Jargon Buster A-Z – Mortgage Terms Explained Simply

If you’re remortgaging to get a better deal, why not see if you can borrow a little extra while you’re at it? Many homeowners use additional borrowing for home improvements, consolidating debts, or even helping a child with their first home deposit. Just be mindful—it still needs to be affordable, and lenders will check that you can comfortably cover the repayments.

This is where lenders figure out how much you can actually afford to borrow based on your income, outgoings, and other financial commitments. They want to make sure you can comfortably make your mortgage payments.

Think of this as a pre-approval from a lender. It gives you an idea of how much they might be willing to lend you, which can be really helpful when you start looking at properties. It's not a guarantee, but it shows sellers you're serious.

The true cost of borrowing, rolled into one handy percentage. While interest rates get all the attention, your APR includes the mortgage rate, broker fees, product fees, and any other sneaky charges. A lower APR generally means a cheaper mortgage overall. If you’re thinking of remortgaging, keep an eye on this number—it could change when you tweak your loan amount or term.

The admin charge some lenders apply for setting up your mortgage. It can range from a few hundred pounds to a few thousand, and while some lenders let you roll it into your mortgage, that means paying interest on it. (Translation: it’s not always the best move.) Your mortgage broker can help you decide whether it’s better to pay upfront or add it to your loan.

A term you never want to hear from your lender. Falling into arrears means missing mortgage payments, which could lead to penalties, a hit to your credit score, or even repossession in the worst cases. If you’re struggling, speak to your lender or mortgage broker as soon as possible—there may be options to help you get back on track before things escalate.

This is a document where you list everything you own (your assets, like savings and investments) and everything you owe (your liabilities, like loans and credit card debt). It gives lenders a good overview of your financial health.

A bit of a broad term, but generally, it means you’ve had financial hiccups in the past—things like missed payments, a County Court Judgment (CCJ), an Individual Voluntary Arrangement (IVA), or even bankruptcy. Having bad credit doesn’t mean you can’t get a mortgage, but it might limit your options. The good news is some lenders specialise in helping borrowers with past credit issues, and the further in the past the problem, the better your chances. A bad credit mortgage broker (like us) knows which lenders to approach, so you’re not wasting time on dead-end applications.

This is the Bank of England’s official interest rate, and it’s a big deal because it influences how much lenders charge for mortgages. If the base rate goes up, variable and tracker mortgage rates tend to follow suit. If it drops, borrowing can become cheaper. If you’re on a fixed-rate mortgage, you’re shielded from these changes until your deal ends—then it’s time to check in with your broker for a better deal before your lender puts you on their Standard Variable Rate (SVR) (which is usually much higher!).

Sometimes known as an arrangement fee, this is a charge some lenders apply for securing your mortgage deal. It’s basically a way of reserving the rate before you submit your full application. Not all mortgages come with a booking fee, and costs can vary—your mortgage broker will help you weigh up whether a deal with a fee is actually worth it in the long run.

This is a short-term loan designed to 'bridge' a gap, often when you're buying a new property before selling your old one, or if you need quick funds for something like an auction purchase or renovations. It's usually for a short period until longer-term finance is in place.

Your mortgage matchmaker. A mortgage broker searches the whole market to find a lender and deal that fits your specific circumstances, whether you're a first-time buyer, remortgaging, or have complex income. They also handle all the paperwork, negotiate rates, and smooth out any bumps along the way—saving you time, stress, and potentially thousands of pounds over the course of your mortgage. Hmmm now if only we knew someone who did this? (Shameless plug: Delta Mortgages does all this and more!)

This is a type of insurance that covers the physical structure of your property against things like fire, floods, and other damage. It’s also a contractual term of the mortgage that you keep the building insured for the term of the mortgage. Lenders require you to have this in place before you move in.

Helps safeguard your business against the financial impact of a key person becoming seriously ill or dying. This can include key person insurance, relevant life, shareholder protection, and business loan protection.

This is a specific type of mortgage designed for people who are buying a property to rent it out rather than live in it themselves. The criteria and rates can be different from a regular residential mortgage.

