Understanding mortgage terminology is crucial for both residential and investment property purchases.

This guide begins with key Buy to Let terms and then covers other important mortgage concepts, providing you with a comprehensive overview of the property finance landscape.

Buy to Let Terms

1. Buy-To-Let Mortgage

What it means: A loan to purchase or refinance a residential property intended to let to tenants.

Why it matters: Has different criteria and terms compared to residential mortgages.

2. Yield

What it means: The rental income from a property calculated as a percentage of its value.

Why it matters: A key measure of the return on a buy-to-let investment.

3. Assured Shorthold Tenancy (AST)

What it means: A tenancy agreement giving the landlord a guaranteed right to repossess the property.

Why it matters: The standard type of tenancy for most residential lettings.

4. House in Multiple Occupation (HMO)

What it means: A property rented to at least 3 people who are not from one household but share facilities.

Why it matters: Subject to different regulations and potentially higher returns.

5. Gearing

What it means: The overall equity levels within a portfolio of properties.

Why it matters: Indicates the level of debt against the portfolio value, affecting risk and potential returns.

6. Company Let

What it means: A property let to a company rather than individual tenants.

Why it matters: Can offer different tax implications and potentially more secure tenancies.

7. Rental Income

What it means: The amount of money collected by a landlord from tenants for using a property.

Why it matters: Crucial for determining the viability and profitability of a buy-to-let investment.

8. Lessee

What it means: The tenant in a leasehold arrangement.

Why it matters: Important to understand roles and responsibilities in leasehold properties.

9. Lessor

What it means: The landlord in a leasehold arrangement.

Why it matters: Clarifies who owns the property and is responsible for certain aspects of its management.

10. Limited Company

What it means: An organisation set up to run your business, separate from personal finances.

Why it matters: Some landlords use limited companies for buy-to-let investments for tax efficiency.

Pre-Application Terms

11. Decision in Principle

What it means: A document from your lender confirming that you can borrow a certain amount.

Why it matters: Provides proof of your buying power to sellers and estate agents.

12. Credit Scoring

What it means: Lenders analyze your credit report to assess your likelihood of repaying borrowed money.

Why it matters: Impacts your ability to secure a mortgage and the interest rates offered.

13. Intermediary

What it means: Also known as a broker, an advisor who can help you arrange a mortgage.

Why it matters: Can provide expertise and access to a wider range of mortgage products.

14. First Time Buyer

What it means: Someone who has not previously owned a property or doesn't currently own one.

Why it matters: May qualify for specific mortgage products or government schemes.

Application Terms

15. Affordability Check

What it means: An assessment to determine if your mortgage would be affordable based on your income and expenses.

Why it matters: Ensures you can comfortably manage your mortgage payments.

16. Arrangement Fee

What it means: A fee charged by your lender for setting up your mortgage.

Why it matters: Impacts the overall cost of your mortgage.

17. Deposit

What it means: The amount you need to pay towards the total purchase price of the property.

Why it matters: Affects your Loan to Value ratio and available mortgage products.

18. Income Verification

What it means: Providing proof of your income to the lender.

Why it matters: Lenders use this to assess your ability to repay the mortgage.

19. P60

What it means: An annual summary of all your payslips.

Why it matters: Often used as proof of income for employed individuals.

20. SA302

What it means: A form showing your proof of earnings issued by HMRC.

Why it matters: Often required for self-employed mortgage applicants.

Property Valuation Terms

21. Valuation Survey

What it means: A check carried out by the lender to assess the property's value.

Why it matters: Protects both you and the lender from overpaying.

22. Loan to Value (LTV)

What it means: The size of your mortgage as a percentage of the property's value.

Why it matters: Affects interest rates and available products.

23. Buildings Insurance

What it means: Insurance that covers damage to the structure of your property.

Why it matters: Usually required by lenders to protect their investment.

24. Freehold

What it means: You own the building and the land it stands on.

Why it matters: Gives you full ownership and control over the property.

25. Leasehold

What it means: You own the property but not the land it's built on for a specific number of years.

Why it matters: May affect mortgage eligibility and property value.

Mortgage Offer Terms

26. Fixed Rate Mortgage

What it means: A mortgage where the interest rate stays the same for a specific period.

Why it matters: Provides payment certainty for the fixed term.

27. Variable Rate Mortgage

What it means: The mortgage interest rate may move in line with market conditions.

Why it matters: Payments could go up or down, offering potential savings but also risk.

28. Tracker Mortgage

What it means: The interest rate tracks the Bank of England base rate at a set margin.

Why it matters: Rate changes are transparent and linked to a specific benchmark.

29. Discounted Rate Mortgage

What it means: A mortgage where your interest rate is reduced by a set percentage for a period.

