We know that there’s lots of product-specific terms and acronyms, which you may bump in to along your mortgage and protection journey. So we’ve pulled together this handy Jargon Buster, that you can refer to whenever you need!

Mortgage acronyms

AIPAgreement in Principle (also known as a Decision in Principle): is a certificate from the lender confirming how much they may be willing to lend
APRAnnual percentage rate (current interest rate)
APRCAnnual percentage rate of charge: This is the fixed rate and today’s variable rate, averaged over the mortgage term, to give you the APRC rate
AVMAutomated valuation model: An auto-generated valuation takes place with the lender
BOEBank of England – The bank that sets the base rates
BTLBuy to let: Purchasing a house to rent it out (excluding family members)
COTCertificate of Title: A document your solicitor sends to the lender to request the funds once enquiries are satisfied and a completion date has been agreed
DIPDecision in Principle (also known as an Agreement in Principle): Certificate from the lender confirming how much they may be willing to lend
ERCEarly Repayment Charge: This is a charge by the lender when you have overpaid, or paid the mortgage in full during the fixed period
HMOHouse of multiple occupancy: this is usually on a rental property where the landlord has one house/building with multiple tenants each has their own bedroom and usually a shared lounge/kitchen space
HPIHouse price index: This calculates the percentage change in house prices based on a set period of time
JBSPJoint borrow sole proprietor: you can get a family member (usually a parent) to be named on the mortgage with you to increase the borrowing amount you are eligible for. The parent will not be named on the deeds to the house, these will be in your sole name
SDLTStamp duty land tax: you may be eligible to pay stamp duty but your solicitor will advise on this, you can also use the governments SDLT calculator to give you an idea of what you may owe
SVRStandard variable rate, this is the lenders variable rate that you will automatically move onto at the end of your fixed term if you don’t do anything when your tie in period ends

Mortgage Terms

Adverse creditThis refers to things such as late or missed payments, defaults, county court judgements, Bankruptcy, involuntary arrangements, arrangements to pay, debt management plans and even payday loans taken in the last 3 years.
Arrangement feeThis is a fee that the lender charges, either added to the mortgage or paid upfront. It usually means you obtain a lower interest rate than their no-fee products
Buy to let A type of mortgage for both first time landlords and existing landlords. Some mortgages do not require proof of income as they can be classed as self-funding, provided the rental income is sufficient.
Capitol and Interest(Also known as repayment) Paying the interest as well as the mortgage balance.
Cash-backSome lenders will offer cash-back on completion. Traditionally paid to your solicitor on completion, however some lenders will pay this directly to the homeowner’s bank account using the pre-agreed direct debit details. (Payment within 30 days of completion)
CompletionThe day you get the keys and move in!
Contents insurance This is a recommendation, not a legal requirement. This will protect the personal belongings in your home from such events as; fire, theft, storm and flooding
ConveyancerA solicitor that deals with house sales and purchases.
CovenantA condition within the title deeds that your solicitor will make you aware of prior to exchange
Credit scoreSome lenders use this to determine whether or not they will lend to you. Recognised agencies used are; Experian, Equifax and Transunion
DepositThe amount you need to put in on top of the mortgage to buy the house, this can vary depending on individual circumstances, typically start from 5% on a standard purchase, On some occasions on shared ownership, right to buy and rent to buy schemes there may be the option to do 100% and zero deposit
Discounted mortgagesA mortgage type usually a certain percentage below the lender’s current standard variable. It’s important to note that there is some risk as your payments could go up or down during the term
EquityThis is the current value of your house minus any mortgage owed, the difference is your equity eg, your house is worth £150k you have a mortgage left on there of £100k this means you have £50k equity
First time buyerYou are classed as a first time buyer is you have never owned any property before whether in the uk or overseas. Some lenders may class you as a first time buyer for their products if you have owned before but not for a specific number of years
Fixed ratesOnce completed, your mortgage will be fixed for a set period (typically two, three, five or ten years, or fixed for the life of the mortgage). The rate and monthly payment figures are fixed during this period. If you pay the mortgage off early for any reason you may incur an early repayment charge (see ERC for more details)
FreeholdYou purchase a house and own the house and the land
Further AdvanceAvailable through your current lender only, you may be able to borrow some additional funds for objectives such as; home improvements, extension work, landscaping. A further advance allows you to release some of the equity from your home’s value, and the agreed amount will be added to your mortgage monthly repayment.
Ground rentThis is usually charged on flats, but can be also be charged on some new build properties for the maintenance of the building and/or grounds
Interest-only mortgagesYou only pay the interest each month, meaning the full balance of the home will still be outstanding at the end of the mortgage term. You will not own the house until the balance is paid. You may plan to pay this with; the sale of the property and downsizing, from an investment or pension fund
LeaseholdYou own the house/flat but not the land it is built on. At the end of a lease, if not extended, the ownership goes back to the leaseholder. Extending a lease will depend on the leaseholder and costs can vary significantly to do this. *It’s important to check when buying a leasehold property how long is left on the lease. (A shorter lease means it may be harder to sell in the future and can affect future buyers’ chances of obtaining a mortgage). You should also check the ground rent and service charges, including how often they increase and by how much, as lenders dislike frequent and large increases
Let to buyYou change your current residential mortgage to a buy to let (BTL). You may be able to release some of the equity to purchase your next home
Mortgage termThe amount of years that you repay your mortgage over
Moving home You may still be in a fixed rate on your current property’s mortgage and could incur an early repayment charge (ERC) if you then pay that mortgage off early. If your current lender allows, we can explore the option of porting your mortgage, this means you keep your current rate and move this over to the new house. The rate is usually fixed, so you have the option to look for additional borrowing if needed to fund the move. We can also explore extending the mortgage term to keep the payments within your budget.
Offset mortgageIf you have a lump sum of savings you can put these into a savings account with the same bank that your mortgage is with. By doing this they will only charge the mortgage interest on the difference. (For example, with a £100k mortgage and £50k in savings, the lender will only charge interest on £50k of your mortgage). Interest is typically not paid on that savings balance, but it does mean that you avoid paying interest on your mortgage
Part & PartThis is where some of your mortgage balance is on repayment, and some is on interest-only, which could help keep your monthly repayments lower as you’re not paying back the full balance. However, you will need to make sure you have a suitable method of repayment at the end of the term
PortingIf you are still in a fixed rate mortgage with your current lender and decide to move home, porting allows you to move the rate on to the new property. Subject to affordability you may be able to borrow more and potentially extend or shorten the term of the mortgage without incurring an early repayment charge (ERC)
Product transferThis is when your fixed rate ends, but rather than move to a new lender it may be more cost-efficient to stay with your current lender (or this may be your only option at the time). Instead of being stuck on standard variable rate, which can be quite costly, you can move on to a new fixed/tracker rate from their current product range
PurchaseThe loan to buy your home. This is typically available from a 5% deposit, however the bigger the deposit the better the interest rate will be. The threshold increases at every 5% interval, so in order to receive a better rate you would need to increase your deposit by 5%
Re-mortgageThis is required when your fixed rate ends. You can re-mortgage up to six months before the end of your current term, meaning if the rates are low you are able to secure it in that time. It’s also important to note that if the rates then reduce during this time we can amend or reapply so that you receive the best rate possible
Repayment mortgageYou pay back the interest and some of the capitol balance. By keeping up to your repayments on time and in full every month, at the end of the mortgage term you will own the house outright
Standard Variable(Also known as the revert rate). This is the rate that your mortgage will go on to at the end of the fixed term if you don’t do anything. This can be more costly than other options, it also means your monthly payments can change month to month as the rate can change at any time
Tracker mortgagesThis type of mortgage tracks at a percentage above the Bank of England (BOE) rate. Because this rate changes, it means you have to be prepared and aware that your monthly payment can fluctuate. With some of these mortgages you have the option to change to a fixed rate without an early repayment charge (ERC), so if you feel you no longer want to take this payments risk, then we can look to change this mid-term
ValuationThe lender will conduct a basic valuation. This can be done remotely as an auto generated desktop valuation, which means they will not visit the house and is determined from online data. Or, they may do a physical valuation and visit the house.

