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Breaking Down Mortgage Jargon: Terms You Should Know Before You Buy
Buying a home is one of the biggest financial commitments you'll ever make—but when
you start researching mortgages, it can feel like you've entered a different language
entirely. As an independent mortgage adviser, I often meet clients who are confused
by the mortgage jargon.
So, let’s break it down. Below are key mortgage terms you’ll come across during your
home-buying journey, explained in plain English.

1. Agreement in Principle (AIP)
Also known as a Mortgage in Principle or Decision in Principle, this is a statement
from a lender saying they’re willing to lend you a certain amount in theory, based on
your income and credit check. It’s not a guarantee, but it shows estate agents and
sellers that you're a serious buyer.

2. Loan-to-Value (LTV)
This tells you how much of the property’s value you’re borrowing, compared to how
much you’re putting in as a deposit. For example, if you put down a 10% deposit, your
LTV is 90%.
Tip: The lower the LTV, the better the interest rates you’re likely to be offered.

3. Fixed Rate vs Variable Rate
• Fixed Rate: Your interest rate stays the same for a set period (e.g. 2, 5 or 10
years). This gives you predictable payments.
• Variable Rate: The rate can change. This includes:
o Tracker Mortgages – follow the Bank of England base rate.
o Standard Variable Rate (SVR) – set by the lender and usually higher after
your initial deal ends.

4. Deposit
This is the upfront cash you put towards the property—typically at least 5-10% of the
purchase price. The more you can put down, the better the mortgage deals you'll
access.

5. Stamp Duty Land Tax (SDLT)
This is a government tax you pay when buying property over a certain price threshold in
England and Northern Ireland. First-time buyers get a discount, but it’s worth budgeting
for this early on.
Use the official Stamp Duty calculator to estimate your cost.

6. Mortgage Term
This is the length of time you agree to repay your mortgage—typically 25 to 35 years.
You’ll also see shorter deal periods (e.g., a 2-year fixed rate) that don’t affect the full
term but dictate your rate for a set time.

7. Early Repayment Charges (ERCs)
If you repay your mortgage (or switch to a new lender) before the end of your deal
period, you might face a penalty fee. These can be significant, so always check the
small print.

8. Product Fee / Arrangement Fee
Some mortgage products come with a fee, usually between £500–£1,500. You can pay it
upfront or add it to your mortgage—but adding it means you’ll pay interest on it too.

9. Conveyancing
This is the legal process of transferring property ownership. You’ll need a solicitor or
licensed conveyancer to handle the paperwork, searches, and contracts. Expect fees
from £800–£1,500 depending on the property and complexity.

10. Independent Mortgage Adviser
Unlike advisers tied to a specific bank or lender, an independent mortgage adviser
(like myself!) can access a wide range of products across the whole market—including
specialist lenders you won’t find on comparison sites. We work on your behalf, not the
bank’s.

Final Thought: Ask Questions Early
No question is a silly question when it comes to mortgages. If you’re unsure about any
terms or want help finding the right mortgage for your situation, speak to a qualified
independent adviser who can walk you through everything, jargon-free.