Buying a home or arranging protection comes with a lot of unfamiliar language. We have pulled together plain-English explanations of the mortgage and protection terms you are most likely to come across, so nothing catches you off guard. If you hear a term that is not listed here, just ask us and we will be happy to explain it.
An early indication from a lender of how much they may be willing to lend, based on a light check of your finances. It is not a full offer, but it shows estate agents and sellers that you are a serious buyer.
A figure showing the overall yearly cost of a mortgage across its full term, including interest and most fees. It is designed to help you compare deals on a like-for-like basis.
A charge some lenders apply for setting up a particular mortgage product. You can usually pay it upfront or add it to the loan, though adding it means paying interest on it over time.
The amount you actually borrow, separate from the interest charged on it.
A mortgage where each monthly payment covers both interest and a slice of the capital, so the balance steadily reduces and is cleared by the end of the term.
A mortgage where monthly payments cover only the interest. The full amount borrowed is still owed at the end of the term and must be repaid separately, so a credible repayment plan is essential.
The size of your mortgage expressed as a percentage of the property value. A £180,000 loan on a £200,000 home is 90% LTV. Lower LTVs usually unlock better rates.
The portion of the purchase price you pay yourself. A larger deposit lowers your LTV and typically gives you access to better deals.
The share of your property you own outright, the difference between its current value and the mortgage still owed.
When your property is worth less than the mortgage secured against it.
An interest rate that stays the same for a set period, keeping your payments predictable regardless of wider rate movements.
The lender default rate, which a mortgage usually reverts to once an initial deal ends. It can move up or down at the lender discretion.
A variable rate that follows the Bank of England base rate at a set margin, so payments rise and fall in line with it.
A variable rate set at a discount below the lender SVR for an agreed period.
A fee a lender may apply if you repay or overpay beyond agreed limits during a deal period, often a percentage of the outstanding balance.
Paying more than your required monthly amount to clear the balance faster. Most lenders allow a yearly overpayment allowance, commonly up to 10%, without triggering an ERC.
Transferring your existing mortgage deal to a new property when you move, subject to the lender approval.
Switching your mortgage to a new deal or a new lender, usually to secure a better rate or release equity, without moving home.
Moving to a new deal with your current lender when the existing one ends, without changing provider.
The total length of time over which the mortgage is repaid, commonly between 25 and 35 years.
The formal, binding confirmation from a lender that they will lend a stated amount on agreed terms, issued once full underwriting is complete.
A lender assessment of a property worth to confirm it is adequate security for the loan. This is separate from a more detailed survey you might commission for your own peace of mind.
The legal process of transferring property ownership from seller to buyer, handled by a solicitor or licensed conveyancer.
A tax payable on property purchases above certain thresholds in England and Northern Ireland. Rates vary by price, buyer type, and whether you already own other property.
Owning both the property and the land it sits on outright, with no time limit.
Owning the right to live in a property for a fixed number of years while someone else owns the land. Ground rent and service charges may apply.
A mortgage for a property you intend to rent out rather than live in. Lending is usually based largely on the expected rental income.
Cover that pays a lump sum if you die within the policy term, helping protect your family or clear the mortgage.
Life cover where the payout amount stays the same throughout the term.
Life cover where the payout reduces over time, often arranged to track a reducing repayment mortgage balance.
Life cover that pays your family a regular income rather than a single lump sum if you die during the term.
Pays a lump sum if you are diagnosed with one of the serious conditions listed in the policy, such as certain cancers, heart attack, or stroke.
Replaces part of your income if you cannot work due to illness or injury, paying out until you recover, retire, or the policy ends.
Buildings cover protects the structure of your home and contents cover protects your belongings inside it. Lenders normally require buildings cover to be in place.
An optional add-on that keeps a protection policy running by covering the premiums if you are unable to work through illness or injury.
A legal arrangement that directs who receives a life insurance payout, often speeding up payment and helping keep it outside your estate for inheritance tax purposes.
The process a lender or insurer uses to assess your circumstances and the risk involved before agreeing terms.
The UK regulator for financial services firms, including mortgage and protection advisers.
An adviser able to recommend products from across the available market rather than from a single limited panel.
A qualified adviser who searches the market on your behalf and arranges a mortgage or protection plan suited to your circumstances.
This glossary is general information to help you understand common terms and does not constitute financial advice. Your home may be repossessed if you do not keep up repayments on your mortgage. For guidance tailored to your circumstances, please get in touch.