UK Mortgage Jargon Explained

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Our most recent article dove in to the various mortgage types, but with so much jargon to have to understand as a homebuyer, whether buying for the first time or re-mortgaging, here’s our A-Z of all the jargon you might hear when going through the mortgage process.

Agreement in principle (AIP)

An AIP is a simple document from a mortgage lender confirming the amount you will be able to borrow. You will need this to prove to estate agents and sellers that you can afford to buy their property.

APR

APR stands for Annual Percentage Rate. The APR is the overall cost of a mortgage, including the interest and fees. It assumes you will have the mortgage for the whole term, so may not be a useful way to compare deals. Your independent mortgage advisor can provide more clarity on deal comparison.

Arrangement fee

A set-up fee for your mortgage. Most mortgage lenders will allow you to add this fee to the loan, but this will mean you pay interest on it for the whole mortgage term.

Arrears

If you go into arrears, it means you have ‘defaulted’ or missed at least one payment on your mortgage. Always contact your lender as soon as possible if you think you may go into arrears.

Base rate

The base rate is an interest rate set by the Bank of England. Tracker mortgages and standard variable rate mortgages usually follow this rate which, as at [04 April 2022] is 0.75%.

Booking fee

A booking fee is a type of mortgage set-up fee.

Broker

The term ‘broker’ is another way of saying ‘intermediary’ or ‘adviser’. The best advisers to get advice from are ‘whole-of-market’ which means they are not limited to a small number of mortgage deals and can access deals from any lender in the UK. Sims Williams can put you in touch with an independent mortgage adviser.

Buildings insurance

If you’ve rented up until now, you’ll likely be familiar with contents insurance. Whilst contents insurance covers your belongings inside of your four walls, building insurance covers you for damage to the structure of your home. A lender will require you to have this in place when you take out a mortgage.

Capital

The amount of money you borrow to buy a property.

CCJ

CCJ is an abbreviation of County Court Judgement. These are made against you for non-payment of debt and could make it harder for you to get a mortgage.

Conveyancing

Conveyancing is the legal process you go through when you buy or sell a property and is done by a solicitor or licensed conveyancer. Sims Williams recommend you instruct your solicitor before commencing the sales process in order to speed it up as much as is possible. We can provide recommendations on reputable, local solicitors in Chichester, Bognor, Arundel and the Six Villages.

Deposit

This is the cash amount you are required to put down yourself towards the cost of the property, often 5% or more. So if you are buying a property that costs £200,000, it’s likely the minimum deposit you’ll need is £10,000.

Early repayment charges (ERCs)

An early repayment charge is a penalty fee you have to pay if you want to leave your mortgage early, similar to a normal loan. This is usually the period of the initial deal. For example, if you take out a 2-year mortgage but want to leave after 1 year, you’ll likely incur an early repayment charge.

Equity

Equity is the amount of the property that you own outright and includes your deposit and any capital that you’ve paid off your mortgage. For example, on a £200,000 property with a £10,000 deposit, £190,000 is mortgaged. Once you’ve paid £10,000 off your mortgage, you have £20,000 equity.

Freehold

If a property is freehold it means you own the building and the land it stands on. This is the opposite of leashold properties where you only own the building and not the land it stands on.

Guarantor

A guarantor is a third party who agrees to meet the monthly mortgage repayments if you are unable to. This is most common with first-time buyers, and the guarantor is usually their parent or guardian.

Help to Buy

The government has launched a number of different Help to Buy schemes, including equity loans, mortgage guarantees, Isas and specific schemes for Scotland and Wales. They all aim to make home-buying easier. Find out more about Help to Buy.

Higher lending charge (HLC)

This is a fee sometimes charged by your mortgage lender if you are borrowing more than 75% of the property’s value. It protects the lender against you defaulting on your mortgage.

Intermediary

The term ‘intermediary is another way of saying ‘broker’ or ‘adviser’. The best advisers to get advice from are ‘whole-of-market’ which means they are not limited to a small number of mortgage deals and can access deals from any lender in the UK. Sims Williams can put you in touch with an independent mortgage adviser.

Joint mortgage

A mortgage taken out by two or more people.

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Land Registry

The official body responsible for maintaining details of property ownership.

Leasehold

You own the building but not the land it stands on, and only for a certain period (anything up to 999 years). This is the opposite of freehold properties where you own both the building and the land it stands on. You may find it harder to get a mortgage if there are fewer than 70 years left on the lease of the property you want to buy. Ask us for advice.

Loan-to-value (LTV)

Loan-to-value is the size of your mortgage as a percentage of the property’s value. For example, if you have a 5% deposit and are getting a mortgage for the remaining 95% of the property, the loan-to-value is 95%.

Monthly repayment

Just as you would repay a credit card or other type of loan, this is the amount you pay your mortgage lender each month.

Mortgage deed

This is a formal contract between the lender and the borrower outlining the legal obligations of the borrower and the rights the lender has if the borrower fails to make a repayment.

Mortgage payment protection insurance (MPPI)

An insurance that covers your mortgage, usually for a year, if you are unable to work due to accident, sickness or unemployment. It is also know as ASU insurance. If you’d like advice on mortgage payment protection insurance, Sims Williams can recommend independent advisors qualified to give such advice.

Mortgage term

The number of years you are taking the mortgage out for.

Negative equity

When the value of your home falls to a level that is below the amount remaining on your mortgage.

Portability

A portable mortgage allows you to transfer your borrowing from one property to another if you move, without paying arrangement fees or early repayment fees.

