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Before You ApplyEducational mortgage-readiness preparation

Reference

UK mortgage glossary

45 terms you are likely to meet while preparing a UK mortgage application, explained in plain English. Where something varies between lenders or changes over time, the entry says so rather than quoting a figure.

This is a reference list, not advice. It does not tell you what you can borrow, which product suits you or whether an application would be accepted.

A

Affordability assessment
The checks a lender carries out on income, spending and existing commitments when it considers a mortgage application. Each lender sets its own approach, so two lenders can reach different conclusions on the same information.Read moreVariable and irregular incomeBank statements: what lenders look at
AIP / DIP (agreement or decision in principle)
An early indication from a lender based on limited information, usually including a credit check. It is not an offer, not a guarantee and can be withdrawn once full information is assessed.Read moreUnderstanding your credit file
Anti-money-laundering (AML) checks
Legal identity and source-of-funds checks that lenders, conveyancers and other firms must carry out. They are the reason deposit money usually needs a documented trail.Read moreGifted deposits
APRC
Annual percentage rate of charge: a standardised cost figure shown on mortgage illustrations, intended to help compare the overall cost of borrowing over the full term.
Arrangement fee
A fee some lenders charge to set up a mortgage product. It may be payable upfront or added to the loan, which changes what you repay overall.

B

Bank statement
A record of transactions on an account over a period. Lenders commonly request recent statements when verifying income, outgoings and deposit funds.Read moreBank statements: what lenders look at
Broker / mortgage adviser
A regulated professional who can advise on and arrange mortgages. Only a suitably qualified, FCA-authorised adviser can give you a personal recommendation. Before You Apply cannot and does not.Read moreQuestions worth asking an adviser

C

Capital repayment
A mortgage structure where monthly payments reduce both the interest and the amount borrowed, so the balance falls over the term.
CCJ (county court judgment)
A court judgment for an unpaid debt, recorded on your credit file. How lenders treat one depends on its age, amount, whether it is satisfied and each lender's own criteria.Read moreAfter a declined application
Completion
The point at which money moves, ownership transfers and the mortgage starts. In England and Wales it follows exchange of contracts; Scotland uses a different process.
Conveyancing
The legal work involved in transferring property ownership, handled by a solicitor or licensed conveyancer. Timescales vary and are outside your lender's control.
Credit file
A record held by credit reference agencies showing your borrowing history and certain public record information. Different agencies can hold different data, so it is worth checking more than one.Read moreUnderstanding your credit file
Credit reference agency
A company that collects and supplies credit information to lenders. You have a right to see the information held about you and to ask for factual errors to be corrected.Read moreUnderstanding your credit file
Credit search (hard and soft)
A hard search is recorded and visible to other lenders; a soft search is not visible in the same way. Some quotation and eligibility tools use soft searches, but the terminology varies between providers.

D

Debt-to-income ratio
A comparison of what you owe or repay against what you earn. Lenders use their own definitions and thresholds, so there is no single published figure that applies everywhere.
Declined application
A lender's decision not to proceed. Lenders are not obliged to explain the detailed reasoning, so preparation after a decline usually starts with gathering your own evidence.Read moreAfter a declined application
Deposit
The money you put towards a purchase price that is not borrowed. A larger deposit reduces loan-to-value, which usually widens the range of products available.Read moreLTV calculator

E

Early repayment charge (ERC)
A charge that may apply if you repay or switch a mortgage before the end of a product period. Check the amount and end date before planning a remortgage.Read moreRemortgage preparation
Equity
The share of a property's value that is not covered by outstanding mortgage debt.Read moreLoan-to-value explained
Exchange of contracts
In England and Wales, the point at which the sale becomes legally binding. In Scotland, the equivalent commitment happens earlier through concluded missives.

F

Fixed rate
A product where the interest rate stays the same for a set period. When it ends, the mortgage usually moves to the lender's standard variable rate unless you arrange something else.

