UK Mortgage Glossary 2026
Plain English definitions for over 40 key mortgage and property terms. Whether you are a first time buyer or an experienced investor, our glossary cuts through the jargon so you can make confident, informed decisions.
FCA regulated advice available — speak to our adviser if any term applies to your situation.
Agreement in Principle (AIP)
Also known as a Decision in Principle (DIP) or Mortgage in Principle, an AIP is a written confirmation from a lender that they would be willing to lend you a specific amount, subject to full application and verification. It is based on a soft or hard credit check and gives sellers confidence that you are a serious buyer. An AIP is not a mortgage offer and does not guarantee lending.
Annual Percentage Rate (APR)
The APR is the total cost of borrowing expressed as an annual percentage, including not just the interest rate but also fees such as arrangement fees. It allows you to compare the true cost of different mortgage products on a like-for-like basis. The APR is a useful comparison tool, though for mortgages the APRC (Annual Percentage Rate of Charge) is the more commonly used figure.
Bank of England Base Rate
The interest rate set by the Bank of England's Monetary Policy Committee (MPC), typically reviewed eight times per year. It influences the interest rates set by commercial lenders for mortgages, savings, and loans. Tracker mortgages are directly linked to the base rate, while fixed rate mortgages are unaffected for the duration of the fixed period.
Bridging Loan
A short-term secured loan — typically lasting between 1 and 24 months — used to bridge a funding gap. Common uses include purchasing a property before an existing one has sold, financing a property that does not qualify for a standard mortgage (e.g. uninhabitable properties), or funding development projects. Bridging rates are higher than standard mortgages, and a clear exit strategy is essential.
CeMAP
Certificate in Mortgage Advice and Practice — the industry-standard qualification required for mortgage advisers in the UK. A CeMAP-qualified adviser has demonstrated competence in mortgage legislation, regulation, and product knowledge. When taking mortgage advice, you should always check your adviser holds this qualification and is authorised by the FCA.
Completion
The final stage of a property purchase or sale, when the remaining purchase funds are transferred to the seller's solicitor and legal ownership passes to the buyer. Completion typically occurs 1–4 weeks after exchange of contracts, though it can sometimes happen on the same day as exchange. Stamp duty is payable within 14 days of completion.
Conveyancing
The legal process of transferring ownership of a property from seller to buyer. It is carried out by a solicitor or licensed conveyancer and covers property searches, reviewing the title, raising enquiries, dealing with the mortgage lender, and handling the exchange of contracts and completion. In England and Wales, the process typically takes 8–16 weeks from instruction.
Decision in Principle (DIP)
See Agreement in Principle (AIP). The terms DIP, AIP, and Mortgage in Principle are used interchangeably across the industry — different lenders use different terminology. All refer to the same initial indication of lending, prior to a full application.
Equity
The difference between the current market value of your property and the outstanding balance of your mortgage. For example, if your home is worth £400,000 and you have £150,000 remaining on your mortgage, you have £250,000 of equity. Equity grows as you pay down your mortgage and as property values increase. It can be released through remortgaging or equity release products.
Early Repayment Charge (ERC)
A fee charged by lenders if you repay your mortgage — or overpay beyond an agreed limit — during a fixed, tracker, or discount period. ERCs are typically expressed as a percentage of the outstanding balance (e.g. 3% in year one, 2% in year two) and can amount to thousands of pounds. Always check the ERC schedule before fixing into a mortgage deal.
European Standardised Information Sheet (ESIS)
A standardised document that mortgage lenders are required to provide to borrowers under EU-derived regulations, setting out the key features of a mortgage product in a consistent format. The ESIS replaced the older Key Facts Illustration (KFI) and allows borrowers to compare deals from different lenders. It includes the APRC, total amount payable, and all charges.
Exchange of Contracts
The point in the conveyancing process at which the buyer and seller become legally bound to complete the transaction. Prior to exchange, either party can withdraw without penalty. On exchange, the buyer typically pays a deposit (usually 10% of the purchase price) and a completion date is fixed. If a buyer pulls out after exchange, they forfeit this deposit.
Fixed Rate Mortgage
A mortgage where the interest rate is fixed for an agreed period — typically 2, 3, 5, or 10 years — regardless of changes to the Bank of England base rate. Fixed rates offer certainty over monthly payments, making budgeting easier. At the end of the fixed period, the mortgage reverts to the lender's Standard Variable Rate (SVR) unless you remortgage or take a new deal.
Freehold
Owning a property freehold means you own the building and the land it stands on outright, with no time limit. Freehold is the preferred tenure for houses in England and Wales. Freehold properties are generally simpler to mortgage and do not involve service charges or ground rent, unlike leasehold properties.
