Finance & Mortgage Glossary
Plain-English definitions of the most searched-for terms, with quick links to calculators and guides.
Amortisation Loans
Process of paying off a loan with fixed payments that cover interest first and gradually more principal. See the Loan Repayment Calculator and guide.
APR — Annual Percentage Rate Borrowing
Yearly cost of credit including interest and compulsory fees, used to compare loans and credit cards. For compounding-true rates, see APR vs EAR or try the APR ↔ EAR converter.
APRC — Annual Percentage Rate of Charge Mortgages
Standardised “whole-of-term” cost measure for mortgages. Includes interest and most fees, assuming you keep the mortgage for the illustrative term.
AER / EAR — Effective Annual (Equivalent) Rate Savings
True yearly rate including compounding. Convert using the APR ↔ EAR calculator.
Base Rate (BoE) Rates
The Bank of England’s policy rate that influences mortgages, savings, and loans. Trackers often quote “Base + margin”.
Bridge Loan Property
Short-term finance used to “bridge” a timing gap, typically when buying before selling.
Charge (Legal Charge) Property
The lender’s legal right over a property until the mortgage is repaid.
Compound Interest Savings
“Interest on interest.” See guide and calculator.
Deposit (Mortgage) Mortgages
The cash you put in upfront, e.g., 10% deposit → 90% LTV mortgage.
DSR — Debt Service Ratio Affordability
Share of take-home pay that can go to housing costs in lender affordability checks. Used in our Affordability Calculator.
DTI — Debt-to-Income Affordability
Total monthly debt payments divided by gross or net income; a risk measure for lenders.
Equity Property
Property value minus mortgage balance. Grows as you repay and/or prices rise.
Fixed Rate Mortgages
Interest rate locked for a set period (e.g., 2 or 5 years). Budget certainty; early repayment charges may apply.
Fee-Free vs Fee Mortgage Mortgages
Compare a lower rate with a product fee to a higher rate with no fee using our calculator.
Gross / Net Pay & VAT
Gross is before deductions; net is after. For VAT, net is before VAT, gross includes VAT — try the VAT calculator.
Help to Buy / LISA Savings
Government schemes to assist first-time buyers. See ISA Allowances.
Interest-Only Mortgage Mortgages
Monthly payments cover interest only; the capital is due at the end. Requires a credible repayment plan.
Index-Linked Investing
Payments or values adjusted with an inflation index (e.g., CPI).
LTV — Loan-to-Value Mortgages
Loan size ÷ property value. Lower LTVs usually get better rates. Calculated on price and deposit.
LTI — Loan-to-Income Affordability
Mortgage size ÷ household income (e.g., 4.5×). Many lenders cap at ~4.0–4.5×.
Mortgage in Principle (AIP) Mortgages
A lender’s initial view of what you may borrow, subject to full checks and valuation.
Margin (Tracker) Rates
The fixed add-on to the base rate in a tracker deal (e.g., “Base + 1.29%”).
Overpayment Mortgages
Paying extra above the required amount to cut interest and term. Many fixes allow up to 10%/year without charge.
Pension (Salary Sacrifice) Pay
Contributions taken before tax and NI, boosting take-home vs post-tax. See take-home guide.
PP — Percentage Points Maths
Difference between two rates (e.g., 3% → 5% = 2 pp). Not the same as % change.
Remortgage Mortgages
Switching to a new deal, often when a fixed term ends, to avoid the lender’s SVR. Consider fees vs rate.
SDLT / LBTT / LTT Property Tax
Stamp duty land taxes for England & NI (SDLT), Scotland (LBTT), and Wales (LTT). Try the Stamp Duty Calculator.
SVR — Standard Variable Rate Mortgages
The lender’s default rate you move to after a fixed/intro period — usually higher than deals on the market.
Term (Mortgage) Mortgages
Length of the loan (e.g., 25 years). Longer = lower payments but more interest overall.
Tax Code (1257L, BR, D0, D1) Pay
Code used by HMRC to size your allowances in PAYE. See guide.
Underwriting Lending
Lender’s assessment of risk: income, credit file, debts, property, and affordability.
Valuation (Mortgage) Property
Lender’s check of a property’s value and saleability; not a full survey.
VAT — Value Added Tax Business
UK sales tax at 20% (standard), 5% (reduced), or 0% (zero-rated). Add/remove quickly with the VAT calculator.
W1/M1 (Week 1 / Month 1) Pay
“Emergency” tax basis that ignores year-to-date smoothing; can cause short-term over/under deductions.
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