Compare all Mortgages

Mortgages – a Glossary of Terms

Arrangement Fees

General administrative/booking fees charged by the mortgage lender to actually set up and secure your loan.

Bank of England Base Rate

This is the rate at which the banks themselves borrow money. It is essentially the cost of money at the time as set by the state. All interest rates offered by mortgage providers will reflect the base rate to varying degrees.

Buy to Let Mortgage

A buy to let mortgage is a loan designed specifically for landlords to purchase a property they wish to rent out. These mortgages are generally interest only, with monthly payments coming out of the rental income received and the rest of the mortgage being paid off when the property is eventually sold.

Capital

This is the amount of money you are actually borrowing. This is as opposed to interest.

Credit Rating

Your credit rating is essentially a profile of your previous dealings with credit that allows a lender to see how much of a risky investment you may be. Things that affect your credit rating will be how promptly you repay debts, as well as how many loans or credit cards you have taken out or used throughout your life. A bad credit rating will make it harder for you to get a mortgage with good interest rates, and vice versa.

Deposit

This is the amount you have to pay up front in order to be able to take out a mortgage. Generally, it amounts to around 25% of the total value of the property, with the mortgage itself making up the remaining portion.

Equity

Equity is the share or portion of the property that you actually own, as opposed to the share that you borrow as part of your mortgage. This can go up either as your property increases in value or as you pay off more and more of your mortgage.

Fixed Rate Mortgage

A fixed rate mortgage is one with an interest rate that stays the same for a set term of either two, three, four, five or ten years. With loans like this, you can budget well into the future and you’ll be safe from rising interest rates. However should rates fall, you’ll end up paying over the odds so they are always something of a gamble.

Flexible Mortgage

With a flexible mortgage, you’ll be able to underpay, overpay and in some cases not pay at all each month without incurring any extra charges.

Interest

This is essentially the cost of the mortgage – it is the amount that is added to what you borrow (i.e. the capital) each month until the entire loan is paid off.

Interest-Only Mortgage

An interest-only mortgage is one where the monthly repayments consist solely of the interest charged and do not contribute to reducing the capital borrowed, which is paid off in full at the end of the term. These are different to repayment mortgages.

Loan-to-Value (LTV)

The loan-to-value ratio of a loan is the difference between the amount borrowed and the total value of the property, where the remainder is paid up front as a deposit.

If you take out a mortgage on a house worth £200,000 and can afford a deposit of £20,000, then you only need to borrow £180,000, giving you an LTV of 90%.

London Interbank Offered Rate (LIBOR)

This is the average rate at which banks borrow money from each other and is taken into account when mortgage providers calculate their representative interest rates.

Mortgage

A mortgage is a loan taken out or secured against a property.

Mortgage Lender

A bank, building society or other financial institution that will offer mortgages.

Mortgage Term

This is the length the mortgage agreement; the amount of time you have to pay the loan off.

Redemption Fees

These are charges you must pay when you pay off the capital on your mortgage. Most lenders will charge early redemption fees if you pay off your mortgage before the term is up.

Repayment Mortgage

A repayment mortgage is one where the monthly repayments consist of a combination of a portion of the capital owed and the interest charged. These are different to interest-only mortgages.

Residential Mortgage

A residential mortgage is one taken out on a residential property. This is the basic kind of mortgage and is different to a buy to let mortgage.

Standard Variable Rate

The standard variable rate (SVR) is the basic representative rate at which a lender will charge interest on variable rate mortgages. Each lender’s SVR will be different and will fluctuate according to a variety of criteria.

Tracker Mortgage

A tracker mortgage is one where the interest rate directly tracks the Bank of England base rate, staying consistently at a set percentage above it – usually between 0.5% and 2%.

Valuation Fee

This is the fee charged by the lender for the valuation of the property to be used as security for the mortgage.

Variable Rate Mortgage

A variable rate mortgage is one where the interest rate changes according to the particular lender’s standard variable rate.

Get the Right Mortgage

You'll most likely use your current account for all of your day to day banking.

Let Money Expert help you find one that best suits your needs.

  •   Mortgages for any Purpose
    Whether you're buying a new home or remortgaging, we'll be able to find a loan that suits your needs.
  •   Choose How You Compare
    Use our comparison tool compare mortgages by a variety of factors from length of term to LTV to interest rates.
  •   Free & Impartial
    Our comparison service is completely free and we're not tied to any provider so what you see is exactly what you get.

General Advice

Taking out a mortgage and buying a home is a big decision, and so you should make sure that you've got all the information you need to get yourself on the right track.

Whether you're looking to buy your first home, move to a new one or remortgage, our guides will tell you what you need to know.

Types of Mortgage

Taking out a mortgage and buying a home is a big decision, and so you should make sure that you've got all the information you need to get yourself on the right track.

Whether you're looking to buy your first home, move to a new one or remortgage, our guides will tell you what you need to know.