Glossary of terms

AIP: This means an Agreement in Principle. Some lenders call it a mortgage in principle. It's an indication of what you can borrow up to based on details you've provided about your income, spending and debts.

APRC: This stands for the Annual Percentage Rate of Charge, and is calculated by taking the total interest cost over the term of the mortgage, plus fees.

Arrangement fee: This is the setup fee for your mortgage and can include a range of fees such as booking, application and product fees, which are an important consideration when picking a mortgage deal and can amount to thousands. 

Arrears: This means you have 'defaulted' at least once on your mortgage repayments or you have missed a payment. If you continually fall into arrears you could be at risk of losing your home.

Base rate: This is the rate of interest set by the Bank of England which is used to base some mortgage deals on, such as trackers, which are pegged at a certain percentage above or below the base rate.

Booking fee: This is a mortgage set up fee, sometimes lumped under arrangement fees.

Borrower: The individual or individuals extended a loan and mortgage for the purchase of a house and/or property. Borrower is responsible for making all payments and fees associated with the loan over the life of the loan.

Buy-to-let: This is a property bought for the specific purpose of letting it to tenants, and mortgage lenders offer buy-to-let mortgages to fit these borrowers. Based mainly on the rental income as opposed to your personal criteria. These mortgages are not regulated by FCA.

Capital: The mortgage amount you borrow secured on your property.

Completion: The completion of a property's sale or purchase. When the loan takes effect and the buyer get their keys to move in. In regards to a re-mortgage it is when one loan is paid off using the proceeds of a new one.

Credit score: This is a score that every borrower has and is used to help assess their suitability for borrowing. A poor credit score is typically a result of past missed repayments on loans or credit cards, for example. 

Deposit: The amount you put towards the cost of the property when you buy your home. On average, you need at least 5% to 25% of the purchase price

Discounted Rate:  A mortgage which has an interest rate below the lender's standard variable rate (SVR), Bank Base Rate or Libor rate, typically for the first few months or years of the loan. The rate payable may move up and down, but the discount on SVR remains constant

Equity: This is the amount of the property value aside from the sum you owe on the mortgage this is known as the equity in your property. 

Estate agent's fee (if selling): Only paid by the seller, not the buyer, for the estate agents services.

First time buyer: A home loan borrower who has never owned a property before. They often qualify for various discounts and first-time buyer perks.

Fixed rate mortgage: This is a mortgage deal set over an initial period of years typically between two and five that offers a fixed interest rate which gives the security of a fixed monthly repayment for that period.

Guarantor: This is somebody for example a parent for a child who undertakes responsibility if the borrower is unable or wont meet repayments.

Higher Lending Charge: A fee sometimes charged by lenders if you borrow a particularly high LTV of around 90%, although these fees are less common these days.

Initial rate: The starting interest rate.

Interest-only mortgage: This mortgage enables the borrower to only pay the interest on the capital sum. However, this means your mortgage balance doesn't reduce and will still have to be repaid at the end of the term by means of an alternative vehicle.

Investment property: Property that is purchased with the intention of generating rental income or capital appreciation.

Key facts illustration: This sets out the detail and key features of the mortgage for a borrower before applying for a mortgage.

Land registry Fee: The fee payable to the Land Registry to register any changes in the property details including a change of ownership, securities etc.

Liabilities: A persons debts or financial obligations. Liabilities include long-term and short-term debt, as well as potential losses from legal claims.

Loan to value (LTV): The loan-to-value is the ratio between the value of the loan you take out and the value of the property as a whole, expressed as a percentage.

Maturity date: The day on which the remaining outstanding principal, interest and fees on a loan must all be repaid.

Mortgage: A mortgage is a loan from a bank or building society that lets you buy a property. It is a secured loan which means the bank will own part of your home until you have paid off the mortgage in full.

Mortgage offer: A formal notification from a lender stating that the borrowers loan has been conditionally approved and specifying the terms under which the lender agrees to make the loan.

Mortgage term: The length of time you agree to pay off the mortgage by.

Negative equity: This is a situation when the amount you owe on your mortgage is greater than the value of your property. It particularly becomes a problem if you want to move house.

Offset mortgage: This is a particular type of mortgage which allows borrowers to offset their savings against their mortgage debt thus reducing the interest they pay. So, for example, if you have £60,000 offset mortgage and £10,000 savings, you only pay interest on £50,000 of the mortgage.

Overpayments: Lenders may allow you to pay extra on your mortgage debt penalty-free, even if you are tied into a deal. Overpaying on your mortgage can result paying less overall interest and shortening the time it takes to clear the debt.

Protection: For peace of mind you may want to protect you home, family and investment by taking out insurance against eventualities that can put any of these at risk.

Purchase price: Is the price you have to pay for the property.

Rate: The amount of interest on a loan expressed as a percentage.

Redemption / early repayment charge: Some mortgage deals have an early repayment charge if you pay some or all of your mortgage off before the end of the term or transfer to another rate before the end of the product period.

Remortgaging: This is when you arrange a new deal on your current home. This may be with same or an alternative lender.

Removal costs: The cost of getting your belongings to your new home.

Repayment mortgage: This is a mortgage when you pay the interest as well as a portion of the capital debt, so by the end of the mortgage term you no longer the lender anything providing you have kept up repayments as scheduled throughout the term.

Search fee: Paid to get information held by the local authority about the property, including prospective planning permission, charges and restrictions.

Security: The property that will be used as security for a loan. If the borrower defaults, the lender can sell the property to satisfy the debt.

Stamp duty: This is the tax levied by the government on house purchases. This is dependent on criteria at the time and is subject to change.

Solicitors fees: For carrying out all the legal work when buying, selling and re-mortgaging your home.

Tracker mortgage: These mortgage deals are typically linked to the Bank of England base rate, and may impact your monthly repayments accordingly.

Transfer fees: Covers the lenders cost of transferring the mortgage money from the lender to the solicitor.

Unsecured loan: Typically used when referring to a loan or credit facility which is not secured against a property.

Valuation survey fee: Assessment calculated by a professional to determine what the house is worth, suitability of mortgage and its condition.

Variable rate: An interest rate that may fluctuate or change periodically. Payments may increase or decrease accordingly.