Mortgage Glossary

Mortgage lenders must quote an Annual Percentage Rate (APRC) as well as their standard interest rate.

The APRC can be slightly confusing for borrowers, but it factors in the total cost of credit to you as a consumer and is then expressed as an annual percentage of the total amount, including interest and charges.

This helps to provide an indication of which mortgage is cheaper over the entire term of the loan.

Also known as a Mortgage in Principle (MIP), an Approved in Principle or Agreement in Principle (AIP) is written confirmation that a lender is willing to provide you with funding subject to certain conditions.

AIPs are extremely useful when making an offer on a property as they show the seller that your proposed lender is willing to consider your mortgage application.

Lenders often charge an arrangement fee to set up your mortgage account.

Charges for arrangement fees can vary, but you may be able to choose to either pay the fee up front, or have it added to your mortgage.

By adding an arrangement fee to your mortgage, you’ll pay more as you’ll pay interest on the amount over the term of the mortgage.

Arrangement fees are also sometimes charged as a percentage of the mortgage amount rather than a flat fee.

Being in arrears means you have missed at least one monthly payment on your mortgage.

Base rate refers to the UK-wide interest rate set by the Bank of England when it lends to other banks.

The base rate is generally used as a benchmark when lenders set their own rates, while Standard Variable Rates and Tracker mortgages are usually linked to the base rate.

Some lenders will charge a booking fee up front while your mortgage application is processed.

Booking fees are sometimes called ‘reservation fees’ and are often non-refundable.

While the cost of a booking or reservation fee can vary, they are usually around £100.

Your mortgage lender will require you to take out a buildings insurance policy as a condition of your loan.

You don’t have to arrange buildings insurance through your lender, but you must have a valid policy in place before you move into your home.

Buy-to-let mortgages are specific loans designed for buyers who purchase property to then rent out to tenants.

A buy-to-let mortgage is not suitable for you if you want to move into the property yourself, while lenders often offer a specialist buy-to-let mortgage which is usually more expensive than a standard residential mortgage.

Capital refers to the total amount of money you borrow to purchase a property.

Cashback is sometimes offered by lenders with certain mortgage products.

These kinds of mortgages see a lump sum paid out following completion and are sometimes offered with reduced interest rates or other incentives.

Cashback mortgages generally have early repayment charges if you redeem the loan amount within a certain period of time after you complete your purchase.

A CCJ refers to a County Court Judgement.

This is a court order in England, Wales and Northern Ireland that can be registered against you if you fail to repay money you owe to a lender.

Collar refers to the minimum rate of interest you’ll be charged and is applied by a lender to a variable interest rate.

This means if interest rates fall, the rate you are charged won’t fall below the lender’s ‘collar’ rate.