Confused by mortgage speak? Let’s break it down.
At Maxwell Mortgages, we believe in straight-talking advice. So here’s your no-nonsense guide to the mortgage terms you’re likely to hear – all explained clearly.
Key Mortgage Terms Explained
The total average yearly cost of your mortgage, shown as a percentage. It includes the initial interest rate, lender fees, and what you’d pay if you moved onto the Standard Variable Rate.
The rate you pay for a set period at the start of your mortgage (e.g. 2–5 years). It’s usually lower than the rate that follows.
The fixed or discounted period where your introductory rate applies. After this, most people move to the lender’s Standard Variable Rate.
The default rate your lender charges once your initial deal ends. It can go up or down at any time and is usually higher than the introductory rate.
A fee charged if you pay back your mortgage early or overpay beyond your allowance. Check your terms before making extra payments.
The amount you can overpay each year without being charged an ERC. Typically, this is 10% of your mortgage balance per year.
Mortgage Size & Structure
The percentage of your property’s value that you’re borrowing. A lower LTV (e.g. 75%) usually means better rates.
How long your mortgage runs – for example, 25 or 30 years. It affects your monthly repayments and how much interest you’ll pay over time.
The upfront cash you put towards buying your home. The bigger your deposit, the better your mortgage options generally are.
Applications & Agreements
A lender's initial indication of how much you could borrow, based on a soft credit check. It’s not a full mortgage offer but helps you understand your budget.
The formal confirmation from a lender that they’re willing to give you a mortgage – based on your application, documents, and financial checks.
An assessment of your income, outgoings, and debts to decide how much you can reasonably afford to borrow.
Soft check – used for an AIP; doesn’t impact your credit score.
Hard check – used during a full mortgage application; may affect your score.
Mortgage Types & Deals
Your interest rate stays the same for a set period, so your monthly repayments won’t change during that time.
Your interest rate tracks the Bank of England base rate, meaning your monthly payments can go up or down.
You pay a set amount below the lender’s SVR for a fixed time. Your repayments can still rise or fall, depending on the SVR.
Links your mortgage to your savings account. Your savings reduce the amount of interest charged, but you can still access your money.
Home Buying Terms
A tax you may have to pay when buying a property over a certain price. First-time buyers often benefit from reduced rates or exemptions.
The legal process of transferring a property from seller to buyer – usually done by a solicitor or licensed conveyancer.
The final step in the buying process – once funds are transferred and you get the keys!
Still Unsure? Just Ask.
Important information
Your home may be repossessed if you do not keep up repayments on your mortgage. There may be a fee for mortgage advice. A fee of up to 1% of the mortgage amount may be charged depending on individual circumstances. A typical fee is £495.