Our Guide to Mortgage Jargon

A list of words associated with Mortgage Jargon used

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Taking out a mortgage is a huge financial commitment, and so you’ll want to feel you’re clear on what you have to do and when – and exactly what you’re getting.

When you start looking at and applying for mortgages, there seems to be a whole world of jargon to get your head around, some of the words and phrases you won’t have heard in any other situation – from arrears to valuations – here we take a look at the vocabulary you’ll need to understand.
If you would prefer to talk with an Expert Mortgage Advisor and have a straight-forward conversation about your Mortgage needs with simple explanations – Please give us a call on: 0330 232 0285.

Mortgage terms explained

Arrangement fee

This is a set-up fee for your mortgage. Most mortgage lenders will let you add this fee to the loan, but this means you’ll be paying interest on it for the whole mortgage term.

Arrears

An account is said to be in arrears if monthly payments aren’t kept up to date with. When this happens, the mortgage company is likely to apply extra charges on top of their monthly payments – and the fact that your account has gone into arrears could be noted on your credit file.

Base rate

The base rate is the rate the Bank of England charges other banks and lenders when they borrow money. This influences the interest rates that many lenders charge for mortgages, loans and other credit they offer customers

Booking fee

A booking fee is charged up front and pays for ‘booking’ in the loan while your application goes through. It’s sometimes also known as an ‘application’ or ‘reservation’ fee. This fee can’t be refunded if you end up not taking the mortgage out.

Broker

A mortgage broker is a financial adviser who specialises in offering advice on mortgages. They can help by saving you time and stress when applying for a mortgage, because as they’re doing this day in day out, they know which mortgage lender might give you the best deal, based on your individual situation. They can also help you a great deal with the application process itself.

Buildings insurance

This is a (usually compulsory) policy that covers damage to the structure of your home such as the walls, roof and floors, and it usually covers damage to fixtures and fittings too. So if you’ve got a fitted kitchen for instance, your insurance is likely to pay for any repairs needed.

Buy-to-let mortgages

These mortgages are especially for landlords who want to buy a property to rent it out. The rules around buy-to-let mortgages are similar to those around regular mortgages, but there are some key differences which a good broker would be able to help you to understand.

Completion

The final stage of the conveyancing process after exchange of contracts – when keys change hands and the mortgage is officially started.

Early repayment charge

Although you may be able to move house and/or remortgage at any time with some lenders, an early repayment charge will be incurred if you repay the capital within the early repayment period – the repayment period will be stated on your contract.

Exchange of contracts

The point at which signed contracts are exchanged by the legal representatives (usually the solicitors) of the buyers and sellers in the process. At this point, the contracts are legally binding, the deposit is paid and in general everyone can rest assured the move is going to happen.

Fixed rate mortgage

With a fixed rate mortgage, your mortgage repayments stay the same for the time period (the term) of the mortgage deal. This has the advantage that you know exactly what you’ll be paying each month, however the disadvantage that if the Bank of England Base Rate changes, you won’t reap any potential rewards either.

Guarantor mortgages

Getting a guarantor to help support your mortgage application could help you buy a property when you have a small deposit, or low income. You’ll need a relative or friend who is willing to be named on the mortgage with you and make any payments you miss.

Interest

Like with most loans, as well as paying back the capital you borrow, you will also have to pay interest on your mortgage – i.e. extra money on top of the capital divided into monthly repayments. This may be calculated on a daily or annual basis, depending on the specific terms and conditions of the mortgage – all of which should be explained in your mortgage agreement.

Interest only mortgages

As the name suggests, with an interest only mortgage, you’ll only pay back the value of the interest each month, rather than paying off the actual property value itself. So, with this mortgage your monthly payments should be lower than with a regular mortgage, but at the end of the term you’ll still owe the original loan amount.

Joint mortgage

A mortgage that’s taken out with two or more people named on the contract. All people named have responsibility for meeting the repayments.

Loan-to-value (LTV)

The loan-to-value ratio is how much you’ve borrowed with a mortgage compared to the value of your property – so this depends on how much of a deposit you can afford to put down. It’s calculated as a percentage, and typically, the lower your LTV, the better chance you have of getting a lower interest rate.

Life insurance

This kind of insurance usually pays a tax-free lump sum of money in the event of your death within the policy term, which can be used to pay off your mortgage. This is a tax-free sum, that’s usually decided on at the time of applying for the policy.

