UK Mortgage Glossary 2026
Plain-English definitions for every UK mortgage term you'll hear from a broker or lender. Updated for 2026 schemes, thresholds, and lender practice.
A
Agreement in Principle (AIP)
Indicative borrowing figure based on a soft credit check.
An Agreement in Principle (also called a Decision in Principle or Mortgage in Principle) is a lender's indicative offer based on a soft credit check and basic income/expenditure data. It is not a binding mortgage offer. AIPs typically last 30-90 days and give estate agents and sellers confidence that you're a serious buyer.
Amortisation
How a repayment mortgage gradually pays off both interest and capital.
Amortisation is the process by which a repayment mortgage pays off both interest and capital over the term. Early payments are mostly interest; later payments are mostly capital. The monthly payment stays constant on a standard repayment mortgage, but the split shifts as the balance reduces.
APRC
The all-in cost of a mortgage including fees, expressed as an annual rate.
Annual Percentage Rate of Charge - the standard UK comparison rate that incorporates the interest rate plus product fees over the full term of the mortgage. APRC assumes you stay on the same product for the entire term (typically 25-35 years), which rarely matches reality with fixed-rate periods. Use the headline rate plus the fee for a more realistic comparison over your actual fixed period.
Arrangement Fee
The lender's product fee, often £0-£1,999.
Also called product fee or booking fee. A charge levied by the lender for setting up the mortgage. Common range £0 to £1,999. Often addable to the loan (you pay interest on it for the term) or payable up front. Fee-free products typically have slightly higher interest rates.
B
Buy-to-Let (BTL)
A mortgage on a property you intend to rent out.
A mortgage product for properties bought to rent to tenants, rather than to live in yourself. Assessed primarily on rental income coverage (ICR) rather than personal income. Typically requires a 25% deposit. Most BTL mortgages are not regulated by the FCA. See our full Buy-to-Let guide.
C
County Court Judgment (CCJ)
A court order to pay a debt; stays on credit file 6 years.
A CCJ is a court order to pay a debt. It is recorded on the Register of Judgments and on your credit file for 6 years. CCJs significantly impact mortgage applications; specialist lenders place CCJ cases, with rate and deposit penalties depending on size, age, and whether the CCJ is satisfied. See our Bad Credit Mortgage guide.
Completion
The day the property purchase finalises and keys exchange.
Completion is the day a property purchase legally finalises. Funds (mortgage + deposit) are transferred from your solicitor to the seller's solicitor, ownership legally transfers, and you receive the keys. Completion typically happens 1-4 weeks after exchange of contracts.
Conveyancing
The legal process of transferring property ownership.
The legal work involved in transferring ownership of a property from seller to buyer. Includes searches (local authority, environmental, drainage), reviewing contracts and the title register, handling the deposit and completion funds, registering the new ownership with the Land Registry, and submitting SDLT to HMRC. Typically takes 8-12 weeks and costs £1,200-£2,500.
D
Debt Management Plan (DMP)
Informal agreement with creditors to repay debt at affordable rate.
An informal arrangement with creditors, usually arranged via a debt management company, to repay outstanding debts at an affordable monthly rate. DMPs themselves don't directly appear on your credit file, but the underlying missed payments and defaults do. Specialist lenders accept active DMPs with 12+ months of evidenced payments.
Deposit
Cash you put toward the property purchase, expressed as % of price.
The cash portion of a property purchase, expressed as a percentage of the property price. UK first-time buyers typically need at least 5% (95% LTV). Deposit sources can include savings, gifted deposits from family, inheritance, LISA proceeds, or sale of an asset. Borrowed money (personal loans, credit cards) is not accepted as deposit by mainstream lenders.
E
Early Repayment Charge (ERC)
Penalty for paying off your mortgage before the fixed period ends.
A penalty fee charged if you redeem (pay off or remortgage) your mortgage during the fixed or discount period. Typical structures: 5/4/3/2/1 (5% in year 1 down to 1% in year 5) or 2/1 (2-year fix). ERCs are calculated as a percentage of the outstanding balance, not the original loan amount. See the Early Repayment Charge calculator.
Exchange of Contracts
The point at which the purchase becomes legally binding.
The moment two solicitors exchange signed contracts on behalf of buyer and seller. From exchange onward, both parties are legally committed to completion. Walking away after exchange means losing the deposit (typically 10% of the purchase price). Exchange usually happens 1-4 weeks before completion.
F
Financial Conduct Authority (FCA)
The UK regulator for financial services firms, including mortgage brokers.
