Jargon Buster – Premier Private Finance

A

Agreement in Principle (AIP): A conditional confirmation from a lender of how much they may be willing to lend, based on a soft credit check and basic information. Also called a Decision in Principle (DIP) or Mortgage in Principle. An AIP gives you a clear budget before house-hunting and shows estate agents you are a serious buyer.
Annual Percentage Rate (APR): The total cost of borrowing expressed as a yearly percentage, including the interest rate and any fees. The APR lets you compare mortgage deals on a true like-for-like basis rather than just the headline rate.
Arrears: When mortgage payments fall behind schedule, leaving an outstanding balance owed to the lender. Persistent arrears can ultimately lead to repossession proceedings, though lenders are required to work with you to find a solution first.

B

Bank of England Base Rate: The interest rate set by the Bank of England's Monetary Policy Committee. It influences the rates lenders charge on mortgages and other borrowing. Tracker mortgages move directly with the base rate; fixed rate payments stay unchanged during the fixed period.
Buy-to-Let (BTL): A mortgage designed for purchasing a property you intend to rent to tenants. BTL mortgages typically require a larger deposit (usually 25%) and carry higher interest rates than standard residential mortgages.

C

Capital: The original sum borrowed on your mortgage, not including interest. On a repayment mortgage, every monthly payment reduces the capital balance, so the amount you owe decreases steadily over the term.
Completion: The final legal stage of a property purchase, when funds are transferred between solicitors and ownership passes to you. On completion day you collect the keys to your new home.
Conveyancing: The legal process of transferring property ownership from seller to buyer. A qualified solicitor or licensed conveyancer carries out searches, reviews title deeds, prepares contracts, and manages exchange and completion.
County Court Judgment (CCJ): A court order registered when someone fails to repay a debt. CCJs stay on your credit file for six years and can affect your ability to get a mortgage, though specialist lenders may still be able to help depending on the circumstances.
Critical Illness Cover: Insurance that pays out a tax-free lump sum if you are diagnosed with a specified serious illness — such as cancer, heart attack, or stroke. The money can be used to repay your mortgage or cover living costs during recovery.

D

Deposit: The upfront cash you contribute towards the purchase price of a property. A larger deposit reduces how much you borrow and typically unlocks lower interest rates. Most lenders require a minimum of 5%, though 20%+ gives you access to the best deals.
Default: A formal record placed on your credit file when you persistently fail to repay a debt as agreed. Defaults can make it harder to get a mortgage, though their impact reduces over time and some specialist lenders will still consider your application.

E

Early Repayment Charge (ERC): A fee charged if you repay your mortgage, or a large lump sum of it, before the end of your initial deal period. ERCs are usually a percentage of the outstanding balance — always check yours before switching deals, overpaying, or moving home.
Equity: The difference between your property's current market value and your outstanding mortgage balance. For example: a home worth £300,000 with a £180,000 mortgage gives you £120,000 of equity. Equity grows as you repay and as property values rise.

F

Fixed Rate Mortgage: A mortgage where your interest rate stays the same for a set period — typically two, three, or five years. Your monthly payment is predictable regardless of base rate changes. When the fixed period ends you usually revert to the lender's Standard Variable Rate unless you remortgage.
Freehold: Full ownership of both the property and the land it stands on, with no time limit. Most houses in England and Wales are freehold. The alternative is leasehold, where you own the property for a fixed period defined in a lease.

G

Gazumping: When a seller accepts a higher offer from another buyer after already agreeing a sale with you verbally. Gazumping is legal in England and Wales because a sale is not binding until contracts are exchanged — which is why buyers are advised to move quickly.
Guarantor: A person — often a parent or close relative — who agrees to cover your mortgage repayments if you cannot. Guarantor mortgages can help buyers with smaller deposits or lower incomes onto the property ladder, though the guarantor's own home may be at risk if repayments are missed.