Types of house purchasing schemes

RTB Right to buy scheme: After a period of time you can buy your council home at a discounted rate. The discount depends on the length of time you have lived there and other T&C’s may apply. You can enquire further with your local council housing office
Shared ownershipYou buy a percentage of the home usually between 25% - 75%. The remaining share is owned by a housing association. Along with the monthly mortgage payment you will usually have a rent payment on the part you don’t own, service charge and management charge. On very rare occasions (depending on the housing association) there may be no rent on the part you do not own, but you still pay the service and management charges. You can buy a share that is affordable to you and have the option to buy further shares in the future usually up to 100% ownership. However, in some areas where there is limited affordable housing there may be a cap on this, typically around 80% to keep affordable housing in the area
Discounted market saleYou purchase a house at a discounted rate to the current market value (usually 20%) but this can vary and is only offered in some areas by local councils. When selling in the future you have to sell on at the same discounted rate. Typically you will not pay any rent on the discounted part
First home schemeThis scheme is for local first time buyers who cannot afford to buy on the open market. The discount is usually between 30-50% of the full market value
All schemes have different T&C’s it is important you fully look into these before buying to ensure you choose the right scheme for you – contact us for further information and advice

Protection Terms

Life insuranceA lump sum paid out upon death
Critical illness coverA lump sum will be paid out upon being diagnosed with a specified critical illness. This varies by lender, illnesses include (and are not limited to); cancer, heart attack, stroke, motor neurone disease
Income Protection If a doctor declares you unfit to work, Income Protection pays out around 60-65% of your gross annual income on a monthly basis until you can return to work.
Family Income BenefitThis replaces the deceased partner’s income for a set period of time. This is typically an annual lump sum or monthly payment. This can help the beneficiary and dependants maintain their lifestyle, should something happen to either parent.
Accident and sickness coverIf you have an accident or become sick and are unable to work, this cover will pay out a set monthly amount (typically to cover the mortgage payment only)
Private medical(Also known as Health Insurance) A private alternative to the UK’s public National Health Service (NHS), which will open your options further.

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