ACCEPTANCE A document confirming acceptance of a mortgage provider’s offer.

ADVERSE CREDIT OR POOR CREDIT This refers to a borrower with a poor credit history. It could range from a missed or late credit card payment to bankruptcy. Different lenders take different views on adverse credit — some may decline applications due to any missed payments, while others may be more flexible.

AFFORDABILITY ASSESSMENT The process by which lenders determine whether a borrower can afford to make mortgage repayments over the full term of the mortgage.

AGREEMENT IN PRINCIPLE (AIP) A statement from a mortgage lender confirming that they are prepared to lend a specified amount, subject to further checks, before you complete the purchase of your property.

ANNUAL PERCENTAGE RATE (APR) A numerical value that shows the true cost of borrowing, taking into account not just the interest rate but also additional fees and charges.

ANNUAL PERCENTAGE RATE OF CHARGE (APRC) APRC stands for annual percentage rate of charge. It shows you, as a percentage, the total annual cost of your mortgage over its full term, reflecting both the interest rate and any additional fees or charges. While APR includes just a single rate, APRC is designed to demonstrate the effects of different rates and charges over the mortgage’s lifespan.

ARRANGEMENT FEE A fee payable to your mortgage provider at the start of your mortgage.

ARREARS If you are in mortgage arrears, it means you have fallen behind on your payments by at least a month. Lenders follow a set procedure when addressing mortgage arrears, and ultimately, failing to bring payments up to date may put your home at risk. We advise you to speak to your lender as soon as you are experiencing financial difficulty.

ASSIGN To transfer ownership or rights to a property from one person to another.

ASSURED SHORTHOLD TENANCY (AST) A common form of periodic or fixed-term rental agreement in the UK, typically made between a landlord (or letting agent) and a tenant. This applies if you own a buy-to-let property.

AUCTION FINANCE Auction finance refers to a short-term bridging loan used to facilitate the purchase of a property at auction. This can be used for both commercial and residential properties.

BASE RATE The Bank of England Base Rate (BBR) is set by the Bank of England’s Monetary Policy Committee and is reviewed regularly, typically every month. This rate helps control the flow of money in the economy and may fluctuate up or down. A tracker mortgage’s interest rate is usually directly tied to the Base Rate, meaning it will move in line with any change in the BBR. A discount mortgage is not typically directly linked to the Base Rate but may be affected if the lender adjusts its Standard Reversion Rate following a change in the BBR. A fixed mortgage’s rate, meanwhile, will remain the same for the duration of its fixed period, regardless of BBR movements.

BREAK CLAUSE A clause within a tenancy agreement that allows either party to bring the agreement to an end after a specified period — for example, six months into a 12-month agreement.

BRIDGING LOAN A short-term financing solution designed to help a borrower complete a property purchase while they arrange a longer-term mortgage or prepare to sell the property. Some bridging loans are by referral only and may be unregulated by the Financial Conduct Authority.

BUILDING INSPECTION A property inspection and report carried out by a qualified surveyor to identify any issues or defects that may affect its safety or value.

BUY TO LET A residential property purchased with the intent of letting it to tenants on a long-term basis. Some buy-to-let mortgages are not regulated by the Financial Conduct Authority.

BUY TO LET MORTGAGE A mortgage designed for landlords who wish to purchase a residential property to rent out. These mortgage products are typically set up on an interest-only basis.

BUY TO SELL MORTGAGE A buy-to-sell mortgage is a short-term mortgage designed for property investors and developers who intend to purchase a property, improve it, and sell it at a profit (also called “fix and flip”) in a short period.

CAPITAL AND INTEREST MORTGAGE With a repayment mortgage, the lender calculates the monthly payments needed to pay off the mortgage in full by the end of its term. These payments include both the mortgage interest and the capital repayment. This is also known as a “capital and interest mortgage.”

CAPPED RATE MORTGAGE This is a variable mortgage product — typically a tracker or discount mortgage — which sets a maximum ceiling for the interest rate that can be charged. The maximum rate payable will be specified in your mortgage offer. Capped rate mortgages are not very common in the current market. You may, however, come across “collared rate” mortgages, especially with tracker products, which include a minimum rate that applies regardless of how much the base rate falls.

