Mortgage Jargon Buster

confused by the terminology? You're not alone.

The mortgage world is full of acronyms and confusing words. At I J Mortgage Solutions, we believe you shouldn't need a dictionary to buy a house.

Here is our simple A-Z guide to the terms you need to know..

A

Agreement in Principle (AIP) Also known as a Decision in Principle (DIP) or Mortgage in Principle (MIP). This is a certificate from a lender stating how much they are willing to lend you, based on a quick check of your income and credit score. You usually need this before an estate agent will let you view properties.

APRC (Annual Percentage Rate of Charge) This figure shows the total cost of the mortgage over its entire life, including interest and fees. It is designed to help you compare different deals, though it can sometimes look higher than the actual interest rate you pay monthly.

Arrangement Fee A fee charged by the lender to set up your mortgage product. It is often around £995. You can usually pay this upfront or add it to the mortgage balance (though you will pay interest on it if you add it).

B

Base Rate The official interest rate set by the Bank of England. It affects the cost of borrowing money. If the Base Rate goes up, "Tracker" mortgages will go up too.

Broker That's us! A qualified professional who acts as the middleman between you and the lenders. We search the market to find you the best deal and handle the application process.

C

Capital The actual amount of money you borrowed to buy the house, not including the interest.

Completion The exciting day when the money is transferred to the seller, you get the keys, and the house legally becomes yours.

Conveyancing The legal process of transferring property ownership from one person to another. This is handled by a solicitor or conveyancer.

D

Decision in Principle (DIP) See Agreement in Principle.

Deposit The chunk of money you pay upfront towards the property price. The rest is covered by the mortgage. A larger deposit usually means a lower interest rate.

E

Early Repayment Charge (ERC) A penalty fee you pay if you leave your mortgage deal early (e.g., if you have a 5-year fixed rate but switch lenders after 3 years). It is usually calculated as a percentage of your remaining balance.

Equity The amount of the property you actually "own." It is the property's current value minus the mortgage you still owe.

Example: House worth £200k - Mortgage £150k = £50k Equity.

Exchange of Contracts The point of no return. Solicitors swap signed contracts, and you pay your deposit. Once this happens, you are legally bound to buy the house.

F

Fixed Rate A mortgage where your interest rate (and monthly payment) stays exactly the same for a set period, usually 2 or 5 years. It gives you protection against rate rises.

Freehold You own the property and the land it sits on. Most houses are Freehold.

G

Gazumping When a seller accepts your offer but then accepts a higher offer from someone else before contracts are exchanged. It’s frustrating, but legal in England and Wales.

Guarantor Someone (usually a parent) who agrees to pay your mortgage if you can't. This can help young buyers get on the ladder.

H

Higher Lending Charge (HLC) A fee sometimes charged by lenders if you have a very small deposit (e.g., 5%). It protects the lender, not you.

I

Interest-Only Mortgage A mortgage where your monthly payment only pays the interest. You don't pay off the actual loan balance. At the end of the term, you still owe the full amount you borrowed (so you need a plan to pay it back!).

L

Leasehold You own the property for a set number of years (the lease), but not the land it sits on. Common with flats/apartments. You usually pay "Ground Rent" to the freeholder.

Loan to Value (LTV) The size of your mortgage compared to the value of the property, expressed as a percentage.

Example: A £10k deposit on a £100k house = 90% LTV.

M

Mortgage Offer The official letter from the lender confirming they are happy to lend you the money. This comes after they have checked your documents and valued the house.

N

Negative Equity When your home is worth less than the mortgage secured on it. This can happen if house prices crash.

P

Porting Moving your current mortgage deal to a new property when you move house. This avoids paying Early Repayment Charges.

Product Transfer Switching to a new deal with your current lender when your old deal ends. It’s often faster than remortgaging but might not offer the cheapest rates.

R

Remortgage Switching your mortgage to a new lender to get a better deal or raise extra cash.

Repayment Mortgage The standard way to pay. Your monthly payment covers the interest plus a bit of the loan balance. By the end of the term, the debt is £0 and you own the house outright.

S

Stamp Duty (SDLT) A tax paid to the government when you buy a property over a certain price. First Time Buyers often get a discount (relief).

Standard Variable Rate (SVR) The lender's default interest rate. You usually get moved onto this (expensive) rate when your fixed deal ends. You should almost always remortgage to avoid staying on this!

Subject to Contract A phrase used during negotiations to mean "nothing is legally binding yet."

T

Term The length of time you take the mortgage out for (e.g., 25 or 30 years).

Tracker Mortgage A variable rate mortgage that follows the Bank of England Base Rate. If the Base Rate goes down, your bills go down. If it goes up, your bills go up.

Transfer of Equity Adding or removing a person from the mortgage (e.g., after a marriage or divorce).

V

Valuation A check carried out by the lender to ensure the property is worth what you are paying for it. This is for their security, not a full survey for you.