The UK regulator responsible for overseeing financial services firms. Mortgage brokers, advisors, and lenders are authorised and regulated by the FCA. Each authorised firm has a unique Firm Reference Number (FRN) on the FCA Register. MortgageConnector is not FCA-authorised - we are an introducer service; the brokers we introduce you to are FCA-authorised.
Fixed Rate
Interest rate locked for a set period, typically 2-10 years.
A mortgage rate that doesn't change for a set period - typically 2, 3, 5, or 10 years. Provides certainty about monthly payments during the fix. ERCs usually apply during the fixed period. At the end of the fixed period, the mortgage reverts to the lender's Standard Variable Rate (SVR) unless you remortgage.
Financial Ombudsman Service (FOS)
Independent body that resolves complaints against UK financial firms.
An independent UK body that handles complaints against financial services firms, including mortgage brokers, when the firm and customer cannot reach agreement. Free to use. Decisions are binding on the firm. See financial-ombudsman.org.uk.
G
Gifted Deposit
Deposit money given by family with no obligation to repay.
A deposit funded by a gift from family (usually parents or grandparents). Lenders require a signed gifted deposit letter from the donor confirming the gift is unconditional and that the donor retains no interest in the property. See the gifted deposit guide.
H
Help to Buy
Closed equity loan scheme for new-build first-time buyers (closed March 2023).
The Help to Buy Equity Loan scheme provided an equity loan from the government of up to 20% (40% in London) toward a new-build property purchase. The scheme closed to new applications on 31 March 2023. Existing borrowers continue under original terms. The Mortgage Guarantee Scheme has become the main replacement for high-LTV first-time buyer support.
House in Multiple Occupation (HMO)
Property let to 3+ unrelated tenants sharing facilities.
A property let to 3+ tenants from 2+ separate households (most council definitions), sharing kitchen, bathroom, or toilet facilities. HMOs of 5+ tenants typically require mandatory licensing. HMOs need specialist HMO mortgages with different LTV and rate criteria than standard BTL.
I
Information Commissioner's Office (ICO)
UK regulator for data protection.
The UK regulator responsible for upholding information rights, including UK GDPR data protection rules. Firms that process personal data must register with the ICO. Consumers can complain to the ICO about data handling issues. See ico.org.uk.
Interest Coverage Ratio (ICR)
BTL test: monthly rent must exceed a multiple of monthly mortgage interest.
The Interest Coverage Ratio is the buy-to-let stress test: monthly rent must cover a multiple of monthly mortgage interest at a stressed rate. Standard ICR is 125% for basic-rate taxpayers, 145% for higher-rate taxpayers or limited-company landlords. Stress rate is typically 5.5-8%. This is usually the binding constraint on a BTL purchase.
Interest-Only Mortgage
Mortgage where only interest is paid monthly; capital owed at term end.
A mortgage where monthly payments cover only the interest accrued. The full capital balance remains owed at the end of the term and must be repaid in full at that point. Now mainly used for buy-to-let and some specialist residential cases. Residential interest-only requires a credible repayment vehicle.
Individual Voluntary Arrangement (IVA)
Formal legal debt arrangement, typically 5-6 years.
A formal legal agreement with creditors to repay debts at a reduced amount or over an extended period, typically 5-6 years. Appears on the Insolvency Register and your credit file. Most mortgage lenders require IVA discharge for 3-6 years before considering an application; some specialists consider active IVAs with trustee consent.
J
Joint Borrower Sole Proprietor (JBSP)
Parents on the mortgage, child on the title.
A mortgage structure where multiple borrowers are jointly liable for the loan but only one is named on the property title. Common use: parents help a child buy by adding their income to the affordability calculation, without the parents becoming property owners (which would trigger the SDLT second-property surcharge and lose the child's FTB SDLT relief).
L
Land and Buildings Transaction Tax (LBTT)
Scotland's equivalent of Stamp Duty.
Scotland's replacement for Stamp Duty Land Tax. Standard nil-rate band up to £145,000 (£175,000 for first-time buyers). Higher rates rise to 12% on portions above £750,000. The Additional Dwelling Supplement of 8% applies to BTL and second-home purchases.
Lifetime ISA (LISA)
Tax-free savings account with 25% gov bonus, usable for first home.
A UK savings product paying a 25% government bonus on annual contributions up to £4,000. Funds can be withdrawn without penalty to buy a first home up to £450,000, or at age 60 for retirement. Available to UK residents aged 18-39 to open. A replacement product is planned for April 2028.
Loan-to-Value (LTV)
Mortgage size as a percentage of property value.
