Mortgage Glossary and Terminology
When looking for a mortgage it is important that you understand the terminology used so we have put
together a list of the most common mortgage terminology used.
Arrangement Fee
A fee charged by a lender for setting up the loan, normally payable on completion, but sometimes added to
the mortgage loan.
Bank of England Rate
The Bank of England Monetary Policy Committee currently reviews this monthly. If the rate changes, the
standard variable rate charged by lenders may change soon afterwards.
Broker Fee
A fee charged by your adviser (e.g. Heritage Mortgages) for advising on and arranging your mortgage.
(This is also known as an Intermediary Fee)
Buy To Let (BTL)
A mortgage for an investment property rented out to tenants, normally on an Assured Shorthold Tenancy
agreement basis.
Completion
The point the legal formalities of a property purchase or mortgage end, and sellers receive the money.
The buyer cannot take possession before completion.
Conveyancing
The act of transferring the legal ownership of land or property from one person to another.
Credit Scoring
Method of assessment carried out by a Lender – the total ‘scores’ provides the basis for the lending
decision and can differ depending on the Lender.
Deeds Release Fee
A charge by the lender for release of the property deeds to the borrower or their solicitor on repayment of
the mortgage.
Early Repayment Charge
The penalty charged by a lender for repaying a mortgage before a given date started in the mortgage
conditions.
Equity
The property value, less the mortgage outstanding.
Financial Conduct Authority (FCA)
The independent body that regulates the financial services industry in the UK. Heritage Mortgages is
a trading style of Heritage Mortgage Advice Ltd which is authorised and regulated by the Financial
Conduct Authority – FCA Registration Number: 794556.
Guarantor
A person, normally a friend or relative of the borrower, who guarantees to repay the mortgage if the
borrower fails to make the repayments.
Higher Lending Charge
Sometimes known as Mortgage Indemnity Guarantee (MIG)
n extra charge made by the lender if your mortgage exceeds a certain proportion of the property value, for
example 90%.
Joint Application
Mortgage application with more than one borrower, up to a maximum of four.
Key Facts Illustration (KFI)
A detailed illustration provided by your lender or mortgage adviser before you apply for a mortgage. It sets
out the key facts including the repayments, fees and terms loan.
Loan-to-Value (LTV)
This is the ratio of the loan amount of the property value expressed as a percentage. For example, if a
borrower is seeking a loan of £100,000 on a property with £200,000, it has a 50% loan-to-value. The higher
the LTV, the greater the risk to the lender, which can have an impact on the lender’s decision to lend as
well as the mortgage rate.
Mortgage Offer
A written formal offer from the lender to the borrower, setting out details of the mortgage with a list of
conditions. The Mortgage Offer is usually valid for 3 to 6 months.
Mortgage Term
The period over which you repay the mortgage
Remortgage
Arranging a loan on a property in which the borrower already owns. Normally this involves redeeming an
existing loan on the property.
Shared Ownership
This is a method of buying a property in partnership with a Housing Association. The borrower buys part of
the property and rents the remainder from the Housing Association.
Vendor
The seller of the property