Full Structural Survey (Level 3)
The most comprehensive type of property survey, recommended for older properties, listed buildings, unusual constructions, or any property showing signs of structural issues. A Level 3 survey provides a detailed assessment of the structure and fabric of the building, including concealed areas. It identifies defects, their cause, urgency of repair, and approximate cost.
Gazumping
When a seller accepts a higher offer from a different buyer after already accepting your offer, but before contracts have been exchanged. In England and Wales, no transaction is legally binding until exchange of contracts, making gazumping legal — if frustrating. It is most common in hot markets. Instructing a conveyancer promptly and pushing for a quick exchange can reduce the risk.
Gazundering
The opposite of gazumping — when a buyer reduces their offer at the last minute, typically just before exchange of contracts, leaving the seller with little option but to accept or start again. This practice is legal but considered poor form. It tends to occur in falling markets or when a buyer discovers issues through the survey process.
House in Multiple Occupation (HMO)
A property rented out by at least three people who are not from the same household (i.e. family) but share communal facilities such as a kitchen or bathroom. HMOs often generate higher rental yields than standard buy-to-let properties but require a specialist HMO mortgage and, for properties of five or more occupants, a mandatory HMO licence from the local council.
Homebuyer Survey (Level 2)
A mid-level property survey — more detailed than a basic mortgage valuation but less comprehensive than a full structural survey. A Level 2 Homebuyer Survey identifies significant defects and issues likely to affect the property's value, using a traffic-light rating system. It is suitable for most conventional properties built after 1900 that appear to be in reasonable condition.
Interest Coverage Ratio (ICR)
A key affordability test used by buy-to-let mortgage lenders. The ICR requires that the monthly rental income covers the monthly mortgage interest payment by a minimum percentage — typically 125% at the pay rate, or 145% if the property is held in a higher-rate taxpayer's personal name. Lenders also stress test the ICR at a hypothetical higher rate (often 5.5–6%).
Interest-Only Mortgage
A mortgage where monthly payments cover only the interest on the loan, with the capital balance unchanged throughout the term. At the end of the mortgage term, the full original loan must be repaid — typically from the sale of the property, an investment plan, or other capital. Interest-only is common in buy-to-let and some high-net-worth residential mortgages.
Key Facts Illustration (KFI)
The predecessor to the European Standardised Information Sheet (ESIS), a document summarising the key features and costs of a mortgage product. KFIs were required under the old Mortgage Code and gave borrowers a consistent way to compare products. While largely replaced by the ESIS, some lenders still issue KFI-style documents for certain product types.
Leasehold
Owning a leasehold property means you own the building or flat for a fixed period (the lease term) but not the land beneath it. The land is owned by the freeholder (or landlord). Leaseholders typically pay ground rent and service charges. Short leases (under 70–80 years) can make a property difficult to mortgage. Leasehold reform is an ongoing area of UK law.
Limited Company SPV
A Special Purpose Vehicle (SPV) is a limited company created solely for the purpose of holding buy-to-let properties. Many landlords purchase through an SPV for tax efficiency, as rental income within a company is subject to corporation tax rather than income tax. Specialist buy-to-let lenders offer mortgages to limited company borrowers, though rates and fees differ from personal name products.
Loan to Income (LTI)
The ratio of the mortgage amount to the borrower's annual gross income, used by lenders as part of affordability assessment. Under FCA Mortgage Market Review rules introduced in 2014, the majority of mortgage lending should not exceed 4.5 times income. Some lenders can exceed this for applicants with higher incomes or in certain professions, subject to the individual lender's criteria.
Loan to Value (LTV)
The ratio of your mortgage to the value of the property, expressed as a percentage. A £180,000 mortgage on a £200,000 property is an LTV of 90%. LTV is a key factor in determining mortgage rates — lower LTV ratios (meaning a larger deposit) unlock better interest rates. The main LTV thresholds are typically 60%, 75%, 80%, 85%, 90%, and 95%.
Mortgage Indemnity Guarantee (MIG)
A one-off insurance premium historically charged by lenders when the LTV exceeded 75–80%. The policy protected the lender (not the borrower) against loss if the property was repossessed and sold for less than the outstanding mortgage. MIGs are now rarely charged by mainstream lenders but may still be encountered from some specialist lenders.
Mortgage Offer
A formal written offer from a lender to provide a mortgage, issued after your full application has been assessed and the property has been valued. A mortgage offer is typically valid for 3–6 months. It is not legally binding until exchange of contracts and completion, but it confirms that the lender is satisfied with your application and the property.
Multi-Unit Freehold Block (MUFB)
A freehold property containing multiple self-contained units, all owned under a single freehold title. MUFBs are popular with landlords as they offer multiple income streams from a single asset. Financing a MUFB typically requires a specialist buy-to-let mortgage or a commercial mortgage, as mainstream residential lenders will not accept them.