CHAIN A chain refers to a series of connected property sales and purchases, each depending on the successful completion of the previous transaction.

CLOSED BRIDGING LOAN A closed bridging loan applies when you know how and when you will pay back the borrowing. Closed bridging loans are typically less expensive. Some bridging loans are by referral only and may be unregulated by the Financial Conduct Authority.

COMPLETION Completion marks the final stage of a property sale — the moment the buyer legally owns the property and collects the keys.

COMPLETION STATEMENT A solicitor’s record of all financial transactions made as part of the completion process.

CONDITIONS OF SALE Provisions within a contract that outline the responsibilities and obligations of both parties involved in a property transaction.

CONTRACT A legally binding agreement between two parties — typically the buyer and seller — in relation to a property transaction.

CONVEYANCER/CONVEYANCING The professional (usually a solicitor or licensed conveyancer) who handles the legal process of transferring ownership of a property from one party to another, and the related tasks involved.

COUNTY COURT JUDGMENT (CCJ) A County Court Judgment (CCJ) is a court ruling against a debtor who fails to pay their debts. Creditors may apply for a CCJ to be registered against the debtor if payments are not made. This information is visible to lenders when they carry out a credit search. An applicant with a CCJ may be considered a higher-risk borrower, which may limit borrowing options.

CREDIT REFERENCE AGENCY Credit files are held by licensed Credit Reference Agencies, in compliance with data protection legislation. These files contain financial information about individuals’ borrowing and payments.

CREDIT SEARCH A search carried out by a lender to aid in assessing your suitability for borrowing. This process shows not only your current borrowing but also your payments and whether they have been made on time. Credit searches may reveal any County Court Judgments (CCJs) you have. This is different from your credit score — see below.

CREDIT SCORE Lenders use a scoring method that assesses points against information provided by both you and the Credit Reference Agencies. Each lender’s scoring process is unique. An “excellent” score by a Credit Reference Agency does not necessarily guarantee mortgage approval, just as a low score doesn’t prohibit borrowing.

DEBENTURE A debenture is a form of secondary security used when a limited company borrows money. It involves placing a charge over the company’s assets as additional security for the mortgage. This is typically used when the company is trading, instead of acting as a special-purpose vehicle (SPV).

DECISION IN PRINCIPLE (DIP) A Decision in Principle is a statement from a mortgage lender confirming the amount they may be willing to lend, subject to further checks, before you complete your property purchase.

DEEDS Deeds are the legal documents that prove ownership of a property and may show any mortgage secured against it.

DEPOSIT A deposit refers to a sum of money that a buyer (mortgage deposit) or tenant (rental deposit) pay to secure their rights to a property.

DILAPIDATIONS Damage or disrepair that occurs during a tenancy due to a tenant’s actions or neglect — these may need to be addressed at the end of the tenancy.

DISBURSEMENTS Disbursements are payments made during the conveyancing process on your behalf, typically for expenses such as search fees and stamp duty.

DISCOUNTED RATE MORTGAGE A mortgage with an interest rate set at a discount to the mortgage lender’s standard variable rate (SVR) — usually for a fixed period of time.

DRAFT CONTRACT A preliminary version of a contract that may be amended or updated before both parties exchange their final, binding agreement.

EARLY REPAYMENT CHARGES (ERC)

If you pay off your mortgage early, or overpay by more than your lender allows, you may have to pay an early repayment charge. This is so your lender can make up for the lost interest they would have made over the remainder of your mortgage agreement.

EASEMENT

A right to cross or use an area of land that may affect a property owned.

ENDOWMENT MORTGAGE

You pay money into a type of investment plan called an ‘endowment policy’ to pay off an interest-only mortgage at the end of the term. These types of mortgage are no longer available.

ENERGY PERFORMANCE CERTIFICATE (EPC)

An EPC is a document that displays a property’s energy efficiency rating and environmental impact. Legally required for the sales and lettings process.

EQUITY

The value of a property owned outright by an individual (versus the value they are still required to make mortgage repayments on).

EXCHANGE OF CONTRACTS

The moment at which a property sale is final, and the buyer and seller have both signed the contract of sale, which can no longer be amended.

