Relevant insights
Mortgage Terms Explained
Blog
Trying the find the right mortgage can be difficult if you come across complicated or confusing terms. When your vision of your dream home is starting to get clouded, we’re here to shine a light through – giving you the information and support you need to secure your future.
Here, we’ve compiled a list of helpful terms and acronyms that you might see on your mortgage journey, giving you chance to put your best foot forward and making it easier to understand the information that’s available.
Glossary of Mortgage Terms
Adverse Credit.
This refers to having a poor credit history, possibly due to repayments on a loan or credit card.
AIP – Agreement in Principle.
This involves a soft credit check which has no impact on your credit score, letting you see how much you could borrow before you apply for a mortgage.
APR – Annual Percentage Rate.
This is the total cost of borrowing, interest, and fees, given as a percentage of the overall cost.
BTL – Buy to Let.
This refers to purchasing or mortgaging a property with the intent to rent it out.
Capital.
This refers to the amount of money you have and borrow to purchase a property.
Completion.
The is the final step in your mortgage journey – completion day is the day you become the legal owner of your property.
Conveyancing.
This is the legal process that transfers the property ownership from the seller to the buyer.
Credit Rating.
This represents your credit history, and impacts how much you might be able to borrow.
Deposit.
This is an amount of money you have to put down to mortgage a property, usually a minimum of 5% of the property’s value.
Early Exit Fee.
This is a fee charged by the lender that occurs if the borrower prematurely ends the mortgage contract.
Equity Release.
This is the process of accessing your property’s equity without having to sell it.
Equity.
This refers to the amount of your property that you own, given as the difference between the value of your property and the remaining mortgage.
Fixed Rate Mortgage.
A fixed rate mortgage holds its interest level for a specified amount of time before requiring renegotiation, usually around 2 to 10 years.
Freehold.
This means the buyer owns the property and the land its build on.
FTB – First Time Buyer.
This applies to those who haven’t purchased a property before.
Guarantor.
This is someone who agrees to be legally responsible for a mortgage should the borrower be unable to pay.
Interest Rate.
This is the percentage of the loan that the lender charges for borrowing the money.
IO Mortgage – Interest Only Mortgage.
This is a type of mortgage that only pays off the interest, meaning the equity in the property doesn’t change.
Joint Borrower Sole Proprietor.
This is a type of mortgage where not all borrowers are listed as legal owners for the property.
Leasehold.
This means the buyer owns the property, but not the land its built on.
Limited Company BTL.
This is where a limited company purchases or mortgages a property with the intent of renting it out.
LTB – Let to Buy.
This is where a property owner rents out their current property and uses the money from that to purchase another one.
Mortgage Offer.
A mortgage offer is a formal offer of a mortgage from a lender, outlining the terms and conditions of the loan.
Self-Employed – Limited Company.
This is a separate legal entity from an individual, but can still be classified as being self-employed for the owner.
Self-Employed – Partnership.
This is where you run a business as a self-employed individual but have one or multiple partners that share the responsibility with you.
Self-Employed – Sole Trader.
This is where you own a business and work for yourself, without the business being a separate legal entity.