Mortgage terminology can feel confusing. From AIP to SVR, mortgage terminology gets thrown around constantly, it is easy to feel lost. Whether you’re a first-time buyer stepping onto the property ladder or remortgaging your home, understanding key mortgage terms explained makes the process less daunting.
The mortgage glossary covers the terms UK borrowers search for most, meaning you can go into your application prepared.
What Does AIP Mean in a Mortgage?
AIP stands for agreement in principle (AIP), sometimes referred to as a decision in principle or mortgage in principle, is a written indication from a lender that they are willing to lend you a certain amount, subject to passing certain checks.
This is not a guarantee, but it shows sellers and estate agents that you are a serious buyer. Many borrowers search this mortgage term early in their property search, and for good reason. By having an agreement in principle, you can get a real edge on England’s competitive housing market.
What is LVT and Why Does It Matter?
LVT stands for loan-to-value. This is the ratio of your mortgage against the value of the property. For example, if you’re buying a £250,000 home in England with a £25,000 deposit, your LTV is 90%.
The lender takes on less risk if you have a lower LTV, usually meaning you can access better interest rates. Your LTV influences which deals you can access and how much your monthly repayments will be.
What is an Early Repayment Charge?
This is a fee your lender may apply if you repay your mortgage, or overpay beyond an agreed limit, before your fixed deal period ends. Early repayment charges are usually a percentage of the outstanding balance.
Always check for ERCs before remortgaging or making large overpayments. This is a mortgage term that catches many UK barriers off guard.
What Is the Difference Between Fixed and Variable Rates?
A fixed-rate mortgage locks your interest rate for a set period of time, usually two, three or five years. This means your monthly payments stay the same regardless of what happens to the Bank of England base rate.
A variable rate mortgage can move up or down. Tracker mortgages follow the Bank of England’s base rate. Standard Variable Rates are set by each individual lender and tend to be higher. Understanding these mortgage terms is key to deciding whether you want payment certainty or the flexibility to exit.
What Does Porting a Mortgage Mean?
Porting means transferring your existing mortgage deal to a new property when you move home. Not all UK lenders allow it. You do have to reapply and pass new affordability checks. If you are still in a mortgage deal and want to avoid an ERC, porting could be a good option for you.
What Is Conveyancing in a Mortgage?
Conveyancing is the transference of property ownership from seller to buyer under English property law. This is handled by your solicitor or licensed conveyancer. They cover local authority searches, Land Registry checks, contracts, exchange and completion.
Mortgage terminology often blurs the lines between legal and lending processes, but conveyancing sits on the legal side. However, your UK mortgage lender will require it to be completed before releasing funds. In England, exchange and completion can happen on the same day, though this is not always advisable.
Still Confused by Mortgage Terminology?
Taking the time to understand mortgage terms is an important first step and applying them to your own situation is vital. Every borrower is different, different incomes and property goals.
At Stuart Brown Mortgage Services, we work with borrowers across Hertfordshire, Bedfordshire and Buckinghamshire. We always take the time to explain every step clearly, helping you find the right deal.
If you’d like to talk through any of the mortgage terms in this glossary or are ready to start your application, get in touch today.
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