APR: This stands for the Annual Percentage Rate, and is calculated by taking the total interest cost over the term of the mortgage, plus fees.
Arrangement fee: This is the set up fee for your mortgage, and can include a range of fees such as booking and application fees, which are an important consideration when picking a mortgage deal and can amount to thousands.
Arrears: This means you have 'defaulted' at least once on your mortgage repayments, so you have missed one. If you continually fall into arrears you’re at risk of losing your home.
Base rate: This is the rate of interest set by the Bank of England which is used to base some mortgage deals on, such as trackers, which are pegged at a certain percentage above the base rate. Lenders’ standard variable rates (SRVs) are also set depending on base rate moves.
You can work out how your mortgage repayments will be affected by base rate changes with our base rate calculator.
Booking fee: This is a mortgage set up fee, sometimes lumped under ‘arrangement fees’.
Buy-to-let: This is a property bought for the specific purpose of letting it to tenants, and mortgage lenders offer buy-to-let mortgages to fit these borrowers. These tend to be at higher rates than standard mortgages, as these mortgages are more expensive than a residential mortgage.
Capital: The mortgage amount you borrow to buy a property.
Credit score: This is a score that every borrower has and is used to help assess their suitability for borrowing. A poor credit score is typically a result of past missed repayments on loans or credit cards, for example.
Early Repayment Charge: Some mortgage deals levy an early repayment charge if you pay some or all of your mortgage off before the end of the term, or transfer to another rate before the end of the product period.
Equity: This is the amount of the property value aside from the sum you owe on the mortgage – this is known as the ‘equity’ in your property.
Fixed rate mortgage: This is a mortgage deal over a period of years – typically between two and five – that offers a fixed interest rate for the security of regular monthly repayments.
Guarantor: This is somebody – for example a parent for a child – who guarantees to meet the mortgage sum if the borrower is unable or won’t meet repayments.
Higher Lending Charge: A fee sometimes charged by lenders if you borrow a particularly high LTV of around 90%, although these fees are less common these days.
Interest-only mortgage: This mortgage enables the borrower to only pay the interest on the capital sum. However, this means your mortgage balance doesn’t reduce and will still have to be repaid at the end of the term.
Key facts illustration: This sets out the detail of the mortgage for a borrower that they need to know.
Loan to value (LTV): This is the proportion of the property price that you borrow when you take out a mortgage. For example, if you borrow £90,000 on a property worth £120,000, this is an LTV of 75%.
Mortgage term: The length of time you agree to pay off the mortgage in – typically, 25 years, but it can be more or less than this.
Negative equity: This is a situation when the amount you owe on your mortgage is greater than the value of your property. It particularly becomes a problem if you want to move house.
Offset mortgage: This is a particular type of mortgage which allows borrowers to ‘offset’ their savings against their mortgage debt. So, for example, if you have £60,000 offset mortgage and £10,000 savings, you only pay interest on £50,000 of the of mortgage.
Overpayments: Typically, lenders will allow you to make 10% overpayments every year on your mortgage debt penalty-free, even if you are tied into a deal. Overpaying on your mortgage will result paying less overall interest and shortening the time it takes to clear the debt. See what you can save with our mortgage calculator.
Remortgaging: This is when you arrange a new mortgage on your current home.
Repayment mortgage: This is a mortgage when you pay the interest as well as a portion of the capital debt, so by the end of the mortgage term you will no longer owe the lender anything provided you keep up repayments.
Tracker mortgage: These mortgage deals are typically linked to the Bank of England base rate, and will rise or fall as they ‘track’ this to set your monthly repayments.