The actual money you borrow to buy your property. When you make your monthly mortgage payments, you’re repaying capital plus interest (unless you’re on an interest-only mortgage, in which case the capital remains untouched until the end of the term). The goal is to chip away at the capital over time until you own your home outright—without a mortgage hanging over your head.

This is a tax you might have to pay on any profit you make when you sell an asset, like shares or a second property.

Think of this as a variable-rate mortgage with a safety net. Your interest rate can go up and down, but it won’t go above a set limit (the “cap”). This means you get the benefit of falling interest rates but won’t get stung too badly if they start climbing. If you like the idea of flexibility but don’t want any nasty surprises, a capped rate mortgage could be worth considering.

A mortgage that gives you a lump sum of cash when you take it out. It sounds great, doesn’t it? It can be, especially if you need extra funds for furniture or home improvements. But (and it’s a big but) cashback mortgages often come with higher interest rates, so while you get a little bonus upfront, you could end up paying more in the long run. Always weigh up the pros and cons with your mortgage broker before jumping in.

This refers to a professional qualification for mortgage advisers. It means they've passed exams and are certified to give mortgage advice. All mortgage advisers giving advice must have this qualification.

This is a mortgage used to buy property for business purposes, such as shops, offices, or warehouses. The application process can be more complex than a residential mortgage.

This is the final day of the property purchase when all the legal paperwork is done, the money is transferred, and you get the keys to your new home.

This type of insurance covers the belongings inside your property if they are damaged, stolen, or lost.

This is a mortgage tailored for people who work as contractors and may have irregular income or a limited company setup. Lenders who offer these understand that your income structure might be different from someone who is permanently employed.

This refers to the legal process of transferring ownership of a property from the seller to the buyer. A conveyancer or solicitor specialises in this work.

This is a type of court order in England, Wales, and Northern Ireland that can be issued against someone who owes money. Having a CCJ can sometimes affect your ability to get a mortgage.

Your financial report card. Lenders use your credit score to assess how well you manage money and whether you’re a responsible borrower. A high score means you’re more likely to get approved for a mortgage with a better interest rate, while a low score could make things trickier. If your score isn’t perfect, don’t panic—there are lenders out there who specialise in bad credit mortgages, and a good broker will know where to look.

This is a type of insurance that pays out a lump sum if you are diagnosed with a serious illness specified in the policy. This can help cover medical costs or other financial needs.

This one’s a bit different. A CAM mortgage links your mortgage, current account, and savings account into one big pot, so instead of earning interest on your savings, they reduce your mortgage balance—meaning you pay less interest overall. The more you keep in your account, the faster you can pay off your mortgage. Ideal for disciplined savers, but if you’re someone who regularly dips into your overdraft, this might not be the best fit!

Your DTI is how lenders measure whether your debt is under control or tipping the scales. It’s worked out by dividing your total monthly debt repayments by your monthly income and multiplying by 100. The lower your DTI, the better—it tells lenders you’re not overstretched. If you’ve got high debt but low income, some lenders may hesitate, but a mortgage broker (hello 👋) can help find lenders who take a more flexible approach.

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.

This is the upfront sum of money you put towards buying a property, with the rest of the purchase price usually covered by a mortgage. The amount needed can vary depending on the type of mortgage and the lender.

This is a type of finance used to refinance a property development project once it's completed. It can be used to pay off the initial development loan.

This is a short-term loan specifically for funding property development projects, like building new homes or converting commercial buildings. Funds are usually released in stages as the project progresses.

In the context of development finance, these are the stages in which the loan funds are released as the building project reaches certain milestones.

These are fees you might have to pay if you pay off your mortgage early or switch to a new deal before the end of your current term.

This is the difference between the current value of your property and the amount of mortgage you still owe. As you pay off your mortgage and if your property value increases, your equity grows.

This is a way for homeowners aged 55 or over to access some of the money tied up in their property without having to sell it. The most common type is a lifetime mortgage.