G

Gifted deposit
Deposit money given, not lent, by another person. Lenders and conveyancers usually ask for a written gift letter plus evidence of where the money came from.Read moreGifted deposits
Guarantor
Someone who agrees to be responsible for payments in certain circumstances. Availability and terms vary considerably between lenders and product types.

H

Home Report
In Scotland, a seller-provided pack including a survey, energy report and property questionnaire. There is no direct equivalent in England and Wales.

I

Illustration (ESIS)
A standardised document setting out the key details and costs of a specific mortgage product, provided before you apply for it.
Interest-only
A mortgage structure where monthly payments cover interest only and the amount borrowed is repaid another way. Lenders apply specific criteria to these.

J

Joint application
An application made by two or more people, where each applicant's income, commitments and credit history are relevant to the assessment.Read moreJoint applications

L

Loan-to-value (LTV)
The mortgage amount expressed as a percentage of the property value: (mortgage ÷ value) × 100. Lenders group products into LTV bands.Read moreLoan-to-value explainedLTV calculator

M

Mortgage offer
The formal document confirming a lender will lend on stated terms, issued after underwriting and valuation. It normally has an expiry date.
Mortgage term
The total length of time over which a mortgage is scheduled to be repaid. A longer term usually lowers monthly payments and increases total interest.

O

Overpayment
Paying more than the required monthly amount. Many products allow limited overpayments without a charge, but the allowance differs by product.

P

Payslip
A record of pay for a period. Lenders commonly ask for recent payslips, and may treat overtime, bonus and commission differently from basic pay.Read moreDocuments usually requested
Porting
Moving an existing mortgage product to a new property. Whether it is possible depends on the product terms and a fresh assessment by the lender.Read moreHome mover preparation
Probation period
An initial employment period. Lender approaches to applicants on probation or with a recent job change vary widely.Read moreChanging jobs before applying
Product transfer
Moving to a new deal with your existing lender rather than remortgaging elsewhere. The paperwork is usually lighter, but it is still worth comparing options with an adviser.Read moreRemortgage preparation

R

Remortgage
Replacing an existing mortgage with a new one, often with a different lender. Preparation usually starts several months before the current deal ends.Read moreApplication timeline tool
Retained profit
Profit left in a limited company rather than paid out. Lenders differ on whether and how they consider it for company directors.Read moreSelf-employed preparation

S

SA302 / tax calculation
HMRC documents summarising self-assessment income for a tax year, often requested from self-employed applicants alongside tax year overviews.Read moreSelf-employed preparation
Source of funds
Evidence showing where deposit money came from, needed for anti-money-laundering checks. Savings built up gradually are usually easier to evidence than large one-off credits.Read moreGifted deposits
Standard variable rate (SVR)
The rate a mortgage usually reverts to when a fixed or tracker period ends. It is set by the lender and can change.
Stress test
A lender check of whether payments would still be manageable if interest rates were higher than the product rate. Methods and assumptions differ by lender.

T

Tracker rate
A product where the interest rate follows a reference rate by a set margin, so payments can rise and fall.

U

Underwriting
The lender's detailed assessment of an application and its supporting evidence. Additional documents are often requested at this stage.Read moreDocument checklist builder

V

Valuation
A lender's assessment of a property's value for lending purposes. It is not the same as a full survey, and a lower-than-expected figure changes the LTV.Read moreLTV calculator
Vulnerable circumstances
Circumstances such as illness, bereavement or financial difficulty that firms are expected to take into account. Tell an adviser or lender directly if support would help.

Using the glossary

Take the words you are unsure about to an adviser

A definition tells you what a term means. Only a suitably qualified, FCA-authorised mortgage adviser can tell you how it applies to your own circumstances.

Where to go next

Optional educational preparation resources. Nothing here is mortgage advice, a lender or product recommendation, an eligibility assessment or a prediction of whether an application would be accepted.

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