EXIT STRATEGY

An exit strategy is the way you will eventually repay your bridging loan or development loan.

The exit strategy should be realistic and credible enough to convince lenders that it can reliably be used to repay the bridging loan. At the end of the loan term, you are expected to repay the bridging loan in full, including any fees and accrued interest.

FIRST CHARGE

Mortgages are secured by way of a legal charge on a property, and a first charge ranks ahead of subsequent Mortgagees' charges in terms of priority. In practice, it means that your main mortgage lender has first call on any money raised from the sale of the property. Everybody else, including you, ranks behind them.

FIRST-TIME BUYER

A first time buyer is someone who has never owned a property or land. Lenders create first time buyer mortgages specially for this group of borrowers.

FITTINGS

Items currently within a property that do not constitute part of the property and are not included in the sale, such as furniture.

FIXED RATE MORTGAGE

The mortgage interest rate stays the same for the initial period of the deal.

FIXTURES

Items attached to the land or property that are included in its sale.

FREEHOLD

The freeholder owns both the property and the land that it stands on. In England, houses are usually freehold, with flats being mostly leasehold. Lenders are not usually keen on lending on English freehold flats, unless it is a leasehold flat with a share of freehold. In Scotland, most flats are freehold.

GAS SAFETY RECORD A legally required document for landlords, confirming that all gas appliances have been inspected by a qualified engineer and are considered safe.

GAZUMPING Gazumping occurs when another buyer makes a higher offer to purchase a property after an offer has already been accepted.

GAZUNDERING Gazundering happens when a buyer reduces their offer at the last minut,— typically just before contracts are exchanged.

GREEN MORTGAGES Green mortgages are designed to encourage homeowners to make energy-efficient improvements to their properties or to purchase a more energy-efficient home. Often, this comes with financial incentives, such as a lower interest rate.

GROUND RENT Ground rent refers to a charge payable by a leasehold owner to a freehold owner, typically on an annual basis.

GROSS DEVELOPMENT VALUE (GDV) When securing development finance, the Loan To Value (LTV) may be based on the projected future value of the property after all development work is completed. This projected future value is called the Gross Development Value (GDV).

HIGHER LENDING CHARGE A higher lending charge is a fee (also called an insurance premium) that lenders may apply when a mortgage exceeds a certain percentage of the property’s value (LTV).

HOMEBUYER REPORT A Homebuyer Report is a property inspection and assessment carried out by a qualified surveyor. It aims to identify any issues or defects that may affect the safety or value of the property.

HOUSE IN MULTIPLE OCCUPATION (HMO) A House in Multiple Occupation (HMO) refers to a property that is rented by at least three unrelated individuals who share facilities, such as the kitchen and bathrooms. Some HMO mortgages are not regulated by the Financial Conduct Authority.

INTEREST ONLY MORTGAGE

Interest is paid on the mortgage each month, without repaying any of the capital loan itself. This would be the opposite of a repayment mortgage.

INITIAL RATE/TERM

Many mortgage lenders offer an initial rate for an introductory period, which is typically 2 to 5 years, but 10 years plus more is sometimes available. After the initial term, the mortgage will revert to the SVR for the remainder of the mortgage. Many people choose to remortgage at this point to avoid any higher charges.

INVENTORY

A document stating the contents and condition of a property at the start and end of a tenancy period, to record any loss or damage.

JOINT APPLICANTS/MORTGAGE

This is where you hold property ownership rights equally with another person or persons. If one person dies, ownership reverts entirely to the surviving person or persons. This legal agreement supersedes any Will the deceased may have made.

LAND REGISTRY HM Land Registry (HMLR) maintains the central record of ownership for land and property in the UK. A fee is payable when ownership is formally transferred.

LEASEHOLD Leasehold refers to a form of property ownership where an individual owns the right to occupy a property for a fixed period, while the land and building remain under the ownership of the freeholder.

LISTED BUILDING A listed building is a property or structure that appears on a register due to its special historical or architectural significance.

