28+ definitions of UK mortgage terminology — written by FCA-regulated brokers, no jargon, no marketing waffle. If a term you're looking for isn't here, call us on +44 20 8706 0915.
A remortgage is when you switch your existing UK mortgage to a different lender — usually to get a cheaper rate, release equity, or change product type. The new lender pays off the old one. Most UK homeowners remortgage every 2–5 years to avoid dropping onto the Standard Variable Rate.
A product transfer stays with your current UK mortgage lender on a new (typically cheaper) deal. It's faster than a remortgage (often no new valuation, no full underwrite) but you're limited to that lender's products. Always compare both before choosing.
The SVR is the default interest rate your UK mortgage drops onto when your fixed deal ends. SVRs are typically 3–5% higher than the cheapest fixed rate available, so switching before your fix ends usually saves you thousands per year.
LTV is the mortgage size divided by the property value, expressed as a percentage. A £180,000 mortgage on a £200,000 home is 90% LTV. Lower LTV = cheaper rate. Most UK lenders bracket their pricing at 60%, 65%, 75%, 80%, 85%, 90% and 95% LTV.
A UK mortgage where the interest rate is fixed for a set period (usually 2, 3, 5 or 10 years). Your monthly payment is identical every month within the fix. Most UK borrowers prefer 2-year and 5-year fixes.
A UK mortgage where the interest rate tracks the Bank of England base rate plus a fixed margin (e.g. base + 0.49%). Your payment goes up and down with base rate. Tracker mortgages usually have no early repayment charges.
The headline UK interest rate set by the Bank of England's Monetary Policy Committee. Tracker mortgages move with it; fixed mortgages don't change mid-term but new fixed deals reprice within days of a base-rate decision.
A penalty (usually 1–5% of your outstanding mortgage balance) for paying off or remortgaging during your fixed-rate period. Most UK mortgages allow you to overpay 10% of the balance every year ERC-free.
UK lenders apply a stress test to make sure you could still afford your mortgage if rates rose. For residential the stress rate is typically 1–3% above your pay rate; for BTL it's an ICR (Interest Cover Ratio) calculation against a 5.5–8.5% notional rate.
A buy-to-let stress test. The lender requires monthly rent to cover the notional mortgage payment by 125% (basic-rate landlord), 145% (higher-rate or ltd-co) or 165% (some HMOs). If your rent doesn't pass ICR, you'll need to borrow less or pick a different lender.
A UK mortgage type where the lender counts a family member's income for affordability, but only one party is on the title deeds. Common for first-time buyers whose parents want to help them borrow more without affecting stamp duty.
A deposit gifted to you (usually by parents) rather than saved by you. UK lenders accept gifted deposits but need a signed letter from the giver confirming it's a non-repayable gift. We handle that paperwork for you.
A UK scheme where you buy 25–75% of a housing-association property with a mortgage and pay rent on the rest. Useful if you can't afford 100% of a home in your area. Specialist UK lender panel only.
UK tax paid by the buyer on residential property purchases above £250,000 (or £425,000 for first-time buyers under £625,000). BTL purchases and second homes pay an additional 3–5% surcharge depending on jurisdiction.
How long the mortgage is scheduled to be paid off, typically 15–35 years in the UK. Longer term = lower monthly payment but more interest over the life of the loan. Most UK lenders cap term at age 70–80 at the end of the term.
A UK mortgage where every payment includes both capital (reducing the balance) and interest. At the end of the term the mortgage is fully paid off. This is the default UK residential mortgage type.
A UK mortgage where you pay only the interest each month and the original balance is repaid at the end via a separate vehicle (savings, investment, property sale). Used mainly for BTL and some specialist residential cases.
A lender's pre-approval that they'd likely lend you a specific amount, based on a soft credit check + your declared income. Usually valid 30–90 days. Estate agents in the UK often ask for a DIP before showing higher-value properties.
The formal lending commitment issued by the lender after underwriting + valuation. UK mortgage offers are typically valid 3–6 months from issue date. Offer in hand = you're cleared to exchange.
The lender's assessment of the property value, used to set LTV. Three flavours: desktop (data-only), drive-by (external photos), or full physical inspection. UK remortgages often qualify for free desktop valuations.
The legal professional who handles the property transfer (purchase) or remortgage paperwork. UK remortgages with the same lender often need no conveyancer; remortgages to a new lender always do.
The commission a UK mortgage lender pays a broker on completion — typically 0.35–0.45% of the loan size. This is how no-fee brokers like us get paid; it's disclosed in writing in your offer pack.
A UK mortgage broker who can place mortgages with any lender they have a panel agreement with (typically 90+ lenders). Contrast with a tied or panel broker, who only has access to a small subset of lenders.
The UK regulator for mortgage brokers and lenders. All UK mortgage advice must be given by an FCA-authorised firm. Always check your broker's FCA reference number before signing anything.
A UK mortgage for a property you're going to rent out, not live in. BTL is regulated differently from residential — stress test is based on rental yield (ICR), not your personal income, and pricing is typically 0.4–0.8% above residential rates.
A buy-to-let mortgage held in a UK limited company (usually an SPV — special purpose vehicle). The company owns the property, the company pays the mortgage. Used by higher-rate landlords to escape Section 24 tax restrictions.
A UK rental property with 3+ unrelated tenants sharing facilities. HMOs typically need a specialist BTL mortgage + an HMO licence from the council. Yields are higher; lending pool is narrower.
A mortgage where the broker or lender pays you a cash bonus on completion. At Cashback Remortgages we pay up to £1,500 cashback on eligible UK remortgages, paid directly to your bank account on the day your new mortgage completes.