Rebuild cost

For insurance purposes: the cost of rebuilding your home if it is destroyed.

Re-mortgage

You might re-mortgage if you are not moving home but wish to secure a new deal. You can do this to save money, to change to a different type of mortgage or to release equity from your home.

Repayment vehicle

A repayment vehicle is required by lenders if you take out an interest-only mortgage. This is the means by which you’re intending to pay off your mortgage at the end of the term – for example, another property, or a stocks and shares portfolio.

Right to Buy scheme

This is a scheme that enables tenants of council houses or housing association tenants to buy the homes they live in.

Service charge

This is a fee paid to a managing agent for the ongoing maintenance of a leasehold property.

Shared ownership

A scheme whereby you purchase a share of a property (usually between 25% and 75%) and pay rent on the remaining share, which is owned by the local housing association.

Stamp duty

Stamp duty land tax (SDLT) is payable when you buy a residential property for more than £125,000 (rates differ for second properties). Visit the government’s stamp duty calculator to work out how much stamp duty you would pay on your purchase.

Tie-in period

This is the period during which you are ‘locked in’ to your mortgage deal. You’ll have to pay an early repayment charge if you leave your mortgage during this period.

Valuation survey

Lenders always carry out a valuation survey to check whether the property is worth roughly the amount you’re paying for it.

Whether you’re moving or simply re-mortgaging, Sims Williams have access to highly recommended independent mortgage advisers that can give you advice when you need it. Contact us on 01243 551368 .

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What our clients say

Helpful & efficient!

SW estate agent in Arundel have been excellent throughout the protracted period of my house purchase. They were kind and helpful and responded to queries very quickly and efficiently .They even offered support once completion had taken place which I suspect is above and beyond what might be expected. I would not hesitate to recommend them and am very grateful for both their friendliness and professionalism.
Gill - Buyer - Nov 4th, 2022

Wonderful Service

After being told probate should be granted on the property within 12 weeks, it has been quite a shock to have finally received the keys a year later. This challenging year was only made easier by the constant support and help from Karen and the Sims Williams team. I'm not sure I could have hung on so long without their wonderful assistance.
George - Buyer - Feb 6th, 2023

EXCELLENT SERVICE

Jo and her colleagues are managing two rental properties for me and the service has been fantastic from start to finish: providing me with very helpful advice prior to letting, finding high quality tenants and managing all ongoing matters. I wouldn't hesitate to recommend Jo and her team to others.
Will H - Landlord - Dec 14th, 2020

THANK YOU!

Can’t praise jo at Chichester branch enough, helpful, professional, knowledgeable. Reassured us throughout the whole process, moving is stressful but made easy Thank you
Penny - Tenant - 09.03.20 - Mar 9th, 2020

Flat Rental - Great Assistance

Jo from SW was a pleasure to work with. She made the whole process of letting a property effortless. Especially for someone who was new to the country. I would definitely recommend Sims Williams to anyone in the Chichester area who was looking to rent/buy/sell. Their team is very professional and will definitely help you with all your concerns/ questions. Thanks again!
Arjun - Tenant - Aug 24th, 2023

I cannot fault Sims Williams and would recommend them in a heartbeat

The common conception of Estate Agents is that they take a few pictures, write a blurb, publish it, show prospective purchasers around a property, and charge you a fortune for the privilege. From the seller's point of view, that may be how it seems. However, after the sale has actually been agreed, the service provided to the purchaser more than justifies the cost. I’ve recently purchased a property through Sims Williams, and they did so much to help. Ambiguity surrounding a tree preservation order was quashed in a matter of minutes, thanks to them having much more up-to-date information than the council. My survey raised a potential concern about damp. Sims Williams provided a damp expert to go and visit the property and compile a report – again resolving this problem very quickly. Lastly, a purchase further up the chain was causing delays. Sims Williams were constantly checking in with me, assuring me that they were chasing and doing everything in their power to help this complete. Obviously, all of this came out of the fee that would have been paid by the seller, so was effectively free for me. Had I have gone back to my solicitor with all these queries, I dread to think how expensive that bill would have been. Through my experience, I cannot fault Sims Williams and would recommend them in a heartbeat.
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Insightful impactful sale

They got the job done easily and without delay! From first contact to successful completion through the many typical twists and turns it was always comforting to deal with a small team who made us feel like the only people selling a home. They totally respected and worked with the personal circumstances which enforced the sale. Sims Williams did exactly what they promised at our first meeting and more than met our expectations. Their understanding of the local market ensured that the property was priced to sell, achieving optimum results less than 48 hours from going live. With grateful thanks to the team.
Mrs Rod - Vendor - Jun 4th, 2021

Excellent Service!

We recently completed on a property in Bognor Regis and bought it through Simms Williams. I have to say the service was excellent from the office staff but mainly from our main contact there Susie Jones. We probably drove her mad with all the questions, extra viewings but she was always there to answer them and do everything she could to help the sale go smoothly. Excellent service, well done Susie.
Noeleen- Buyer - Nov 25th, 2023

Thanks for everything!

Team Sims Williams, Thank you so much for a thoroughly professional, efficient and effective service. I don't think we'd have got over the line without you. It was the second time we've purchased through SW and I'd be happy to use you again.
Matt - Buyer - Oct 6th, 2021

Professional Throughout

A great big thanks to John and all the staff at your Bognor branch. From the first visit to the completion of the sale we were dealt with professionally and with understanding. Great staff and very efficient. We were given all the help we needed through the entire transaction.
Mrs Hetherington - Vendor - Aug 31st, 2022