26 November 2014

Mortgage glossary and jargon buster

For many people, mortgages and mortgage terminology can be confusing so we’ve produced a glossary of some of the most common mortgage-related words, terms and phrases to help you understand the jargon.

Types of mortgage


With a fixed rate mortgage, your repayments usually remain the same throughout a specified period, for example five years. Fixed rates give you the security of knowing exactly how much you’ll have to pay each month. At the end of the deal, the interest rate usually reverts to the lender’s standard variable rate (SVR).

Variable rate

With a variable rate mortgage, your monthly payments can go up or down, depending on the interest rate set by your lender. You might start off with a low rate but there’s no guarantee that this won’t go up at a later date.


With a tracker mortgage, the interest rate you pay tracks another rate (usually the Bank of England base rate) up and down by an agreed percentage. Your payments will go up and down in line with the rate changes, unless the base rate goes below the tracker floor. The tracker floor is the lowest rate that will be tracked. If the rate being tracked drops below this the interest rate will not follow it further.


A capped mortgage guarantees your interest rate won’t go beyond an upper fixed interest rate – a limit set by the lender. Like tracker rate mortgages, your monthly payments do change depending on the rate that is being tracked (usually the Bank of England base rate), but with a capped mortgage your interest rate will never go beyond the set limit, even if the rate being tracked goes higher than it.


With a discount mortgage, you’ll get a discount on the lender’s standard variable rate (SVR) for a set period of time, typically two or three years.


This gives you an extra lump sum of cash at the beginning of your mortgage, to spend on things like decorating or refurbishing your home. These mortgages often come with a higher interest rate.


This links your savings to your mortgage debt. Instead of earning interest on your savings, that money is balanced against your mortgage so you pay less interest on it. For example, if you have a £100,000 mortgage and £20,000 in savings, you would only be charged interest on £80,000 of the mortgage. This can save you a significant amount in interest and clear your debt more quickly.

Mortgage terminology explained

Decision In Principle (DIP)

A lender may give you a certificate showing you the amount they are willing to lend you. This is not a guarantee but it can be helpful when negotiating with sellers and estate agents.

Collar Rate

Your monthly repayments can’t fall below a certain level. Collar rates are often put on tracker mortgages.

Early Repayment Charge (ERC)

This is an amount of money (a charge) you may have to pay a lender if you either move your mortgage to another lender during the special deal period or overpay by more than you are allowed within the agreed period


This is how much of a property you actually own. If, say, you have a £90,000 mortgage on a property worth £100,000, your equity is £10,000 or 10%.

Loan-To-Value (LTV)

This refers to how big your mortgage is in relation to how much your property is worth, expressed as a percentage. If you have a £150,000 mortgage on a house that’s worth £200,000, you have an LTV of 75%.


This is a feature of a mortgage that allows it to be transferred between properties when you move house.

Redemption statement

This shows you what you would need to pay, including all fees and interest owing, to pay off your mortgage.


Remortgaging is when you switch your current mortgage to a new lender without moving home.

Check out our mortgage guides for more help or visit our mortgages section for more information.


Most buy to let and commercial mortgages are not regulated by the Financial Conduct Authority or the Prudential Regulation Authority.

The content displayed on our recent news and articles page is for information purposes only, and is accurate at the time of publication. The information will not be maintained, and so we cannot guarantee that at any given time the information will be up to date or complete. Please verify any information you take before relying on it.

Nationwide is not responsible for the content or availability of external websites. Nationwide does not make any recommendation or endorse any advertising, products, services or other content on such external websites. Views expressed on third party websites are those of the public and unless specifically stated, are not those of Nationwide.

Most popular

The Budget 2017


Chancellor Philip Hammond presented his first – and last – Spring Budget to Parliament yesterday. Here’s your easy guide to the changes.

You may also be interested in...

Our helpful guides

We've created a range of helpful guides to help you make better financial decisions regardless of your circumstances. Find out more about owning property, growing wealth and planning for life events.

Our products

Whether you are after a current account, a savings account or even looking for a mortgage, Nationwide has a range of great products that could help you, no matter the situation.