LOAN TO VALUE (LTV) The Loan to Value (LTV) ratio shows the mortgage amount as a percentage of the property's value. Lenders typically use LTV to determine pricing, with higher LTV ratios often resulting in higher interest rates. For instance, you may apply for a mortgage up to 75% LTV, but if your property is valued lower than expected and your LTV increases to 77%, you may need to pay a higher rate or contribute additional deposit to bring it back down to 75%.

LOAN TO GROSS DEVELOPMENT VALUE (LTGDV) The Loan to Gross Development Value (LTGDV) ratio applies to development finance. It expresses the maximum amount that can be borrowed as a percentage of the projected Gross Development Value (GDV) — the eventual market value once the project is completed.

MARKET VALUE

The estimated value that a property would sell for at the current time on the open market.

MORTGAGE ADVISER OR MORTGAGE BROKER

A qualified individual who has permission from the Financial Conduct Authority to provide advice on regulated mortgage contracts.

MORTGAGEE

The mortgage lender.

MORTGAGOR

The person taking out the mortgage.

MORTGAGE VALUATION

A report on the value of a property by an independent surveyor on behalf of the mortgage provider.

MULTI UNIT FREEHOLD BLOCK (MUFB)

A multi-unit freehold block comprises multiple self-contained units on a single freehold title. An example would be a large residence that has been converted into separate flats or a block of apartments with no separate leases.

MULTI UNIT FREEHOLD COMPLEX

This term is often used in relation to holiday complexes where there are several buildings under a single freehold title. An example would be a group of barn conversions frequently used for holiday lets.

MUNDIC

Mundic can be found in some properties in Cornwall and Devon. It was used in the making of concrete and can cause serious structural problems for properties. A valuer will always report to the lender if they believe a property is constructed using Mundic and it is likely the lender will ask you to obtain a specialist report assessing its condition. Some lenders may be unwilling to lend on this kind of property.

NEGATIVE EQUITY

A state in which the owner of a property owes more to their mortgage provider than the total value of the property.

OFFSET MORTGAGE

A mortgage that is connected to a savings or current account. Credit balances in these accounts are offset against the mortgage balance, meaning interest is calculated daily and charged only on the difference, while also reducing the mortgage principal. This is sometimes called a current account mortgage.

OPEN BRIDGING LOAN

Open bridging finance is provided without a fixed repayment date. Because of this uncertainty, the lender typically charges a slightly higher interest rate than for a closed bridging loan. Some bridging loans are not regulated by the Financial Conduct Authority and are available by referral only.

PART AND PART This refers to a mortgage that is a combination of both repayment and interest only. For example, a mortgage of £150,000 might be made up of £100,000 on a repayment basis and £50,000 on an interest only basis. This means there would be a balance of £50,000 left to pay at the end of the mortgage term. PERSONAL GUARANTEES (PG) A Personal Guarantee is a promise by an individual, usually a company’s director or shareholder, to be liable for a debt if the company cannot keep up with its payments. The person who provides the guarantee then becomes responsible for making payments until the debt is cleared. Most buy to let lenders require Personal Guarantees from the Directors when lending to corporate vehicles, such as Special Purpose Vehicles, trading companies or Limited Liability Partnerships. PORTABILITY OR PORTING The lender may enable the borrower to transfer their existing mortgage product to a new property, provided both the borrower and the new property meet its lending criteria at the time of application. This can be a way to retain a desirable mortgage product or avoid early repayment charges. However, it involves a new mortgage application and underwriting process.

REDEMPTION

Repaying your mortgage in full.

REFLECTION PERIOD

A set period of time provided by the lender to enable you to consider the mortgage offer in depth before proceeding.

REGULATED BRIDGING LOAN

A bridging loan is regulated if it is secured against a property that you currently occupy or intend to occupy. Some bridging loans are not regulated by the Financial Conduct Authority and are available by referral only.

REMORTGAGE

Switching your mortgage to a new mortgage without moving home. This may be to reduce payments, transfer to a different mortgage product or release equity from your property.

RESIDENTIAL MORTGAGE

The most frequently used mortgage for purchasing or remortgaging your main residence.

REVERSION RATE

The interest rate that applies to your mortgage after any special product rate expires.