I

Income Protection Insurance: An insurance policy that pays a regular monthly income if you are unable to work due to illness or injury — typically 50–65% of your gross earnings. Unlike critical illness cover, income protection pays out for virtually any condition that stops you working, not just a specified list.
Interest-Only Mortgage: A mortgage where monthly payments cover only the interest charged, leaving the capital balance unchanged. The full loan must be repaid at the end of the term, usually by selling the property or drawing on a separate repayment plan. Common in buy-to-let.

J

Joint Mortgage: A mortgage taken out by two or more people, all of whom are jointly and severally liable for repayment. Lenders typically assess both applicants' incomes to calculate maximum borrowing, and all parties' credit histories are taken into account.

L

Leasehold: Ownership of a property for a fixed period defined in the lease — most commonly flats. You do not own the land, which is retained by the freeholder. Short leases (under 80 years) can affect your mortgage options and the property's saleability.
Life Insurance: A policy that pays a lump sum to your beneficiaries if you die during the term. Taken alongside a mortgage, it is typically set up to clear the outstanding balance, protecting your family from losing their home if you pass away.
Loan to Value (LTV): The mortgage amount as a percentage of the property's value. A £180,000 mortgage on a £300,000 home = 60% LTV. Lower LTV generally means lower interest rates because the lender is taking on less risk.

N

Negative Equity: When your outstanding mortgage balance is higher than your property's current market value — for example, owing £200,000 on a home now worth £180,000. Negative equity makes it very difficult to remortgage, sell, or move without covering the shortfall yourself.

O

Offset Mortgage: A mortgage linked to one or more savings accounts. Your savings balance is offset against your mortgage debt, reducing the interest charged. For example: a £200,000 mortgage with £30,000 in savings means you only pay interest on £170,000.
Overpayment: Paying more than your contracted monthly amount, which reduces your balance faster and cuts the total interest you pay. Most lenders allow overpayments of up to 10% of the outstanding balance per year without triggering an Early Repayment Charge.

P

Porting: Moving your existing mortgage deal to a new property when you move home, subject to lender approval. If you are on a favourable fixed rate, porting lets you keep it without paying an Early Repayment Charge to exit early.

R

Remortgage: Switching your mortgage to a new deal — either with your current lender (a product transfer) or a different one. The most common reason is to save money when a fixed or tracker deal ends, though you can also remortgage to release equity or change your mortgage type.
Repayment Mortgage: The standard mortgage type, where each monthly payment covers both the interest charged and a portion of the capital borrowed. The balance reduces steadily over the term until the mortgage is fully paid off at the end.

S

Shared Ownership: A scheme where you buy a share of a property — typically 25–75% — and pay subsidised rent on the remaining share owned by a housing association. You can buy additional shares over time (called staircasing) until you own the property outright.
Stamp Duty Land Tax (SDLT): A government tax on property purchases in England and Northern Ireland above a certain price threshold. The amount depends on purchase price and personal circumstances. First-time buyers benefit from relief. Scotland uses LBTT and Wales uses LTT instead.
Standard Variable Rate (SVR): The default interest rate a lender charges once your initial fixed, tracker, or discount deal expires. SVRs are set by the lender and can change at their discretion — they are typically higher than the rates available on new deals, so it usually pays to remortgage before your deal ends.

T

Term: The agreed length of time over which your mortgage will be repaid, typically 25 years — though terms from 5 to 40 years are possible. A longer term lowers monthly payments but significantly increases the total interest paid over the life of the mortgage.
Tracker Rate Mortgage: A variable rate mortgage that follows the Bank of England base rate at a fixed margin above or below it — for example, base rate + 0.99%. When the base rate rises, your payments go up; when it falls, they reduce. Trackers often have no Early Repayment Charge.

V

Valuation: An assessment of a property's market value carried out by a surveyor on behalf of the mortgage lender, before they approve your application. A basic mortgage valuation is not the same as a full structural survey and may not flag significant condition issues.
Variable Rate Mortgage: Any mortgage where the interest rate can change over time — including tracker mortgages (which follow the base rate) and Standard Variable Rate mortgages (which the lender can change at will). Monthly payments rise and fall with the rate.

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everything in plain English