A clever way for parents to help their children get on the property ladder—without handing over cash. Instead of gifting a deposit, parents use their savings to offset the mortgage balance, reducing the interest their child pays. The savings stay in their account (so they still have access if needed), but they won’t earn interest on them while they’re offsetting the mortgage.

A government-backed scheme offering eligible first-time buyers at least a 30% discount on new-build properties. Some councils may offer even bigger discounts to make homeownership more affordable for locals. If you’re a key worker or a first-time buyer struggling to get on the ladder, this could be worth exploring.

If you’ve never owned a property before, congratulations—you’re a first-time buyer! That comes with some perks, like stamp duty relief (on properties up to £300,000 in England) and access to certain government schemes designed to make homeownership easier. A mortgage broker can help you figure out what’s available.

With this type of mortgage, the interest rate stays the same for a set period (e.g., 2, 3, 5, or 10 years). This means your monthly payments will be the same during that time, which can help with budgeting.

This is someone who is employed for a specific period of time under a contract.

This means you own the property and the land it sits on outright.

This is someone who works for themselves and is not employed by a company on a long-term contract.

A fee paid by leasehold property owners to the freeholder (the person or company that owns the land). Typically applies to flats and some new-build houses where there are shared spaces like car parks, lifts, or gardens. Some older leases have sky-high ground rent clauses, so always check the small print before buying a leasehold property.

A financial safety net. A guarantor (usually a parent or family member) agrees to cover your mortgage payments if you can’t. This can help first-time buyers (or those with low credit scores) get approved for a mortgage when they might not otherwise qualify. Just remember—if you miss payments, your guarantor is legally responsible for covering them.

This is a specialist buy-to-let mortgage for properties rented out to multiple unrelated tenants who share communal areas.

This was a government scheme that helped first-time buyers with a smaller deposit by providing an equity loan. It's different from Shared Ownership.

If you’re borrowing more than 75% of a property’s value, some lenders might add an extra charge to cover their risk. Not all lenders apply an HLC, and a mortgage broker can help find options that don’t add this extra cost.

This is a type of equity release where you sell a share of your property to a provider in exchange for a tax-free lump sum or regular income, while retaining the right to live in the property until you die or move into long-term care.

This type of insurance pays out a regular income if you can't work due to illness or injury. It helps replace lost earnings.

This is a mortgage professional who is not tied to any specific lender and can search the whole market to find the best mortgage deals for you. They work for you, not the lender.

A formal agreement where you repay your debts over a set period (usually five to six years), avoiding bankruptcy. If you’ve had an IVA in the past, some lenders may be cautious about offering a mortgage—but not all. A mortgage broker can match you with lenders open to IVA applicants.

The percentage that determines how much extra you’ll repay on top of your mortgage loan. For example, at 1% interest, borrowing £100,000 for a year would cost you £1,000 in interest. Rates can be fixed (staying the same) or variable (changing with the market).

With this type of mortgage, your monthly payments only cover the interest, and you don't pay off any of the original loan amount (the capital) until the end of the term. Lenders usually require a plan for how you'll repay the capital.

Another word for a mortgage broker (that’s us!). Instead of going direct to one bank, an intermediary has access to multiple lenders, helping you compare deals and get a mortgage that actually fits your situation.

This is another term for a buy-to-let mortgage.

This clever mortgage solution allows someone, typically a parent or close relative, to help boost your borrowing potential by joining your mortgage application without actually owning a stake in the property. It's ideal for first-time buyers needing a bit of extra financial muscle but who still want sole ownership of their home.

When two (or more) people buy a property together and share responsibility for repaying the mortgage. It’s not just for couples—siblings, friends, and even parents and children can take out a joint mortgage. Having two incomes on the application can increase borrowing potential, but everyone involved is equally responsible for the repayments.

This is a type of business insurance that protects a company if a key employee dies or becomes seriously ill.

Think of this as the official property record-keeper. The Land Registry keeps legal records of property ownership in England and Wales, ensuring that when you buy a home, your name is registered as the new owner. Without this, there’s no proof you actually own your property—so it’s pretty important!

This means you own the property but not the land it's built on. You have a lease agreement with the freeholder and usually pay ground rent and service charges.

