Mortgage jargon, explained
Every acronym and bit of industry shorthand you are likely to meet, in plain English, with no assumption that you already know the next one along.
Plain-English guide · no advice, just how the market works
Mortgage language is dense, inconsistent, and frequently used by people who have forgotten it is not obvious. Nothing below is complicated once written out. Keep this open in a tab while you read anything else.
The application
Agreement in principle (AIP, DIP, MIP)
A lender’s early indication of roughly what it might lend, based on figures you declare plus a credit check. Not an offer, not binding, but usually what an estate agent wants to see. Full detail in our agreement in principle guide.
Mortgage offer
The formal, binding commitment from the lender after full underwriting, document checks and a valuation. This is the one that counts. It typically stays valid for three to six months.
Underwriter
The person at the lender who assesses your case against its criteria. Queries from underwriting are the usual reason an application pauses.
Criteria
Each lender’s own rulebook: what income it counts, what credit history it tolerates, what property it will lend on. Criteria vary enormously between lenders, which is why the same case can be declined in one place and approved in another.
Affordability assessment
The lender’s calculation of what you can sustainably repay, based on income, committed outgoings, dependants and a stress test against higher rates. It is not a simple income multiple, and different lenders reach different answers on identical facts.
Hard search and soft search
A soft search is visible only to you and does not affect your credit score. A hard search is recorded on your file and visible to other lenders. Several hard searches in a short period can count against you.
The money
Loan to value (LTV)
The mortgage as a percentage of the property value. A £180,000 loan on a £200,000 property is 90% LTV. Lenders price in bands, commonly 60, 75, 80, 85, 90 and 95 per cent, so a small movement in deposit or valuation can land you in a better or worse band.
Standard variable rate (SVR)
The lender’s default rate, which most mortgages revert to when a deal period ends. The lender can change it whenever it likes, and it is usually higher than the deal you were on. Drifting onto it by accident is the most common avoidable cost in UK mortgages.
Fixed, tracker and discount
A fixed rate stays the same for the deal period. A tracker follows a reference rate, usually the Bank of England base rate, plus a set margin. A discount is a reduction off the lender’s SVR, which moves when the SVR moves.
Early repayment charge (ERC)
A charge for leaving or repaying the deal early, often a percentage of the balance that steps down each year. Check this and your deal end date before considering any switch.
Product fee, arrangement fee, booking fee
Lender fees for the mortgage product itself, sometimes payable upfront and sometimes addable to the loan. Adding a fee to the loan means paying interest on it for the whole term.
Procuration fee (proc fee)
The commission the lender pays the broker on completion. It is how fee-free brokers get paid, it must be disclosed to you, and it does not change your rate. Our fees guide covers who pays what.
Capital repayment and interest-only
On capital repayment, each payment clears interest and some of the balance, so the debt reaches zero at the end of the term. On interest-only, payments cover interest alone and the balance is still owed at the end, so the lender wants to see a credible plan for repaying it.
The property
Valuation
The lender’s check that the property is adequate security for the loan. It might be an automated desktop valuation, a drive-by, or a physical inspection. It is for the lender’s benefit, not a survey for yours.
Down valuation
When the valuation comes in below the agreed purchase price. It changes the LTV and often means renegotiating, adding deposit, or both.
Survey (homebuyer report, building survey)
A separate, more thorough inspection commissioned by you about the condition of the property. Distinct from the lender’s valuation and not a substitute for it.
Non-standard construction
Anything not built of brick or stone with a tiled roof: timber frame, concrete panels, thatch and so on. Many lenders restrict or refuse these, which is a criteria question rather than a reflection on you.
Leasehold and freehold
With freehold you own the building and the land. With leasehold you own the right to occupy for a fixed number of years. Lenders care about the remaining lease length, and short leases narrow the field of lenders quickly.
Conveyancing
The legal work of transferring ownership. It sits between the mortgage offer and completion and is usually the longest stage. See how long a mortgage takes.
Switching and moving
Remortgage
Moving your mortgage to a different lender, usually when a deal ends. Full application, legal work, whole market available. Our remortgage page covers the timing.
Product transfer
Taking a new deal with your existing lender. Fast, usually light on paperwork, often no new affordability assessment, but limited to that lender’s own products. Convenience and range are the trade-off.
Porting
Moving your existing deal to a new property. Requires a fresh application and the lender’s agreement, so it is never guaranteed even when the paperwork says the product is portable.
Further advance
Borrowing more from your current lender on top of the existing mortgage, often for improvements. Assessed on its own terms and sometimes priced differently.
Credit and income
Default, CCJ, IVA
A default is a lender formally ending an account you fell behind on. A CCJ is a county court judgment for an unpaid debt. An IVA is a formal arrangement to repay creditors over time. All three sit on your credit file for six years, and how much they matter depends heavily on size, age and lender. Our credit history page explains the specialist route.
SA302 and tax year overview
HMRC documents showing your declared income and that the tax was accounted for. Self-employed applicants are usually asked for two or three years of both, as a matching pair per year.
Adverse credit
Industry shorthand for any negative credit history. Specialist lenders price for it rather than refusing outright, which is the whole point of the specialist market.
Advice and regulation
Whole of market, panel, tied
Whole of market means comparing across most UK lenders. Panel means a restricted list. Tied means one lender’s products only, which is what a bank branch offers. Worth asking outright, as covered in how to choose a broker.
Appointed representative and directly authorised
A directly authorised firm is regulated by the FCA in its own right. An appointed representative operates under the regulatory umbrella of a larger principal firm. Both are legitimate and both appear on the FCA Register.
FRN (firm reference number)
The unique number every FCA-regulated firm has. You can look any firm up on the FCA Register with it, which takes about thirty seconds and is always worth doing.
Introducer
A firm that puts you in touch with a regulated adviser without advising you itself. That is exactly what Broker Finder is: we connect, brokers advise, and we never recommend a product.
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