Negative Equity
When the outstanding mortgage balance is greater than the current market value of the property. This occurs when property prices fall significantly after purchase. Negative equity can make remortgaging extremely difficult and may leave the owner unable to sell without making up the shortfall from their own funds. It is most common for buyers who purchased at peak values with a high LTV.
Offset Mortgage
A mortgage linked to one or more savings accounts held with the same lender. The savings balance is offset against the mortgage balance, so you only pay interest on the net amount (mortgage minus savings). For example, a £200,000 mortgage offset against £20,000 in savings means you only pay interest on £180,000. Offset mortgages are particularly efficient for higher-rate taxpayers.
Overpayment
Making a payment above your standard monthly mortgage amount, reducing the outstanding capital balance and therefore the total interest paid over the life of the mortgage. Most lenders allow overpayments of up to 10% of the outstanding balance per year without incurring an Early Repayment Charge. Overpaying can significantly shorten your mortgage term.
Porting
The ability to transfer your existing mortgage deal — including its interest rate — to a new property when you move home. Most mortgage products are portable, but porting is subject to re-application and the new property meeting the lender's criteria. If you need to borrow more, the additional amount will typically be on a new rate. Not all moves are approved for porting.
Product Transfer
Switching to a new mortgage deal with your existing lender at the end of your current deal. A product transfer is quicker than a full remortgage as it does not require a new valuation or conveyancing. However, it only gives you access to one lender's range. A whole-of-market broker can check whether your existing lender's offer is competitive before you commit.
Redemption
Repaying your mortgage in full, either at the end of the term or earlier. A mortgage redemption statement (also called a settlement figure) shows the exact amount required to repay the outstanding balance, including any interest owed and, if applicable, Early Repayment Charges. Mortgage redemption is typically processed by solicitors during a property sale or remortgage.
Remortgage
Switching your existing mortgage to a new deal — either with your current lender (product transfer) or with a new lender. Remortgaging is most commonly done at the end of a fixed rate deal to avoid reverting to the lender's Standard Variable Rate. It can also be used to release equity, consolidate debt, or change the mortgage term. A broker can search the whole market to find the most suitable new deal.
Repayment Mortgage
A mortgage where monthly payments cover both the interest and a portion of the capital (the loan itself). Over the full mortgage term, the entire debt is repaid and you own the property outright. Repayment is the most common mortgage type for residential purchases and is required by most mainstream lenders for owner-occupied properties.
Stamp Duty Land Tax (SDLT)
A tax payable to HMRC on the purchase of property or land in England above certain thresholds. Rates are tiered — different percentages apply to different portions of the purchase price. First time buyers receive relief up to £425,000. Additional property purchasers (e.g. buy-to-let investors) pay a 5% surcharge on top of standard rates. Scotland has Land and Buildings Transaction Tax (LBTT) and Wales has Land Transaction Tax (LTT).
Solicitor / Conveyancer
The legal professional who handles the conveyancing process — transferring legal ownership of a property. For a purchase, they conduct searches, review the title, raise enquiries with the seller's solicitor, deal with the lender's legal requirements, and handle the transfer of funds on completion. A licensed conveyancer can also carry out conveyancing but cannot handle other legal work.
Stress Test
An affordability check carried out by lenders to ensure borrowers could still meet their mortgage payments if interest rates were to rise. For residential mortgages, lenders typically stress test at the current rate plus 3%. For buy-to-let mortgages, the Interest Coverage Ratio (ICR) is usually assessed at a stressed rate of 5.5–6%, regardless of the actual product rate.
Standard Variable Rate (SVR)
The default interest rate a lender charges when a mortgage deal ends. SVRs are set by individual lenders (not tied to the base rate, though they usually move in line with it) and tend to be significantly higher than available product rates. Allowing your mortgage to lapse onto the SVR is almost always more expensive than remortgaging to a new deal — taking advice 3–6 months before your deal ends is strongly recommended.
Tracker Mortgage
A variable rate mortgage where the interest rate tracks the Bank of England base rate at an agreed margin above it (e.g. base rate + 0.5%). If the base rate rises or falls, your rate moves with it — typically from the following month. Tracker mortgages usually do not carry Early Repayment Charges, offering more flexibility than fixed rate deals. They suit borrowers who can absorb payment fluctuations.
Valuation
An assessment of a property's value carried out by a surveyor on behalf of the mortgage lender. The valuation confirms that the property is worth at least the amount being lent. It is not a survey — it does not assess the condition of the property in detail. Lenders typically charge a valuation fee, though many products now offer free valuations. Buyers should commission a separate survey for their own protection.
Variable Rate Mortgage
A mortgage where the interest rate can change at any time. The most common variable rate types are tracker mortgages (linked to the base rate) and Standard Variable Rate (SVR) mortgages (set by the lender). Discount rate mortgages offer a set reduction below the lender's SVR. Variable rates can increase monthly payments but often offer more flexibility than fixed rates.
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