Show Menu
Cheatography

Mortgage Jargon Glossary Cheat Sheet by

Lenders, underwriters, and acronyms - mortgages seem to attract jargon. Here's a cheat sheet for the common terms.

General Mortgage Glossary

Agreement in principle
A document from a lender indicating they may, based on the inform­¬≠ation they've received, be able to offer that much as a mortgage to the borrower.
Arrangement fee
A fee from the lender to cover their costs for arranging the mortgage.
Arrears
Arrears means money owed to the lender which has not been paid on time.
Booking fee
A fee from the lender to cover their costs for arranging the mortgage.
Broker
An adviser who can help you arrange a mortgage.
Buy-to-let
A property the borrower intends to let out instead of live in.
Capital
The money you borrow to buy a property.
Conveyancing
The legal process of buying or selling property.
Deposit
The amount of money the borrower puts forward to buy the property, which together with the capital should add up to the total purchase price.
Early repayment charge
A fee the borrower pays to repay some or all of the mortgage early.
Equity
The amount of the property that the borrower owns outright. The value of the property less the amount outsta­nding on the mortgage.
Equity release scheme
A system allowing people to take some of the equity out of their home.
Freehold
The property owner also owns the land the property stands on.
Gazumping
This is when an offer has been accepted by the seller, but a second (higher) offer is made and the seller accepts that instead.
Guarantor
A third party who agrees to pay the mortgage payments if the borrower does not.
Higher lending charge
This is an additional fee charged by some lenders if the LTV is very high.
Intermediary
An advisor who can help arrange a mortgage.
Land Registry
The official body respon­sible for mainta­ining details of property ownership.
Leasehold
The property owner does not own the land the property stands on.
Loan-to-value
The percentage of the value of the property that is being borrowed.
Monthly repayment
The amount the borrower pays each month to the lender.
Mortgage deed
The official contract between the lender and borrower covering the terms of the loan.
Mortgage term
The length of time the borrower will owe money to the lender, if they do not make any early repaym­ents.
Negative equity
This is when the value of the property drops enough that the amount outsta­nding on the mortgage is less than the value of the property.
Portability
This is where the borrower can transfer their mortgage to a new property without arrang­ement or early repayment fees.
Repayment vehicle
Part of intere­st-only mortgages, where the mechanism by which the capital is to be repaid is specified.
Service charge
The fees charged by the freeholder to the owner of a leasehold property.
Stamp duty
A tax on property sales, charged by the govern­ment.
Tie-in period
The length of time for which the borrower would incur an early repayment fee if they attempted to remortgage with another lender.
Underwriter
The person or organi­sation which approves the borrower's mortgage.
Valuation survey
A survey by the lender to confirm the property is worth enough to secure their loan.

Interest Rate Terms

APR
A rate designed to help understand the cost of borrowing, including charges as well as interest.
Base rate
An interest rate set by the Bank of England, on which tracker and standard variable rates are usually based.
Capped rate
An upper limit above which the interest on a mortgage is not allowed to rise.
Collar
A lower limit below which the interest on a mortgage is not allowed to fall.
Discounted rate
A rate, typically for a defined period, which is lower than the standard interest rate of the mortgage.
Fixed rate
An interest rate which does not change.
Standard variable rate
An interest rate which changes, typically based on something like the Bank of England base rate.
 

Types of Mortgage

Cashback mortgage
A mortgage where the initial loan includes some cash as well as the loan for the property.
Current account mortgage
All debts and balances combined into one, so the borrower's balances offset and reduce your debts.
Discounted-rate mortgage
A mortgage where the rate is lower than the lender's standard rate.
Endowment mortgage
A type of intere­st-only mortgage where the balance is paid at the end of the term via an invest­ment.
Family offset mortgage
A mortgage which allows family members to use their savings to offset the interest accrued by first-time buyers.
Fixed-rate mortgage
A mortgage where the interest rate stays constant for a set period.
Flexible mortgage
A mortgage which allows the borrower to overpay or underpay, or take a payment holiday.
Interest-only mortgage
A mortgage where the borrower only pays the interest on the loan, with the balance still being due at the end of the term.
Joint mortgage
A mortgage with more than one borrower (for example, a married couple might take a joint mortgage together).
Lifetime mortgage
A mortgage where the balance is repaid upon the borrower's death.
Offset mortgage
The mortgage and savings are treated as a single entity, so your savings serve to reduce the interest on your mortgage.
Remortgage
A new mortgage a borrower takes out without moving house, often to improve the interest rate they are paying.
Repayment mortgage
A mortgage where the borrower pay off the interest and the loan each month (as opposed to intere­st-­only).
Sub-prime mortgage
A mortgage offered to someone who doesn't reach typical credit requir­ements for a mortgage.
Tracker mortgage
The interest rate will follow the Bank of England base rate at a set level above it.
Variable-rate mortgage
The interest rate will follow the standard rate offered by the lender.

Insurance Terms

Buildings insurance
Insurance that covers damage to the structure of the property.
Contents insurance
Insurance that covers damage to the contents of the property.
Mortgage payment protection insurance
Insurance that covers the borrower for a time in the event they cannot make mortgage payments.
Rebuild cost
The cost of rebuilding your home if it is destroyed.

Government Buyer Help Schemes

Help to Buy
One of several government schemes designed to help buyers, including guaran­tees, ISAs, and equity loans.
Help to Buy ISA, Lifetime ISA
A savings vehicle in which the government will add a bonus to money saved each year.
Right to Buy scheme
Intended to allow those in social housing to buy their homes.
Shared ownership
Where the borrower buys a share of the property, with their housing associ­ation owning the remainder.
Starter Homes Initiative
Discounted homes for first-time buyers under 40.

Acronyms and Initia­lisms

AIP
Agreement in principle. A document from a lender indicating they may, based on the inform­ation they've received, be able to offer that much as a mortgage to the borrower.
APR
Annual Percentage Rate. The cost of the mortgage on an annual basis.
BTL
But-To­-Let. A type of mortgage intended for people who are borrowing so they can buy a property they intend to let out instead of live in.
CAM
Current Account Mortgage. All debts and balances combined into one, so the borrower's balances offset and reduce their debts.
CCJ
County Court Judgement. When debts go to court, a CCJ may be issued, and that remains on a credit report for six years.
DIP
Decision in principle (see AIP above)
CI
Critical Illness. Related to insurance a borrower can take out to cover them if illness makes them unable to work.
ERC
Early Repayment Charge. The penalty fees incurred by repaying some or all of the mortgage early.
LTV
Loan-t­o-V­alue. The percentage of the value of the property that is being borrowed.
MPPI
Mortgage Payment Protection Insurance. Insurance that covers the borrower for a time in the event they cannot make mortgage payments.
RIO
Retirement Interest Only. A retirement mortgage where the borrower only pays interest and the loan is repaid on the death of the borrower.
RTB
Right to Buy. A government scheme allowing people to buy social homes.
SVR
Standard Variable Rate. This is the typical interest rate when not in a fixed or discounted period.
               
 

Comments

No comments yet. Add yours below!

Add a Comment

Your Comment

Please enter your name.

    Please enter your email address

      Please enter your Comment.

          Related Cheat Sheets

          Financial Statement Analysis Cheat Sheet
          UK Mortgage Application Cheat Sheet

          More Cheat Sheets by DaveChild

          Regular Expressions Cheat Sheet
          Linux Command Line Cheat Sheet
          CSS2 Cheat Sheet