission from a lender, or both. Ask how they will be paid and what services are included before proceeding.

• Legal and conveyancing fees: Your legal costs can include the conveyancer’s fee, searches and other disbursements. These are separate from the lender’s mortgage charges.

People involved in a purchase

• Solicitor or licensed conveyancer: Conveyancing is the legal work involved in transferring property ownership. An appropriately qualified solicitor or licensed conveyancer can carry it out within their jurisdiction and lender-panel requirements.

• Conveyancing: The legal process of transferring ownership of a property. Your legal representative deals with the contract, searches, title checks and completion requirements relevant to the transaction.

Other key terms

• Stamp Duty Land Tax (SDLT): A property transaction tax in England and Northern Ireland. Wales uses Land Transaction Tax and Scotland uses Land and Buildings Transaction Tax. Liability depends on the transaction and buyer circumstances as well as the price; see GOV.UK’s SDLT guidance and the relevant devolved guidance.

• Loan to value (LTV): The loan amount as a percentage of the lender’s accepted property value. For example, borrowing £150,000 on a property valued at £200,000 gives an LTV of 75%. Maximum LTV and deposit requirements depend on the lender, product, borrower and property. Purchase costs are separate from the deposit, and a small deposit can mean less equity if property values fall.

• Deposit: The money you contribute towards the purchase price rather than borrow. The amount needed varies: specialist low- or no-deposit products may be available only to borrowers meeting restrictive criteria.

• Agreement in Principle (AIP) or Decision in Principle (DIP): A provisional indication of how much you may be able to borrow. It is not a mortgage offer; full checks on you and the property are still needed.

• Remortgage: Replacing your existing mortgage with a new mortgage, often with a new lender. A product transfer is switching to a new deal with the same lender, while additional borrowing means increasing what you borrow. A lower monthly payment does not necessarily mean a lower total cost, especially if the term is longer. Check fees, ERCs and the risks of securing previously unsecured debt against your home. Read more about remortgaging.

• Negative equity: When the mortgage balance is greater than the property’s value, often after a fall in property prices.

• Mortgage deed or legal charge: In England and Wales, a legal charge records the lender’s security over the property; it does not transfer ownership of the home to the lender. Documents and registration arrangements differ across the UK.

• Title records and deeds: Documents and records that evidence ownership, rights and restrictions affecting a property. They are distinct from the mortgage security.

• Transfer of equity: A change to ownership interests in a property, for example when adding or removing an owner. If there is an outstanding mortgage, lender consent and legal advice may be needed. Removing someone from the title does not by itself release them from mortgage liability.

Buying a home is a substantial, long-term commitment. Understanding the language helps you ask clearer questions and compare products on their full terms.

If you would like to discuss your mortgage options, get in touch with Extend Finance to arrange an initial conversation.