Glossary
Mortgage and protection terms, in plain English.
A quick-reference glossary of the abbreviations and concepts that come up in a mortgage or protection conversation. Short definitions, no jargon, written by the Major Money Matters adviser team.
Mortgage advisers, lenders and solicitors all use shorthand. Some of it is genuinely useful (LTV, AIP, ERC). Some of it is faintly ridiculous. Either way, this page collects the abbreviations and concepts you are likely to hear during a Major Money Matters conversation, with a short, plain-English definition for each. If something is missing, tell us and we will add it.
A
- Affordability
- How much a lender is willing to lend you, calculated against your income, your monthly commitments, household size and a stress-tested interest rate. Different lenders use different affordability models; the right lender often depends on which model is kindest to your particular profile.
- AIP (Agreement in Principle)
- A lender-issued indication of how much they would be willing to lend you, based on a soft credit search and the figures you have given them. Sometimes called a Decision in Principle (DIP). Typically valid for 30, 60 or 90 days. Useful when making an offer because it shows the estate agent the case is real.
- AST (Assured Shorthold Tenancy)
- The standard tenancy agreement for residential rental property in England and Wales. Most buy-to-let lenders require the property to be let on an AST. Holiday lets and HMOs typically use different agreements, which can affect lender choice.
B
- Bridging finance
- Short-term loan, typically 1 to 24 months, secured against property. Used for chain breaks, auction purchases, light refurbishment, or to bridge to a longer-term mortgage. Higher rates than a residential mortgage; the saving is the speed and the flexibility.
C
- Capital and interest
- A repayment mortgage where each monthly payment pays off both the interest and a portion of the capital owed. By the end of the mortgage term you owe the lender nothing. Most residential mortgages in the UK are capital and interest.
- Conveyancing
- The legal process of transferring ownership of a property from seller to buyer. Handled by a solicitor or licensed conveyancer. Includes searches, contract review, exchange and completion.
D
- Decreasing term assurance
- Life cover where the sum assured falls in line with a repayment mortgage balance. Cheaper than level term cover, and the right shape for a typical residential mortgage. Not the right shape for an interest-only mortgage where the balance never falls.
- Deposit
- The portion of the property purchase price you pay yourself, with the lender funding the rest. Expressed as a percentage of the property value. 5% is the typical minimum on a UK residential purchase, with better rates from 10%, 15% and 25% upwards.
- DIP (Decision in Principle)
- See AIP. Different lenders use different acronyms for the same thing: AIP, DIP, MIP. All refer to a lender-issued indicative borrowing figure based on a soft credit search.
- Discount rate
- A mortgage rate set at a discount to the lender's Standard Variable Rate (SVR) for a fixed period (often 2 or 3 years). The headline rate moves up or down whenever the lender changes its SVR. Less common in the current market than fixed and tracker rates.
E
- Early repayment charge (ERC)
- A fee the lender charges if you repay your mortgage, switch lender, or overpay above the allowed limit during the initial fixed or discount period. Typically 1% to 5% of the outstanding balance. Always check the ERC schedule before remortgaging early.
- Equity
- The portion of a property's value that you own outright, after subtracting any outstanding mortgage. If your home is worth £400,000 and you owe £250,000 on the mortgage, you have £150,000 of equity.
- Exchange of contracts
- The point in a property purchase where the deal becomes legally binding on both sides. You typically pay your deposit at exchange, and a completion date is set. Pulling out after exchange triggers contractual penalties on both sides.
F
- Fixed rate
- A mortgage rate fixed for an initial period (commonly 2, 3, 5 or 10 years). Your monthly payment does not change during that period regardless of what the Bank of England base rate or the lender's SVR does. Most UK borrowers choose a fixed rate.
- FTB (First-time buyer)
- Someone buying a residential property who has never owned property before, anywhere in the world. FTB status unlocks Stamp Duty relief and access to a slightly different lender pool with FTB-specific products.
G
- Gifted deposit
- A deposit, or part of a deposit, given to you by a family member or other related party. Most lenders accept gifted deposits but require a letter from the giver confirming the gift is non-repayable, and ID and source-of-funds documentation. Loans dressed up as gifts are not acceptable to lenders.
H
- HMO (House in Multiple Occupation)
- A property let to three or more tenants forming more than one household, sharing facilities. HMOs are licensed by the local authority, taxed differently and require an HMO mortgage rather than a standard buy-to-let mortgage. The lender pool is narrower.
I
- ICR (Interest Coverage Ratio)
- The buy-to-let lender's test for whether the rent covers the mortgage. Typically expressed as a ratio: rent must be at least 125% to 145% of mortgage interest at a stressed rate. Limited-company buy-to-let cases often have lower ICR thresholds because of the tax treatment.
- Income protection
- Insurance that pays a regular monthly income (typically up to 60% to 70% of your gross salary) if you cannot work due to illness or injury. Pays out until you can return to work, or to retirement, depending on policy term. Often the most useful protection product for working-age adults.
- Interest-only mortgage
- A mortgage where each monthly payment covers only the interest, with the capital balance unchanged. The full capital is owed at the end of the term, repaid from the sale of the property, an investment vehicle, or another agreed strategy. Standard on most buy-to-let mortgages, less common on residential.
