Mortgage Jargon Buster UK: 50+ Terms Explained Simply

A – D

Agreement in Principle (AIP)

A preliminary indication from a lender that they'd be willing to lend you a certain amount based on a basic check of your finances. Also called a Decision in Principle (DIP). Not a guarantee — a full application is still required.

APR (Annual Percentage Rate)

The total cost of borrowing expressed as an annual percentage, including fees and charges — not just the interest rate. Useful for comparing the true cost of different mortgage deals.

Arrangement Fee

A fee charged by the lender to set up your mortgage. Typically £500–£2,000. Can usually be added to the loan (but you'll pay interest on it). See our fees guide.

Base Rate

The interest rate set by the Bank of England. Tracker mortgages follow this directly. Currently 3.75% (March 2026). See our rate history guide.

Bridging Loan

A short-term loan used to bridge the gap between buying a new property and selling your current one. Expensive and typically used for weeks or months only.

Buildings Insurance

Insurance covering the structure of your property. Your mortgage lender will require this from exchange of contracts. See our buildings insurance guide.

Capital

The actual amount you borrow (as opposed to interest). On a repayment mortgage, your monthly payments cover both capital and interest.

Chain

A series of linked property transactions where each sale depends on another. If one transaction falls through, the whole chain can collapse.

Completion

The final stage of buying a property — money transfers, ownership changes, and you get the keys.

Conveyancing

The legal process of transferring property ownership from seller to buyer, handled by a solicitor or licensed conveyancer. See our conveyancing guide.

Credit Score

A numerical rating of your creditworthiness based on your financial history. Higher scores improve your mortgage options. See our credit score guide.

Decision in Principle (DIP)

Same as Agreement in Principle — a preliminary mortgage approval.

Deposit

The upfront cash you put towards buying a property. Most mortgages require at least 5% deposit. See our deposit guide.

Disbursements

Costs your solicitor pays on your behalf during conveyancing — such as Land Registry fees, local searches, and stamp duty.

E – L

Early Repayment Charge (ERC)

A penalty for paying off your mortgage or switching lender before your current deal ends. Typically 1–5% of the outstanding balance.

Equity

The portion of your property you own outright — property value minus outstanding mortgage. Equity grows as you make payments and if property values rise.

Equity Release

A way for homeowners aged 55+ to access cash tied up in their property without selling. See our equity release guide.

Exchange of Contracts

The point when buyer and seller become legally committed to the transaction. Your deposit (usually 10%) is paid at exchange.

Fixed-Rate Mortgage

A mortgage where the interest rate stays the same for a set period (typically 2, 3, 5, or 10 years). See our fixed rate guide.

Freehold

Full ownership of a property and the land it sits on — no ground rent or lease to worry about. Most houses are freehold.

Gazumping

When a seller accepts a higher offer from another buyer after already accepting yours. Legal in England and Wales until exchange of contracts.

Guarantor Mortgage

A mortgage where a family member provides security or agrees to cover payments if you can't. See our guarantor guide.

Interest-Only Mortgage

A mortgage where your monthly payments only cover the interest — the capital balance doesn't reduce. See our interest-only guide.

Leasehold

Ownership of a property for a fixed period (the lease term) but not the land it sits on. Common for flats. You may pay ground rent and service charges.

Loan-to-Value (LTV)

The ratio of your mortgage to the property's value, expressed as a percentage. Lower LTV = better rates. See our LTV guide.

M – R

Mortgage Offer

A formal document from the lender confirming they will lend you a specific amount at a specific rate. Valid for 3–6 months typically.

Mortgage Term

The total length of your mortgage — most commonly 25 years but can be 30, 35, or even 40 years. Longer terms mean lower monthly payments but more interest overall.

Negative Equity

When your mortgage balance exceeds your property's current value. This can happen if property prices fall after purchase.

Offset Mortgage

A mortgage linked to your savings account — your savings reduce the balance on which interest is calculated. See our offset guide.

Overpayment

Paying more than your required monthly amount. Most lenders allow up to 10% per year without penalty. See our overpayments guide.

Porting

Transferring your existing mortgage deal to a new property when you move. See our porting guide.

Remortgage

Switching your mortgage to a new deal, either with your current lender or a different one. See our remortgage guide.

Repayment Mortgage

A mortgage where monthly payments cover both interest and capital, so the loan is fully paid off by the end of the term. The most common type.

Retention

When a lender holds back part of the mortgage advance until specific repairs or work are completed on the property.

S – Z

Stamp Duty Land Tax (SDLT)

A tax paid when buying property in England and Northern Ireland above certain thresholds. See our stamp duty guide.

Standard Variable Rate (SVR)

The lender's default interest rate. You move to this when your fixed or tracker deal ends. Usually higher than deal rates — always remortgage before your deal expires.

Stress Test

A lender assessment checking if you could still afford mortgage payments if interest rates rose significantly. Usually tests at your rate + 3%.

Survey

A professional inspection of a property's condition. Different levels available from basic to full structural. See our surveys guide.

Swap Rate

The rate at which banks swap variable-rate funding for fixed-rate funding. Fixed mortgage rates are priced off swap rates, not the base rate. See our swap rates article.

Tracker Mortgage

A mortgage with a rate that follows the Bank of England base rate by a set margin (e.g., base rate + 1%). See our tracker guide.

Transfer of Equity

Changing who owns a property — adding or removing someone from the title deeds and mortgage. Common during divorce. See our divorce guide.

Valuation

A basic assessment of a property's value carried out by or for the mortgage lender. Not the same as a survey — it's for the lender's benefit, not yours.

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