These are the rules and requirements that mortgage lenders use to decide whether to approve a mortgage application. These can include things like your income, credit history, and deposit amount.

This type of mortgage allows you to rent out your existing property and buy a new one. It often involves taking out a new residential mortgage and switching your existing one to a buy-to-let mortgage.

This type of insurance pays out a lump sum to your beneficiaries if you die. It can help your family cover mortgage payments and other living costs.

A type of equity release designed for homeowners aged 55 or over. It allows you to access some of the money tied up in your property without selling your home. Instead of making repayments, the loan (plus interest) is paid back when you pass away or move into long-term care. A popular choice for those wanting extra cash in retirement without having to move. To understand the features and risks, ask for a personalised illustration.

This is someone who runs their business through a limited company. Their mortgage application might be assessed differently than a sole trader.

This is the ratio of the mortgage amount to the value of the property, expressed as a percentage. A higher LTV means you have a smaller deposit.

The estimated price your property would sell for in the current market. This isn’t necessarily what you paid for it, but what a willing buyer would pay for it today, based on factors like location, demand, and condition.

This is a form of subordinated debt often used in property development to fill the gap between senior debt (like a bank loan) and equity. It's usually higher risk and comes with higher interest rates.

The amount you pay your lender each month as part of your mortgage agreement. If you’re on a repayment mortgage (the most common type), this will cover both the loan amount (capital) and interest. If you’re on an interest-only mortgage, your monthly payment only covers the interest, and you’ll need a plan to repay the loan at the end of the term.

This is the charge that a mortgage broker may apply for their services in finding and arranging a mortgage for you. Brokers should be transparent about their fees.

The financial institution (usually a bank or building society) that loans you the money to buy a property. In return, they expect regular repayments (with interest, of course). Each lender has different criteria, which is why a mortgage broker can be so useful—we find the right lender for your situation.

This service involves keeping track of your mortgage deal after it's been set up. If better deals become available, or if your circumstances change, Delta Mortgages can offer advice and help you switch to a more suitable mortgage.

A type of insurance that helps cover your mortgage repayments if you can’t work due to illness, injury, or redundancy. It’s sometimes called ASU insurance (Accident, Sickness & Unemployment cover). Not all policies cover redundancy, so it’s worth checking the small print—or speaking to a mortgage protection expert.

This is a type of insurance designed to help cover your mortgage payments if you die, become seriously ill, or are unable to work.

This is the length of time you have to repay your mortgage. Common terms are 25 or 30 years. Some lenders will even go up to 40 years.

Another term for an Agreement in Principle (AIP).

This happens when your home is worth less than your outstanding mortgage. In other words, if you sold your property, the proceeds wouldn’t be enough to repay your lender. This isn’t usually an issue if you can keep up with repayments, but it can become a problem if you need to sell or remortgage. Market fluctuations can cause negative equity, so keeping an eye on house prices and mortgage repayments is key.

A property that has been recently built or is still under construction. These homes are typically sold by developers and often come with a 10-year warranty to cover potential defects. The first two years focus on minor faults, while years three to ten cover major structural issues. They’re popular for first-time buyers and often available with government-backed schemes.

A company that purchases land, secures planning permission, and builds new homes for sale. When you buy from a developer, the transaction is either completed with cash or a mortgage. Some developers offer incentives, like covering legal fees or adding upgrades to attract buyers.

The official “yes” from your lender. Once they’ve reviewed all your documents, completed their checks, and are happy with the property, they’ll send you a formal mortgage offer. This confirms how much they’re willing to lend you and under what terms. It’s the green light to move towards exchange—and one step closer to getting the keys to your new home.

This is a type of mortgage that links your savings and current accounts to your mortgage balance, reducing the amount of interest you pay.

This is a commercial mortgage for a property that your own business will operate from.

Some mortgage brokers work with a specific group of lenders rather than the whole market.

Also known as Shared Ownership, this scheme allows you to buy a share of a property and pay rent on the rest. Usually backed by housing associations, it’s designed to make homeownership more affordable by requiring a lower deposit than a standard mortgage. You can increase your ownership over time—a process called staircasing—eventually working towards full ownership if you choose.

