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Mortgage jargon buster

The Aldermore guide to understanding common mortgage terms
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A

Additional Borrowing Increasing borrowing by releasing some of the equity available in a property.
Affordability Check An assessment to find out whether your mortgage would be affordable based on your income, credit commitments and essential household spending. For buy-to-let mortgages an affordability check will also take into account rental income.
Annual Percentage Rate of Charge (APRC) The overall cost of the mortgage including interest and fees.
Arrangement Fee A fee charged by your lender for setting up your mortgage.
Arrears If you are in arrears it means you have missed one or more monthly mortgage payments. 
Assured Shorthold Tenancy (AST) An Assured Shorthold Tenancy offers the landlord a guaranteed right to repossess his/her property at the end of the term stated in the tenancy agreement.

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B

Bank of England Base Rate The interest rate set by the Bank of England.
Bank Charge A fee you have to pay your bank for either going into an un-authorised overdraft, or for unpaid Direct Debits, cheques or standing orders because you don’t have sufficient funds in your account.
Buy-To-Let Mortgage A loan to purchase or refinance a residential property which is intended to let to tenants rather than to be lived in by the mortgage borrower.
Buildings Insurance Insurance that covers you for damage to the structure of your property. Your lender will require that you have buildings insurance in place when you take out a mortgage.

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C

Capital Gains Tax A tax you pay on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that has increased in value. It’s the gain you make that is taxed, not the amount of money you receive.
Capped Rate A capped rate mortgage means the interest rate charged by your lender will never go over its ‘capped’ limit even if the Bank of England changes the base rate.
Change of Parties A request to change the name of the parties named on your mortgage account.
Company Let A property let to a company. It may also be referred to as a corporate let.
Consent To Let A request to let out a property on which a residential owner-occupied mortgage is currently held.
Conveyancing The legal process you go through when buying or selling a property. Normally undertaken by a licensed conveyance or solicitor.
County Court Judgment (CCJ) A County Court Judgment is made against you for non-payment of debt and an application to the County Court is made for a Judgement against you to claim back the money. If the Court then decides the debt is to be paid, they will issue a CCJ which will set out how the debt should be repaid. Having a CCJ may make it harder for you to obtain a mortgage.
Credit Scoring A statistical number based on analysis of a person's credit files, to evaluate the creditworthiness of the person
Creditor A person or business that money is owed to.

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D

Debtor A person or business that owes money to another party.
Decision in Principle Sometimes known as an Agreement in Principle. This is a document from your lender confirming that you can borrow a certain amount and can be used as proof that you can afford to buy a property.
Deposit The amount you are required to put towards purchasing a property.

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E

Early Repayment Charge A fee you will have to pay if you redeem your mortgage during a specified period. This is usually the period of the initial deal.
Endowment A type of interest only mortgage where you also pay money into an investment called an endowment to pay off the mortgage at the end of the term.
Enquiry Fee If a lender requests mortgage details from your existing mortgage lender, the existing lender may charge an enquiry fee.
Equity The amount of property that you own outright. It is calculated as the difference between the property’s actual value and the mortgage held against the property.

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F

Fixed Rate Mortgage The mortgage interest rate of your mortgage stays the same for an initial fixed rate period.
Financial Conduct Authority (FCA) Is a financial regulatory body in the United Kingdom.
Freehold You own the building and the land it stands on.
First Time Buyer Someone who has not previously owned a property or doesn’t currently own a property.

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G

Gearing The overall equity levels within a portfolio of properties. It gives an indication of the level of debt against the portfolio value.
Gross The full amount of money earned or paid before any deductions such as tax.
Ground Rent An annual charge payable by the leaseholder to the freeholder.
Guarantor A third party who agrees to meet your mortgage payments if you are unable to.

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H

Higher Lending Charge (HLC) If you are borrowing more than 75% of the property value you may be subject to a higher lending charge that protects the lender against you defaulting on your mortgage.
House in Multiple Occupation (HMO) A property rented to at least 3 people who are not living in one household but who share facilities such as the bathroom or kitchen. It is sometimes called a ‘house share’.