The size of your mortgage expressed as a percentage of the property value. A £150,000 mortgage on a £200,000 property is 75% LTV. Lower LTV unlocks better interest rates; UK lenders typically band rates by LTV in 5% increments. Most lenders cap at 95% LTV, with a small number at 98% or 100% for specific products.
Land Transaction Tax (LTT)
Wales's equivalent of Stamp Duty.
Wales's replacement for Stamp Duty Land Tax. Standard nil-rate band up to £225,000. No specific first-time buyer relief. Higher rates rise to 12% on portions above £1.5m. The higher rate for additional properties is currently 5%.
M
Mortgage Guarantee Scheme (MGS)
Government scheme backing 95% LTV mortgages from UK lenders.
A UK government scheme that guarantees a slice of the lender's risk on 95% LTV mortgages, encouraging banks to offer high-LTV products without prohibitive pricing. Made permanent on 1 July 2025. Most major UK lenders participate. See the 95% LTV guide.
N
Notice of Correction (NoC)
200-word statement you add to your credit file to explain entries.
A statement of up to 200 words that you can add to your credit file via Experian, Equifax, or TransUnion to explain context behind adverse entries (e.g. a missed payment caused by job loss or illness). Lenders are required to read NoCs as part of underwriting. Useful for adverse-credit applications.
O
Offset Mortgage
Savings account linked to mortgage; balance reduces interest charged.
A mortgage structure where your savings account is linked to your mortgage. The savings balance is 'offset' against the mortgage, so you pay interest only on the net difference. Withdrawals from savings are allowed but reduce the interest benefit. Suited to high-income borrowers with significant savings.
Overpayment
Paying more than required to reduce mortgage balance and interest cost.
Extra payments on top of the required monthly mortgage payment. Reduces capital outstanding, which reduces total interest paid over the term. Most UK fixed-rate mortgages allow overpayments of up to 10% of the outstanding balance per year without ERCs. See the Overpayment calculator.
P
Porting
Transferring your current mortgage to a new property.
Moving your existing mortgage product (rate, term, conditions) onto a new property when you move home. Avoids ERCs from breaking the current deal early. Subject to a new affordability and property assessment. Useful when your current rate is much lower than current market rates.
Product Transfer
Switching to a new rate with your existing lender at end of fix.
Taking out a new mortgage deal from your existing lender at the end of your current fixed or discount period. Faster and cheaper than remortgaging to a new lender (no legal fees, often no new affordability check). Limited to your current lender's product range, so doesn't always offer the best market rate.
R
Remortgage
Switching your mortgage to a different lender at end of fix.
Moving your mortgage from your existing lender to a new lender, usually at the end of your current fixed period. Provides access to whole-of-market rates. Requires full application, valuation, and legal work. See the Remortgage guide.
S
SA302
HMRC tax calculation summary used for self-employed mortgages.
A summary of your tax calculation produced by HMRC after you submit a self-assessment tax return. UK mortgage lenders typically require 2 years of SA302s plus matching Tax Year Overviews to verify self-employed income.
Stamp Duty Land Tax (SDLT)
Tax on UK property purchases in England and Northern Ireland.
The tax levied by HMRC on property purchases in England and Northern Ireland. Banded structure: 0% to £125,000, 2% to £250,000, 5% to £925,000, 10% to £1.5m, 12% above. First-time buyers get relief: 0% to £300,000, 5% to £500,000. Additional properties incur a 3% surcharge on top of standard rates. Scotland uses LBTT, Wales uses LTT.
Standard Variable Rate (SVR)
Lender's default rate after a fix ends; almost always uncompetitive.
The default rate your mortgage reverts to after a fixed or discount deal ends. Set by the lender at their discretion. UK SVRs in 2026 typically sit between 7% and 9% - significantly higher than competitive fixed rates. Letting your mortgage roll onto SVR is one of the most expensive financial mistakes UK borrowers make. Remortgage before your fix ends to avoid the SVR trap.
Stress Test
Affordability check at a higher rate than your contract rate.
The lender's check on whether you could still afford the mortgage at a rate higher than your contract rate, simulating future rate rises. UK lenders' stress assumptions vary; typically contract rate + 1-3 percentage points with a floor around 6-8%. Even if you can pay the contract rate, failing the stress test means the lender will offer a smaller loan.
T
Tracker Mortgage
Rate that moves with the Bank of England base rate.
A mortgage whose interest rate is tied to the Bank of England base rate plus a fixed margin. Rate moves up or down with BoE rate decisions. Some trackers have ERCs (e.g. 2-year tracker); lifetime trackers usually have no ERCs. Best for borrowers who think rates will fall or who want flexibility.
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