The Magical A-Z of Mortgage Acronyms
Welcome, brave adventurer, to the glossary of mortgage acronyms! Here, you’ll find the keys to unlock the mysteries behind those mystical letters that may appear on your mortgage journey. Each acronym is like a spell—once understood, it will empower you to navigate the world of homeownership with confidence. So, grab your quill, and let’s decode the magic together!
AIP (Agreement in Principle)
An Agreement in Principle is a document from a lender stating that they would lend you a certain amount based on your current financial situation. It’s not a full mortgage offer, but a useful step in showing sellers that you’re a serious buyer.
APR (Annual Percentage Rate)
The APR is the true cost of your mortgage, including both the interest rate and any additional fees. The Annual Percentage Rate reflects the total cost of borrowing, including interest and any fees, expressed as a yearly percentage. It’s a key number to compare when looking at different mortgage deals.
ARM (Adjustable-Rate Mortgage)
An Adjustable-Rate Mortgage is a type of mortgage where the interest rate can change over time, typically after an initial fixed-rate period. It can go up or down based on market conditions.
BOE (Bank of England)
The Bank of England is the mighty institution that sets the base interest rate in the UK, influencing the cost of borrowing.
BTL (Buy to Let)
Buy to Let mortgages are for purchasing a property to rent out, rather than to live in. These mortgages often require a larger deposit and may have higher interest rates than residential mortgages.
You can find more information on our Buy To Let page.
CCJ (County Court Judgment)
A County Court Judgment is a legal decision made against you if you fail to repay a debt. Having a CCJ on your credit report can affect your ability to get a mortgage, but options are still available.
DIP (Decision in Principle)
Similar to an AIP, a Decision in Principle is an initial agreement from a lender stating how much they might be willing to lend you. It’s based on your financial circumstances and credit check.
ERC (Early Repayment Charge)
The Early Repayment Charge is a fee you might face if you pay off your mortgage early, particularly during a fixed-rate period.
FCA (Financial Conduct Authority)
The Financial Conduct Authority is the UK regulator that oversees financial services, including mortgage lenders and brokers. Their role is to protect consumers and ensure markets run smoothly.
FOS (Financial Ombudsman Service)
The Financial Ombudsman Service is an independent organisation in the UK that helps resolve disputes between consumers and financial services companies. If you have a complaint about a financial product or service that you can’t resolve directly with the company, you can bring your case to the FOS.
FRM (Fixed-Rate Mortgage)
A Fixed-Rate Mortgage is a type of home loan where the interest rate stays the same for a specified period, typically 2, 5, or 10 years. This means your monthly mortgage payments remain stable throughout this period, protecting you from any changes in market interest rates.
HMO (House in Multiple Occupation)
An HMO is a property rented out by at least three people who are not from the same household (e.g., a group of friends). Special mortgages and licenses are needed to rent out an HMO.
HTB (Help to Buy)
Help to Buy is a government scheme designed to help first-time buyers get on the property ladder. It includes options like equity loans and shared ownership.
IO (Interest-Only Mortgage):
An Interest-Only Mortgage is one where you only pay the interest each month, not the loan amount itself. At the end of the term, you’ll need to repay the full loan, often requiring a repayment plan.
IVA (Individual Voluntary Arrangement)
An IVA is a formal agreement between you and your creditors to pay back debts over time. It can impact your credit score and your ability to secure a mortgage.
LTV (Loan to Value)
Loan to Value is the ratio of the mortgage amount to the property’s value, expressed as a percentage. A lower LTV usually means better mortgage rates and terms.
MIP (Mortgage Indemnity Protection)
Mortgage Indemnity Protection is an insurance policy that protects the lender if you default on your mortgage. It’s a safeguard for the lender, ensuring they’re not left empty-handed.
MPPI (Mortgage Payment Protection Insurance)
MPPI is a type of insurance that covers your mortgage payments if you are unable to work due to illness, an accident, or unemployment.
MVR (Mortgage Valuation Report)
The Mortgage Valuation Report is a basic assessment of the property’s value, carried out by the lender to ensure the property is worth the amount they are lending.
RTB (Right to Buy)
Right to Buy is a scheme allowing council tenants to purchase their home at a discounted price. It’s a great opportunity for those who qualify.
See our Right To Buy page for more information on this topic.
SVR (Standard Variable Rate)
The SVR is the lender’s default mortgage rate, which can fluctuate with the market. When your fixed or introductory rate ends, you might be placed on the SVR, so keep your eye on it!
TR (Transfer of Equity):
A Transfer of Equity involves changing the ownership of a property. For example, adding or removing someone from the mortgage and the title deeds.
UC (Universal Credit)
Universal Credit is a government benefit that combines several types of financial assistance, including housing costs. It may be considered by lenders when assessing your income for a mortgage.
VAL (Valuation)
A Valuation is an assessment of a property’s worth, often carried out by the lender to ensure the property is worth the mortgage amount being requested.
VAT (Value Added Tax)
Value Added Tax (VAT) is a tax applied to most goods and services, including certain fees associated with your mortgage, such as legal or arrangement fees. It’s a tax that the government collects on the value added at each stage of production or service delivery.
And there you have it, a compendium of the most common mortgage acronyms you’re likely to encounter. These will be part of your journey toward homeownership, and now that you know their secrets, you’re well-equipped to face any challenges ahead. Should you need more guidance, just consult with us at Endeavour Magic Mortgages—your trusted partners in turning dreams into deeds.