In a business context, this is a type of business structure where two or more people agree to share in the profits or losses of a business.

This means transferring your existing mortgage deal to a new property when you move home. Not all mortgages are portable.

This is a specialist broker who helps you find and arrange funding for property development projects.

This refers to a large portfolio of properties owned by an individual or company, often for investment purposes.

This is a type of tax-efficient life insurance taken out by an employer to provide death benefits for an employee.

This is the process of taking out a new mortgage on a property you already own, often to get a better interest rate, release equity, or change the terms of your loan.

This is the most common type of mortgage where your monthly payments cover both the interest and a portion of the original loan amount (the capital). This means you gradually pay off the entire mortgage by the end of the term.

A government scheme that lets housing association tenants buy their home—often with a helpful discount. If you’ve rented from a housing association for at least three years and your property qualifies, this scheme could help you take that exciting step from tenant to homeowner. It’s similar to Right to Buy, but specifically for housing association tenants rather than council homes

A government initiative that allows council and housing association tenants to purchase their homes at a discount. It was originally introduced for council tenants but has since been extended to housing association tenants in some areas. The discount varies depending on how long you’ve been a tenant and the value of your property.

This is an official document from HMRC (Her Majesty's Revenue and Customs) in the UK that shows your income and tax paid if you are self-employed. Lenders often require this as proof of income for self-employed mortgage applicants.

This refers to remortgaging for self-employed individuals who received grants through the UK government's SEISS during the COVID-19 pandemic. Lenders may have specific criteria for these applicants.

This refers to building your own home from scratch.

This is a mortgage for people who work for themselves, such as sole traders, freelancers, and limited company directors. Lenders will need to assess your income differently than someone with a regular salary.

If you own a leasehold property, you’ll usually pay a service charge to cover maintenance of communal areas like gardens, lifts, car parks, and hallways. This fee is paid to the managing agent or freeholder, and the cost can vary depending on the property and level of services provided.

This type of mortgage allows you to buy a share of a property (usually from a housing association) and pay rent on the remaining share. It can be a way to get on the property ladder with a smaller deposit.

This is a government scheme that allows you to buy a share of a property and pay rent on the rest. You can often buy more shares later on (this is called staircasing).

This is a type of business where one person owns and runs the business and is personally liable for its debts.

This refers to types of lending that are not standard residential mortgages, such as bridging loans, commercial mortgages, and property development finance. These often cater to more complex situations.

In Shared Ownership, this is the process of buying further shares of your property from the housing association, with the goal of eventually owning it outright.

This is a tax you pay when you buy a property over a certain price in England and Northern Ireland. First-time buyers may get a discount or be exempt up to a certain price.

This is the default interest rate that your mortgage lender will usually switch you to once your initial fixed or tracker rate period ends. SVRs are usually higher than introductory rates.

Chief Happiness Officer at Delta Mortgages. He may not be able to fetch you a mortgage deal, but he’s an expert in fetching tennis balls and lifting spirits. If your mortgage application gets overwhelming, Theodore recommends belly rubs and a biscuit break—sadly, not yet an approved mortgage strategy, but we’re working on it.

The fixed period of your mortgage deal where you’re committed to staying with your lender. If you switch lenders or repay early during this time, you’ll likely face an Early Repayment Charge (ERC). This is why it’s important to check your mortgage terms before making any changes—because no one likes an unexpected fee.

With this type of mortgage, the interest rate 'tracks' a base rate (like the Bank of England base rate) plus a certain percentage. Your payments can go up or down depending on changes to the base rate.

This is someone who assesses the risk involved in lending money for a mortgage. They make the final decision on whether to approve a mortgage application.

This is a report carried out by a surveyor to determine the market value of a property. Lenders will usually require a valuation before approving a mortgage.

With this type of mortgage, the interest rate can change over time, unlike a fixed rate mortgage. This means your monthly payments could go up or down.

This type of broker has access to mortgage products from across the entire market, meaning they can consider deals from a wide range of lenders (like we do 😎).