J
- JBSP (Joint Borrower Sole Proprietor)
- A mortgage where a family member (typically a parent) is named as a borrower to boost the affordability calculation, but is not on the property deeds. Avoids triggering the additional-property Stamp Duty surcharge for the helper. Few lenders, specific structures.
- Joint mortgage
- A mortgage in two or more names, with all parties jointly and severally liable for the full balance. Most commonly with a partner; also possible with parents, siblings, or friends. Different lenders accept different joint structures.
L
- Land Registry
- The government body that records property ownership and charges in England and Wales. Your solicitor registers your purchase and your mortgage with the Land Registry shortly after completion.
- Leasehold
- A form of property ownership where you own the property for a fixed number of years (typically 99, 125 or 999) but the land underneath is owned by a freeholder. Common on flats. Lenders care about the remaining lease term; below 80 years can be a problem.
- Lender stress test
- A lender's requirement that, when assessing affordability, your income must support the mortgage at a higher hypothetical rate (often 3% above the product rate, or a floor rate set by the regulator). Designed to test whether you could still afford the mortgage if rates rose.
- Level term assurance
- Life cover where the sum assured stays the same throughout the policy term. The right shape for an interest-only mortgage, or for cover where the family needs a flat lump sum on death rather than something tied to a falling mortgage balance.
- LTV (Loan to Value)
- The mortgage size as a percentage of the property value. A £200,000 mortgage on a £250,000 property is 80% LTV. Lower LTV typically unlocks better rates, with material rate steps at 60%, 75%, 80%, 85% and 90%.
M
- MIP (Mortgage in Principle)
- See AIP. Another acronym for the same lender-issued indicative borrowing figure.
- MUFB (Multi-Unit Freehold Block)
- A single freehold title containing multiple self-contained flats or units, each typically with its own AST. Different from an HMO. Specialist lenders only; valued differently from a standard buy-to-let.
O
- Offset mortgage
- A mortgage linked to a savings account; your savings balance is set against your mortgage balance for interest calculation purposes. Reduces the interest you pay without you actually using the savings. Useful for higher-rate taxpayers and those with significant cash savings.
P
- Portfolio landlord
- A landlord with four or more buy-to-let mortgaged properties. Triggers a different (more rigorous) lender assessment, with the entire portfolio stress-tested rather than just the individual case. The lender pool narrows materially at this point.
- Procuration fee (proc fee)
- A commission paid by the lender to the broker on completion. The default funding model on most UK residential cases. Major Money Matters is paid this way on most cases; client fees are charged only on more complex cases and always disclosed in writing up front.
- Product transfer
- Switching to a new product with your existing lender at the end of your fixed or discount period, without changing lender. Quicker than a full remortgage and does not always require a new affordability check, but sometimes the product transfer is not the most suitable deal. We always compare.
R
- Repayment vehicle
- On an interest-only mortgage, the agreed strategy for repaying the capital at the end of the term: typically the sale of the property, an investment portfolio, an endowment, or another asset. Lenders require evidence of the vehicle at application and may ask for updates during the term.
- Remortgage
- Switching your existing mortgage to a new lender, typically at the end of a fixed or discount period to avoid drifting onto the lender's SVR. Distinct from a product transfer (which keeps you with the same lender).
S
- SDLT (Stamp Duty Land Tax)
- The tax due on property purchases in England and Northern Ireland, paid by the buyer at completion. Different rates apply for first-time buyers, additional properties (the 5% surcharge) and overseas buyers. Wales uses Land Transaction Tax; Scotland uses Land and Buildings Transaction Tax.
- SPV (Special Purpose Vehicle)
- A limited company set up specifically to hold buy-to-let property. Most limited-company BTL lenders require a clean SPV structure (typically SIC codes 68100, 68209, 68320). The tax treatment is different from holding property in personal name; we run both side by side before recommending one.
- SVR (Standard Variable Rate)
- The lender's default mortgage rate, set by the lender, often two or three percentage points above the cheapest fixed deals. When your fixed or discount product ends and you do not switch, you drift onto the SVR. Almost never the right place to be.
- Stamp Duty
- See SDLT. Often shortened to "stamp duty" in everyday speech across the UK, even though Wales and Scotland have their own equivalent taxes.
- Stress test
- See Lender stress test. The hypothetical rate the lender uses to confirm you could afford the mortgage if rates rose. Distinct from the rate you actually pay.
T
- Term
- The length of the mortgage, typically 25 to 35 years for residential. Longer terms reduce monthly payments but increase total interest paid. We model both before recommending a term.
- Top slicing
- A buy-to-let assessment approach where the lender uses surplus personal income to top up shortfalls in rental coverage. Useful for landlords with strong day-job income but tight rental yields. Only certain lenders offer it.
- Tracker rate
- A mortgage rate that tracks the Bank of England base rate plus a fixed margin. Your rate goes up and down in line with base rate movements. Often (not always) has no early repayment charges, useful when you expect to repay or remortgage during the period.
W
- Wide range of lenders
- With the access of over 65 lenders. We offer a comprehensive range of first charge regulated mortgage contracts from over 65 lenders across the market, rather than a tied panel. Major Money Matters partners with a diverse panel of lenders, providing flexibility and choice beyond what a limited or tied broker can offer.
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