Demystifying Mortgage Terminology: A Jargonbuster Guide

jargon busting

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Buying a home is one of life’s exciting and most important landmarks, but it can also be overwhelming, especially when it comes to understanding the jargon and acronyms used in the mortgage process.

From AIP to LTV, there are many terms that may seem like a foreign language to first-time homebuyers and even experienced property investors. To help you navigate through the world of mortgages, Credicus have created this jargonbuster guide to explain some of the most common terms and acronyms used in the UK mortgage market.

Please let us know if you have any other suggestions or questions: our experts are on hand to talk to you about any specific mortgage or bridging finance requirements you have.

Mortgage terms

Mortgage

A mortgage is a loan used to purchase a property. The borrower agrees to pay back the loan, plus interest, over a set period of time.

Lender

A lender is a financial institution that provides the funds for a mortgage.

Borrower

The borrower is the person or people who are taking out the mortgage.

Mortgage broker

A mortgage broker’s primary role is to help borrowers find the best mortgage deals available. Here at Credicus, we have access to a wide range of lenders and mortgage products, which allows us to find the most suitable option for you. Speak to one of our experts today and learn more about how we can support your mortgage requirements.

Interest rate

The interest rate is the percentage of the loan amount that the borrower will pay in addition to the loan amount. It is determined by the lender and can be fixed or variable.

Fixed-rate mortgage

A fixed-rate mortgage is a type of mortgage where the interest rate remains the same for the entire term of the loan.

Variable-rate mortgage

A variable-rate mortgage is a type of mortgage where the interest rate can change over time, usually based on the Bank of England base rate.

APR (Annual Percentage Rate)

The APR is the total cost of borrowing, including interest and any fees, expressed as a percentage.

Deposit

A deposit is the initial payment made by the borrower towards the purchase of a property. It is usually a percentage of the property’s value.

Equity

Equity is the difference between the value of the property and the amount of the mortgage still owed.

Stamp Duty

Stamp Duty is a tax paid by the buyer on the purchase of a property. The amount of Stamp Duty paid depends on the value of the property.

Valuation

A valuation is an assessment of the property’s value carried out by a surveyor on behalf of the lender.

Conveyancing

Conveyancing is the legal process of transferring ownership of a property from the seller to the buyer.

Completion

Completion is the final stage of the mortgage process, where the property officially changes ownership, and the mortgage funds are released to the seller.

Mortgage calculator

A mortgage calculator is a tool that helps you estimate your monthly mortgage payments based on various factors such as the loan amount, interest rate, and loan term. It takes into account the principal amount, interest rate, and loan term to give you an accurate estimate of your monthly payments.

Mortgage acronyms

LTV (Loan-to-Value)

LTV is the ratio of the mortgage amount to the value of the property. For example, if a property is worth £200,000 and the mortgage is £150,000, the LTV is 75%.

AIP (Agreement in Principle)

An AIP is a document from a lender that states how much they are willing to lend to a borrower based on their financial information. It is not a guarantee of a mortgage but can help when making an offer on a property.

DIP (Decision in Principle)

A DIP is similar to an AIP, but it is a more detailed assessment of the borrower’s financial situation. It is usually required before a mortgage application can be submitted.

EPC (Energy Performance Certificate)

An Energy Performance Certificate (EPC) is a document that provides information about the energy efficiency of a property. It rates the energy efficiency of a building on a scale of A to G, with A being the most energy efficient and G being the least. The certificate also includes recommendations on how to improve the energy efficiency of the property.

SVR (Standard Variable Rate)

The SVR is the interest rate set by the lender that borrowers will pay once their initial mortgage deal ends.

ERC (Early Repayment Charge)

An ERC is a fee charged by the lender if the borrower pays off their mortgage early.

HLC (Higher Lending Charge)

An HLC is a fee charged by the lender if the LTV is higher than a certain percentage, usually 75%.

CCJ (County Court Judgement)

A CCJ is a court order that can be issued if a borrower fails to repay a debt.

IVA (Individual Voluntary Arrangement)

An IVA is a formal agreement between a borrower and their creditors to repay their debts over a set period.

DMP (Debt Management Plan)

A DMP is an informal agreement between a borrower and their creditors to repay their debts over a set period.

Mortgage types

Repayment mortgage

A repayment mortgage is a type of mortgage where the borrower makes monthly payments that cover both the interest and the loan amount. By the end of the term, the mortgage will be fully repaid.

Interest-only mortgage

An interest-only mortgage is a type of mortgage where the borrower only pays the interest on the loan each month. The loan amount is repaid at the end of the term.

Buy-to-let mortgage

A buy-to-let mortgage is a type of mortgage used to purchase a property that will be rented out to tenants.

Help-to-buy mortgage

A Help-to-Buy mortgage is a government scheme that helps first-time buyers get onto the property ladder by providing a loan towards the purchase of a new build property.

Shared ownership mortgage

A shared ownership mortgage is a type of mortgage where the borrower purchases a share of a property and pays rent on the remaining share.

Offset mortgage

An offset mortgage is a type of mortgage where the borrower’s savings are used to reduce the amount of interest they pay on their mortgage.

Talk to one of our experts

Understanding the jargon and acronyms used in the mortgage process can make the experience less daunting and help you make informed decisions when it comes to purchasing a property.

We hope this jargonbuster guide has provided you with a better understanding of the key terms and acronyms used in the UK mortgage market. Remember to always seek professional advice when making any financial decisions: speak to one of credicus’ specialists today and find out how we can help with your mortgage needs.

Property finance made simple.

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