Mortgage Jargon, Translated Into Human
TL;DR
Mortgages come with their own language. You shouldn't need a dictionary to buy a home.
AIP, LTV and affordability decide what you can borrow. Start there.
Fixed, tracker and SVR work very differently. Know which one you're on.
When your deal ends, you'll hear "product transfer" and "remortgage". Watch out for early repayment charges.
Want all 33 terms? Grab our free jargon buster at the end.
Ever read an email from a lender and felt like you'd missed a lesson somewhere? It’s not just you!
Lenders, solicitors and estate agents all have their own shorthand, and most of them forget the rest of us don't speak it. So here are the words you'll actually hear, translated into plain English. No waffle, and no jargon to explain the jargon.
The first words you'll hear
Agreement in Principle (AIP). You might also hear it called a Decision in Principle or Mortgage in Principle. It's a lender's rough idea of how much they might lend you, usually after a credit check. It's not a guarantee or an offer. But it shows estate agents and sellers you're serious.
Affordability. How a lender works out what you can comfortably pay back. They look at your income, your regular bills, any debts, and whether you'd still manage if rates went up.
Loan to value (LTV). How big your mortgage is compared with what the home is worth. A £150,000 mortgage on a £200,000 home is 75% LTV. The lower it is, the better the rates you'll usually get.
Deposit. The money you put in yourself. A bigger deposit means a lower LTV, and that usually means cheaper rates and more choice.
Gifted deposit. Deposit money given to you by someone else, usually family. The lender will want it in writing that it's a gift, not a loan, and that the person giving it won't own any of your home.
Picking your deal
Fixed rate. Your rate stays the same for a set time, usually two, three or five years, sometimes longer. Your payments don't move, which makes budgeting easy. The catch is that if rates drop, you don't benefit, and leaving early usually costs you.
Tracker. Your rate follows the Bank of England's rate, plus a set amount on top. When theirs moves, yours moves too, and so do your payments.
Bank Rate. Often called the base rate. It's the interest rate set by the Bank of England. When it changes, trackers and other variable rates usually follow. Fixed rates stay put until the fixed period ends.
Standard Variable Rate (SVR). Your lender's default rate. It's where you usually end up when your deal finishes and you haven't moved to a new one. It's normally higher than their other deals, and they can change it whenever they like. Nobody should be sitting on one by accident.
APRC. The total cost of a mortgage over its whole term, including interest and fees, shown as a yearly percentage. It assumes you keep the mortgage for the full term, including years on the SVR. So it's useful for comparing deals, but it isn't a prediction of what you'll actually pay.
Arrangement fee. Sometimes called a product fee. It's what some lenders charge to set up your mortgage. You can usually pay it upfront or add it to the loan, but add it and you'll pay interest on it. Deals with a fee often have a lower rate, so the cheapest-looking deal isn't always the cheapest. The sums are worth doing.
When your deal's ending
Product transfer. Switching to a new deal with the lender you're already with. It's usually quicker and involves less paperwork than moving lenders. Quicker doesn't always mean better, though, so it's worth comparing against the rest of the market first.
Remortgaging. Moving your mortgage to a new deal with a different lender. People usually do it to get a better rate when their deal ends, or to borrow more against their home.
Early repayment charge (ERC). A charge some lenders make if you pay off your mortgage, or overpay more than you're allowed, during your deal. It can apply if you remortgage or move before your deal ends. Many lenders let you overpay up to 10% of the balance a year without one.
Porting. Taking your current deal with you when you move home, usually to avoid an early repayment charge. Not every mortgage can be ported, and the lender still has to approve you and the new property.
The final stretch
Valuation. The lender's check that the home is worth enough to lend against. It's for them, not you, and it doesn't tell you anything about the home's condition. For that, you want a RICS Home Survey (Level 1, 2 or 3).
Exchange of contracts. When you and the seller swap signed contracts through your solicitors and the deposit is paid. From here, you're legally committed and the moving date is set.
Completion. The big day. Your lender sends the money, the seller's side receives it, the home is yours and you get the keys. On a remortgage, it's the day your old mortgage is paid off and the new one starts.
Want the full A to Z?
These are the terms we get asked about most, but there are plenty more. Our free jargon buster covers 33 of them on a few easy-to-read pages. No email address needed.
Download the mortgage jargon buster (PDF) →
How we help
Jargon is our job, not yours. We're based in Greasby, we work with people right across the Wirral, and you deal with the same person from your first question to the day it's done.
We search the whole market, explain your options in plain English and make sure it actually makes sense to you. If a word on a form or an email from a lender leaves you scratching your head, just ask. There's no such thing as a daft question here.
This is general information, not personal advice. Everyone's situation is different, so the best next step is a chat about yours.
Let's talk. Book your free chat, call us on 0151 440 3500 or email hello@ngmortgages.co.uk. No pressure, no jargon. Sorted.
Your home may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you remortgage.