Mortgage term

This is the length of time you have to repay your mortgage. The typical mortgage term is 25 years when you take it on, but they can be much shorter or longer depending on factors such as your age, and how many years you’ve had a mortgage for before.

Negative equity

When a property is in negative equity it is worth less than the mortgage secured on it, this is usually caused by falling property prices.

Remortgage

This is when the homeowner pays off one mortgage with a new mortgage using the same property as security. People choose to remortgage for various reasons, but usually it’s to bring down the overall monthly mortgage payment amounts.

Stamp duty

Stamp duty – a tax that’s paid when buying a property – it’s paid by the buyers. It is paid at the point of completion, and the amount is related to the price being paid for the property.

Tracker mortgages

Tracker mortgages are a type of variable rate mortgage. What makes them different from other variable rate mortgages is that they follow movements of another rate. Usually, the rate they track (follow) is the Bank of England Base Rate.

Variable rate mortgage

Here your mortgage rate will move up and down over the time you have it, meaning that your mortgage repayments won’t always stay the same. The main cause for this is the UK economy. If you’re using a mortgage broker, they might be able to offer their opinion on whether it’s a good time for a variable rate mortgage

Valuation

Before agreeing to provide a mortgage, the lender will arrange for a valuer to look over the property to check how much it’s worth and assess its suitability for the mortgage amount that’s being taken out.

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Zin Ameur
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Exceptional service from Vicki & the Oak Mortgages team, who were integral to ensuring I secured a competitive remortgage deal and took away the time burden in doing so, would highly recommend.
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Major Tom
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Unexpectedly had to source a small mortgage to complete a house purchase. We contacted Oak Mortgages to explain we were under prepared to start mortgage applications but they put in alot of leg work and employed the full use of their team to source the best value, conditions and terms that fit our situation. Contact was prompt and informative, with all questions answered and investigated with patience and clarity. The team were very empathetic and took on a level of customer care I didn't expect from a mortgage broker. Whether it was over the phone or by email, all information was presented and explained in the best way for us to make an informed decision on what we were buying and agreeing to. The team continue to provide that care even after mortgage offer is accepted and purchases are complete, and I look forward to speaking to them again in the future as they monitor mortgage rates and endeavour to advise what are the best options available going forward.
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Alex
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⭐⭐⭐⭐⭐ Absolutely fantastic service from start to finish. They’re the only mortgage brokers I use, and for good reason. The level of service, professionalism and dedication is second to none. Nothing is ever too much trouble, communication is excellent, and they’re always on hand to answer questions, explain the process and find the best possible solutions, even when things aren’t straightforward. With multiple property investments, it’s important to have someone knowledgeable, reliable and proactive in your corner, and that’s exactly what you get. I wouldn’t hesitate to recommend them to anyone looking for a mortgage, remortgage or property investment finance. They’ll certainly continue to be my go-to as I grow my property portfolio. Highly recommended!
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sunday ifenkwe
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They were very very professional and always willing and ready to respond to all my queries, guided me through this process simlessly. I am happy I used their services. I will also like to give a special appreciation to Vicki Redley she was very great and an amazing individual as she guided me all through the process.
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Ifenkwe Grace
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Well so far the experience with you guys has been pretty great
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Hannah Vivian
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Recently had Abby as our broker, who was super friendly and made the process smooth and easy. Thank you
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Stephen Dowding
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My experience of Oak Mortgages has been unfailingly amazing. Abby is WONDERFUL at her job: super-kind, expert and patient and a huge credit to the company.
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G S
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From the very first contact through (what was a complex and hugely frustrating conveyancing process), to the day of completion, Oak Mortgages were the shining light that got us through. Sarah and her team were brilliant. They were responsive, caring, empathetic, knowledgeable, professional, and human at each and every stage. We are so grateful that we used Sarah and Oak Mortgages and highly recommend them to anyone wanting to guarantee that authentic, trustworthy approach from professionals who care. A top class act - 5 ⭐️⭐️⭐️⭐️⭐️
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DOBO and the Foodies
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Awesome service, helped me at every step on a journey I never thought at 50 I could make! Sarah is amazing available whenever I needed her highly recommend
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Caoimhe Clarke
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Thank you to Abby and the admin team at Oak Mortgages who have been fantastic in helping me secure a remortgage on my property. From my first phone call to Abby I was filled with confidence and the experience with the team was brilliant, especially when other companies involved were not so brilliant the Oak Mortgage team pulled out all the stops to make sure completion happened. I would highly recommend this company and will use their services in the future. Thank you again.
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