RETENTION

The lender may approve your mortgage but hold back a portion of the funds until certain conditions are met, which will be clearly explained in your mortgage offer. Your solicitor must confirm when these conditions have been satisfied before the lender releases the rest of the funds. This typically occurs when repairs or improvements are needed on the property.

REPOSSESSION

The process used by a secured lender to enforce its rights by selling or renting the property in order to recover its costs if a borrower fails to make payments or breaches the mortgage agreement. The lender will follow its internal procedure and may apply to the court for a possession order if the borrower cannot resolve the matter. Repossession is a last resort and does not release you from liability for the outstanding mortgage balance. If the sale does not cover the amount you owe, the lender may pursue you for the shortfall.

REPAYMENT MORTGAGE

With a repayment mortgage, the lender calculates a monthly payment that will pay off both the mortgage principal and the interest over a set term. This is also called a capital and interest mortgage.

SA302 TAX CALCULATION

The SA302 Tax Calculation is a document provided by HMRC that shows your earnings for a particular tax year.

SEARCHES

Checks carried out during the conveyancing process before a property sale is finalized.

SECTION 106 AGREEMENT

A Local Authority may use a Section 106 agreement to control how a property is used or when it may be used. This is especially common with holiday lets.

SHARE OF FREEHOLD

A form of property ownership where several individuals collectively own a portion of the freehold through a limited company.

SOLE AGENT INSTRUCTION

When a single estate or letting agent is appointed to manage a sale or rental of a property.

SPECIAL PURPOSE VEHICLE (SPV)

A Special Purpose Vehicle is a nontrading limited company set up for a specific purpose, typically for purchasing investment properties. The Standard Industrial Classification (SIC) code should reflect its intended activity.

STAMP DUTY LAND TAX (SDLT)

A government tax payable when buying a property above a certain price. You can learn more about Stamp Duty Land Tax and use a calculator to see how much it may be in your case.

STANDARD VARIABLE RATE (SVR)

The mortgage lender’s fallback interest rate after the initial mortgage deal expires.

SUBJECT TO CONTRACT

The stage in a property sale after an offer is made and accepted but before the exchange of contracts.

SURVEY

An inspection and report carried out by a qualified surveyor to identify any issues or defects in a property that might affect its safety or value.

TAX YEAR OVERVIEW

Your Tax Year Overview is a statement that shows the amount of tax payable, the payments you have made and any outstanding balance.

TENANCY OR TENANT

A period during which an individual is allowed to live in a specified property under a tenancy agreement, and the person involved in that arrangement.

TERM

The length of time that your mortgage is scheduled to be in place. It is possible to modify the term during your mortgage or when remortgaging.

TOP SLICING

Usually used for holiday let and buy to let mortgages, a lender may enable you to borrow more by taking into account additional personal income in their calculations.

TRACKER MORTGAGE

This mortgage’s interest rate moves in relation to the Bank of England base rate, either above or below it by a set margin.

TRANSFER DOCUMENT

The document that legally transfers ownership of a property from one party to another.

TRANSFER OF EQUITY (TOE)

Transfer of equity involves adding or removing someone from the ownership of a property. This process often involves a remortgage as well.

TITLE DEEDS

Most land is now registered with the Land Registry, meaning you are less likely to receive a paper bundle of title deeds. The title deed confirms that the property exists, who owns it and whether there are any financial charges secured against it, such as a mortgage. You can obtain copies from the Land Registry for a small fee.

UNDER OFFER

A phase of a property sale after an offer has been made.

UNENCUMBERED PROPERTY

A property is said to be unencumbered if there are no loans secured against it.

VALUATION

An assessment of a property to determine its market value.

Usually this is carried out by the lender for their own purposes. As the name suggests, it provides the lender with an estimate of the market value of the property at that moment in time and includes brief details of the mortgage property. It may highlight any issues that could affect its value. The lender may then ask the purchaser for additional information, typically from specialist contractors, before proceeding with the mortgage.

A mortgage valuation offers no protection to the borrower and should not be considered a comprehensive structural report.

VALUATION FEE

The charge made by the lender for a mortgage valuation as described above.

VARIABLE RATE MORTGAGE

This mortgage’s interest rate may fluctuate up or down, depending on the lender’s standard variable rate.

VENDOR

The person selling the property.