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I

Individual Voluntary Arrangement (IVA) An agreement between a debtor and their creditors to pay off the balance over a period of time. An IVA can be an alternative to bankruptcy.
Interest Only Mortgage You only pay the interest on your mortgage each month and the amount of capital owed will not reduce. This means you need to have suitable plans in place to pay off the mortgage at the end of the term.
Intermediary Also, known as a broker, an intermediary is an advisor who can help you arrange a mortgage

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J

Joint Mortgage A mortgage taken out by two or more people.

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L

Land Registry The official body responsible for maintaining details of property ownership.
Leasehold You own the building but not the land it stands on and only for a certain period of time.
Lessee The tenant
Lessor The landlord
Let To Buy A mortgage that allows you to borrow money to buy a new home to move into, while your existing residence is let out to tenants.
Limited Company An organisation set up to run your business that is responsible in its own right for everything it does and its finances are separate to your personal finances.
Loan To Value (LTV) LTV or loan-to-value is the value of the mortgage compared to the value of the property expressed as a percentage.

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M

Monthly Repayment The amount you pay your mortgage lender each month under the terms of your mortgage contract.
Mortgage Deed The formal contract between a borrower and a lender which outlines the legal obligations of the borrower and the rights of the lender if the borrower fails to make repayments.

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N

Negative Equity You are in negative equity if the amount you owe to your mortgage lenders is more than the value of your home.
Net The amount of money earned or paid after any deductions such as tax.
New Build Property A property that has been built within the last two years, or one that has never been bought from a builder.

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O

Outstanding Balance The amount owed to your lender on your current mortgage.
Overpayment A payment made by the borrower over and above the monthly repayment on their mortgage that is stipulated in their mortgage contract.
Owner Occupier A person who owns a property and who will be living in the property as his sole or principle residence.

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P

P11D A form to report end-of-year expenses and benefits for employees who earned £8,500 or more.
P60 An annual summary of all your payslips. Your employer gives you one at the end of each tax year, if you still work for the employer.
PCM Per calendar month.
Property Value The purchase price or the conservative market value of the property being used as security for a mortgage.
Prudential Regulation Authority (PRA) One of two bodies responsible for regulating financial services in the UK working alongside the Financial Conduct Authority (FCA).

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R

Remortgage Changing your mortgage without moving home. You could remortgage if you want to save money, change to a different type of mortgage or release equity from your property.
Rental Income The amount of money collected by a landlord from a tenant or group of tenants for using a particular property.
Repayment mortgage Also known as a capital and interest mortgage, your monthly payments will cover both the interest and reduce the outstanding balance.
Repayment vehicle Sometimes referred to as a repayment plan, this is the means you will use to pay off the capital at the end of an interest only mortgage term.

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S

SA302 A form showing your proof of earnings issued by HMRC.
Second Charge Mortgage Sometimes referred to as second mortgages they have secondary priority behind your main (or first charge) mortgage.
Self Assessment A system HM Revenue and Customs (HMRC) uses to collect Income Tax. Tax is usually deducted automatically from wages, pensions and savings. People and businesses with other income must report it in a tax return.
Stamp Duty A tax you pay when you buy a property for more than £125,000.
Standard Variable Rate (SVR) The default interest rate your mortgage lender will charge.
Subject to Contract An agreement is not yet legally binding.
Switching Moving to a new mortgage with the same lender.

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T

Term The period of time it will take to pay back your mortgage.
Tie-In Period The period of time during which you are locked in to your mortgage deal. You will normally have to pay an early repayment charge if you leave your mortgage before the end of this period.
Title Deeds The legal documents that prove ownership of a property and which are transferred to the new owner on the sale of a property.
Tracker Mortgage The interest rate on your mortgage tracks the Bank of England base rate at a set margin above or below it.

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U

Underpayment A reduction in mortgage repayments that is agreed with your lender.

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V

Valuation Survey A check carried out by the lender to find out whether the property is worth the amount you’re paying for it. You should always have your own survey done too, to check for any structural problems.
Variable Rate Mortgage The mortgage interest rate may move in line with market conditions and therefore your repayments could go up or down.

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Y

Yield The rental income from a property calculated as a percentage of its value.

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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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