Glossary of Mortgage Terms
Annual Percentage Rate of Charge (APRC)
This shows, as a percentage, the true annual cost of a mortgage. It includes all charges (such as product fees and other costs) and is calculated as if you kept your mortgage for the full term without any changes.
Base Rate
This is the interest rate that the Bank charge lenders to borrow money. This rate will influence how much lenders then charge as mortgage rates. The most commonly used is the Bank of England Base Rate and is what the majority of lenders will refer to when they use the term Base Rate.
Buy to Let (BTL)
This is a mortgage that is designed specifically for an investment property that is being used to rent to tenants.
Early Repayment Charge (ERC)
A fee a lender may charge you to pay off your mortgage early whilst tied to one of their products.
Freehold
This is a type of property ownership whereby you own the property as well as the land it is built on. This is most commonly found when purchasing a house as opposed to a flat.
Leasehold
The term used to refer to the ownership type whereby a property is owned for a certain number of years but the land it stands on remains under the ownership of the 'freeholder'. If a lease is not extended and comes to an end the property is then reclaimed by the freeholder. A lease is most commonly found when purchasing a Flat.
Let to Buy (LTB)
Much like a Buy-to-Let mortgage, the property will be used to rent out. The difference is that this is for a property that you already own on a Residential basis, typically looking to let it out in order to buy a new Residential property.
Loan to Value (LTV)
In simple terms this is the amount of debt on a property relative to its value, expressed as a percentage. The lower the LTV, the less risk involved from a lender's perspective and therefore usually more attractive rates are available. If the LTV is above 100% that is what is referred to as Negative Equity as you would now owe more than you own.
Share of Freehold
This is another type of property ownership found when purchasing a flat. With this type of ownership you will have a shared ownership of the freehold title relating to the building, as well as a leasehold interest in the individual flat. The freehold title often is registered in the name of a company in which the individual flat owners will be shareholders.
Stamp Duty Land Tax (SDLT)
A tax imposed by the UK government on the purchase of houses, flats and other land and buildings with values over a certain level.
Standard Variable Rate (SVR)
This is the interest rate a lender will charge if you are not on one of their products. This rate is set by the lender although is often linked to the Bank of England Base Rate.
Tracker Rate Mortgage
Unlike a fixed rate mortgage where the interest rate remains at a fixed level for a set period, a tracker rate mortgage will usually have a fixed interest rate plus a base rate. This means the overall interest rate could go up or down depending on the base rate.