Mortgage Jargon Buster

Buying a property and moving home can be difficult enough even if you have done it before, so you don’t want to be confused by the terminology and abbreviations used during the process.

Our A to Z glossary, to help you beat the jargon

Additional borrowing (further advance)

Additional borrowing is borrowing more money from your current lender. This is secured on your property. Skipton does consider additional borrowing but only where we are the current mortgage lender.

Affordability check

An affordability check works out how much you might be able to afford to pay back on your mortgage based on your income and outgoings. It is for illustrative purposes only and doesn't provide all the information you need to choose a mortgage. You can carry it out using an online tool like our affordability calculator. An affordability check usually involves a credit check which will leave either a hard of soft footprint on your record, a lender should inform you before they complete the check as to which this will be.

Annual Percentage Rate of Charge (APRC)

The APRC tells you how much your mortgage would cost you each year, assuming you kept it for its full term. It factors in the initial rate you'd pay as well as the follow-on variable rate after any special deal period finishes, along with any associated mortgage costs or fees. This way, you can see exactly how much you would be paying over the full term of the mortgage.

Arrears

Mortgage payments which have not been paid and become overdue.

Bank of England Base rate (BoEBR)

This is the rate which is set by the Monetary Policy Committee (MPC) of the Bank of England and influences the rates banks and building societies charge customers to borrow money.

Binding offer

The Society will issue a binding mortgage offer following receipt of an acceptable mortgage application.

Broker

A mortgage broker provides mortgage advice by looking for the most suitable mortgage deals based on your circumstances. They may offer advice on mortgages from a selection of lenders or may even be totally independent and advise customers on mortgage products available across the whole of the market. The Broker acts on your behalf, not on behalf of the lender.

Buy to Let

A buy to let property is a property bought with the sole intention of renting it out to tenants. If you want to borrow money to buy a house for this purpose, you'll need a Buy to Let mortgage. Find out more about our Buy to Let mortgages.

Completion

The point at which the money is released to remortgage your home or to buy your new home. Your conveyancer will ensure that ownership is transferred to you enabling you to move. This is known as Settlement in Scotland.

Conclusion of Missives

The point at which both buyer and seller are legally bound to the purchase (Scotland only). In England this is known as exchange of contracts.

Consumer Buy-to-Let (CBTL)

A Buy to Let contract where the borrower is not acting wholly for a business purpose. Examples of CBTLs include:

• Where the borrower or a relative has lived in the property since it was purchased
• Where there was no intention for the property to be let out at the time of purchase
• Where the property was inherited

Conveyancing

The legal transfer of a property from one owner to another. The process is carried out by a person who is legally qualified to carry out conveyancing (such as a licensed conveyancer / solicitor) who acts on behalf of the buyer.

Credit check

When you make an application for a mortgage all lenders will carry out a credit check to see how you have managed your finances in the past. The companies that provide these checks will give you a credit score. You can find more information on our Credit Scoring Guide. Generally, the higher this number is, the more likely that you’ll be accepted for credit, but some lenders can have different scoring systems. A credit check will either leave a soft or hard footprint. A soft footprint isn't visible to lenders and it won’t impact your credit score. Hard footprints are visible on your credit file and may affect your credit score.

Deposit

A deposit is the amount of money you are required to pay up front towards the cost of the property. For example, if a property is worth £125,000 and the lender wants a 20% deposit, you’ll need to contribute £25,000 of your own money.

Decision in Principle (DIP)

Sometimes known as an Agreement in Principle or Mortgage in Principle, it gives an indication as to how much you could borrow and many estate agents will insist on seeing this as an assurance before they'll put your offer to the seller. A DIP is for illustrative purposes only and doesn't provide all the information you need to choose a mortgage. To help make the process of getting a Skipton DIP as simple as we can, we make it easy to request a DIP online.

Disbursements

The fees your conveyancer has to pay to others on your behalf e.g. Stamp Duty Land Tax (England), Land Registry fees, search fees.

Early repayment charges (ERCs)

A charge which may apply if you repay your mortgage early or make an overpayment that's more than your annual overpayment allowance. They will normally apply during the initial period of your mortgage deal being in place.

CHAPS

The method which the loan amount (the amount you are borrowing) is sent at completion. The payment is guaranteed to be received and cleared by close of business on the same working day that the lender sends the funds, provided they are sent before the lender's cut off time. Please note, your lender may charge an admin fee for this service.

Equity

The difference between the value of your property and the amount of any outstanding loans secured against it (i.e. the amount you own outright).

Exchange of Contracts

This is the moment when you exchange the legal agreements to buy or sell a property. At this point you are legally bound to go ahead with the purchase or sale. In Scotland this stage is known as Conclusion of Missives.

Fixed rate mortgage

Fixed rate means the interest rate is fixed on your mortgage for an agreed period of time – typically for two, three, five, seven or ten years. So your interest rate won’t change even if external interest rates go up or down.