Why it matters: Can offer lower initial payments but may change over time.

30. Interest Only Mortgage

What it means: You only pay the interest each month, not reducing the capital owed.

Why it matters: Lower monthly payments but requires a separate repayment plan.

31. Repayment Mortgage

What it means: Monthly payments cover both interest and capital, reducing the balance over time.

Why it matters: Ensures the loan is fully repaid by the end of the term.

32. Annual Percentage Rate of Charge (APRC)

What it means: The total cost of the loan, including fees and charges, expressed as an annual percentage.

Why it matters: Helps compare the true cost of different mortgage products.

33. Early Repayment Charge

What it means: A fee for paying back the loan early or overpaying beyond allowed limits.

Why it matters: Can impact the cost of switching mortgages or making large overpayments.

Completion Terms

34. Conveyancing

What it means: The legal process when buying or selling a property.

Why it matters: Ensures proper legal transfer of ownership.

35. Stamp Duty

What it means: A tax paid when buying a property over a certain price.

Why it matters: Can be a significant additional cost when purchasing.

36. Exchange of Contracts

What it means: The point at which the sale becomes legally binding.

Why it matters: Marks the commitment to purchase and often requires a deposit.

37. Completion

What it means: The point at which money is transferred and you get the keys.

Why it matters: This is when you officially become the property owner.

38. Land Registry

What it means: The official body responsible for maintaining details of property ownership.

Why it matters: Ensures your ownership is officially recorded.

39. Title Deeds

What it means: The legal documents that prove ownership of a property.

Why it matters: Important for establishing clear ownership and any restrictions on the property.

Post-Completion Terms

40. Overpayment

What it means: Paying extra, over and above your monthly mortgage payment.

Why it matters: Can help pay off your mortgage faster and save on interest.

41. Underpayment

What it means: A reduction in mortgage repayments agreed with your lender.

Why it matters: Can provide temporary financial relief but extends the loan term.

42. Remortgage

What it means: Changing your mortgage without moving home, often to a new lender.

Why it matters: Can potentially save money if you find a better deal.

43. Additional Borrowing

What it means: Taking on more borrowing from your existing mortgage lender.

Why it matters: Can be used for home improvements or other large expenses.

44. Negative Equity

What it means: When you owe more on your mortgage than your home is worth.

Why it matters: Can make it difficult to remortgage or move home.

45. Equity

What it means: The difference between your home's value and the amount owed on the mortgage.

Why it matters: Represents your stake in the property and can be used for borrowing.

Special Circumstances

46. Consent To Let

What it means: Permission from your lender to rent out your home for a short period.

Why it matters: Required if you need to let your property on a residential mortgage.

47. Let To Buy

What it means: A mortgage that allows you to buy a new home while letting out your current residence.

Why it matters: Enables moving to a new property without selling your current home.

48. Guarantor

What it means: A third party who agrees to meet your mortgage payments if you're unable to.

Why it matters: Can help secure a mortgage or better rates for some borrowers.

49. County Court Judgment (CCJ)

What it means: A judgment made against you for non-payment of debt.

Why it matters: Can make it harder to obtain a mortgage.

50. Individual Voluntary Arrangement (IVA)

What it means: An agreement between a debtor and creditors to pay off debts over time.

Why it matters: Can affect your ability to get a mortgage.

Understanding these 50 key terms is just the beginning of your property finance journey. Whether you're considering a Buy to Let investment or a residential mortgage, the complexities of the market can be challenging to navigate alone.

That's where GB Bank comes in. Our expert Relationship Managers are here to help you take the next steps with confidence. They can:

1. Clarify any terms or concepts you're unsure about

2. Provide personalized advice tailored to your unique situation

3. Guide you through the application process

4. Offer innovative financial solutions that align with your property goals

Don't let the complexity of mortgage terminology hold you back from achieving your property ambitions.

GB Bank is your ideal partner, offering substantial funding capabilities for your property investments.

Rapid turnaround times to seize emerging opportunities, dedicated relationship managers to navigate the tech-savvy property management space, and flexible funding solutions that cater to a diverse range of investment locations and regulatory requirements.

Note:

Potential investors should carefully consider their financial situation, risk tolerance, and long-term objectives before making any property investment decisions.

At GB Bank, we offer various financing options for property investments. However, we do not provide investment advice. We strongly recommend seeking independent financial and legal advice before making any property investment decisions.

If you're considering property investment and would like to discuss financing options, please contact GB Bank. Our Relationship Managers can provide information about our products and services.

Disclaimer: This blog is for informational purposes only and does not constitute investment advice. Property values can go down as well as up, and past performance is not indicative of future results.

‍