First legal mortgage

Also known as first charge mortgage. This means that the loan takes priority over any other borrowing secured on your property, if your property is sold the first charge will be paid off first.

Freehold

In a freehold property you own both the property itself and the land that it stands on and there is no time limit to your period of ownership. This generally relates to houses.

Gazumping

Gazumping happens when a seller has accepted an offer but before contracts are exchanged accepts another higher offer from someone else.

Interest only

The monthly payments over the term of the mortgage cover only the interest charged on the amount borrowed. This means that the original amount borrowed together with any fees or charges debited to your account, will be owed in full at the end of the term.

Joint mortgage

This is a mortgage taken out by two or more people which might be used if you were buying a property with a partner, friend or relative.

Law of Property Act receiver (LPA receiver)

A receiver appointed under a mortgage or charge by the lender and typically on a Buy to Let property. A secured creditor or the Court may appoint a Receiver Manager to operate and manage any existing BTL agreement and also make the decision to end a pre-existing agreement and with a view of selling the property.

Leasehold

If you own the leasehold of a property, you own the property but lease the ground it sits on from whoever owns the freehold, this is common with flats. The lease will be for a fixed period of time, up to 999 years, but can often be extended. For properties in which there are fewer than 70 years left on the lease it may be hard to get a mortgage.

Lender

Typically the bank or building society you have your mortgage with.

Loan

Sometimes called the advance. This is the actual amount of money that we agree to lend you.

Loan to Value (LTV)

This is the proportion of the mortgage compared with a property’s value. It’s expressed as a percentage, so an £85,000 loan on a £100,000 property would be an LTV of 85%. The LTV you have affects the mortgage rates available to you.

Mortgage deed

The mortgage deed together with the mortgage offer is a formal contract between a lender and borrower, outlining the legal obligations of the borrower and the rights the lender has if the borrower fails to make repayments towards their loan.

Monthly payment

Your monthly repayment is the amount of money you pay to your mortgage lender each month.

Mortgage Illustration (MIL)

This document must be provided to you by law from a lender and shows you all the key information you need when choosing a mortgage. You can use it to compare different mortgages with different lenders.

Mortgage term

Your mortgage term is the amount of time between the date you take out your mortgage and the date by which it has to be repaid in full to the lender.

Part and Part Mortgage

This is a combination of both repayment and interest only mortgage. For example, a loan of £50,000 could be made up of £30,000 repayment and £20,000 interest only, so there would be a remaining capital balance of £20,000, plus any fees and charges which have been debited, to repay at the end of your mortgage term.

Porting

The process of transferring your existing mortgage product to a new property. All of the terms and conditions of your mortgage product remain the same, but the mortgage is moved onto the new property that you are purchasing. When you port your mortgage, you may require additional borrowing and for this you may require an additional mortgage product.

Remortgage

Remortgaging is moving from one mortgage deal to another, this could be with your current lender or with a new lender.

Redemption Administration fee (sometimes called a Mortgage Exit Fee)

A fee charged by the lender for releasing the legal charge over your property following repayment of a mortgage.

Reflection period

This is a formal period of time which allows you to consider a binding mortgage offer. The reflection period does not affect how long your offer is valid for.

Repayment Mortgage

This means that your monthly mortgage payment will cover both a portion of the interest owing on the mortgage, and the debt for the property itself (the capital).

Repayment strategy

This is the means by which you choose to pay off the amount borrowed on an Interest Only or Part and Part mortgage when the mortgage term comes to an end. You need to check with us to make sure that your chosen repayment strategy is acceptable to the Society.

Second charge borrowing

This is where a lender offers a loan secured on the property which, if your property is sold, will be paid off after the first legal charge.

Searches

For example, enquiries made at the Land Registry, the Land Charges register and local authorities to ensure there is nothing to cause concern about the property.

Shared Ownership

With the government's Shared Ownership scheme, you purchase a share of the property you want to buy (usually between 25% and 75%) and rent the rest of your home from a housing association. Find out more about Shared Ownership.

Subject to Contract

A provisional agreement made between buyer and seller, before exchange of contracts, which allows either side to back out without penalty (England and Wales only).

Title

The legal right to ownership of a property.

Title Deeds

The documents showing the ownership of the property.

Transfer Deed

The legal document which transfers ownership of registered land.

Transfer of Equity

The adding or removal of a person to/from an existing mortgage account and ownership of the property.

Valuation - for mortgage purposes

An inspection of a property required by the lender to make sure it’s worth what they’re going to lend you to purchase it.

Variable rate mortgage

Your monthly repayments can go up or down with a variable rate mortgage because of changes to your interest rate. Rate changes can happen for a variety of reasons - some will be decided by your lender. Sometimes variable rate mortgages may be subject to a "floor" (below which the rate can never fall), or a "ceiling" (which the rate cannot go above).

Vendor/Seller

The person(s) selling the property.