Mortgage acronyms terms, explained
Don’t know your SVRs from your APRs? Think a DIP sounds like it would be nice with chips? Find out what the common mortgage terms mean here in our mortgage acronym cheat sheet.
We’ve compiled a jargon-busting list of terms you’re likely to come across when applying for a mortgage in one mortgage acronym cheat sheet. So you can confidently know your AIPs from the APRs.
What does LTV mean?
LTV stands for Loan To Value. It's a calculation used by mortgage lenders to work out how high the level of your mortgage debt is compared to the value of your property, expressed as a percentage.
It’s easy to work out. If you’re applying for a mortgage of £250,000 and the home you’re buying costs £300,000, you divide 250,000 by 300,000 to get a loan to value of 83%. With this loan to value you would be eligible for interest rates in a lender’s 85% range, not 80% range.
The lower your loan to value, the less risk you are to the lender, so the cheaper your interest rate.
To see what interest rates you could get with different LTVs, check out our Interest Rate Tracker.
Do say: "I reduced my LTV by increasing the size of my deposit, unlocking lower interest rates."
Don't say: "LTV is the name of Elon Musk's first child."
What does AIP or DIP mean?
AIP stands for an Agreement in Principle. Also known as a Decision in Principle (DIP), this is a certificate or statement from your mortgage lender that gives an estimate of the maximum loan amount they are prepared to lend to you after carrying out a credit check and asking you some basic questions like how much you earn.
An Agreement in Principle is valid for between 30 and 90 days and qualifies you as a serious buyer, which comes in handy when you start viewing houses. An estate agent will often ask to see your Agreement in Principle or a Decision in Principle before letting you make an offer on a property.
An Agreement in Principle shows up on your credit file, so don’t get multiple AIPs from different lenders, as this can makes you seem desperate for a mortgage which could scare lenders off.
Do say: "I'll need a DIP to pass on to my estate agent before making an offer on my first property."
What does DTI mean?
DTI stands for Debt To Income. This is the amount of your total debts (including a mortgage) in relation to your income. DTI is used by mortgage lenders to work out if you can afford a loan as part of their qualification process.
Do say: "I need a good DTI to get a mortgage"
What does APR mean?
APR stands for Annual Percentage Rate. APR is tells you what the total cost of a mortgage is, not the interest rate you're charged each month. On top of the initial interest rate it includes your follow-on rate or SVR and the fees charged by your lender when you take out the mortgage deal and pay it back.
Do say: "Can you show me where I can see the APR for this mortgage?"
Don't say: "I learnt how to perform APR in the Scouts."
What does SVR mean?
SVR stands for Standard Variable Rate, but it's also known as a follow-on rate. The Standard Variable Rate is the default interest rate your bank or building society will put you on when your mortgage deal ends. If you don’t remortgage to a new mortgage deal when your current one expires, your monthly payment will jump up.
Do say: "If you're reaching the end of your fixed rate, beware of falling onto the SVR."
What does ERC mean?
ERC stands for an Early Repayment Charge. If you leave your mortgage deal before it ends, you’ll be charged an early repayment charge of between 1% and 3%.
Timing is everything here - ERCs can cost your dearly. Ask your mortgage broker for help to make sure you don't get caught out here.
What does CCJ mean?
CCJ stands for a County Court Judgement. This is a court order registered against you because you have failed to repay a debt you owe.
A County Court Judgement doesn’t come out of the blue. You’ll have missed lots of payments and received a letter from the county court ordering you to pay your debt before a CCJ is registered on your credit file. Unless you pay your debt within 30 days of receiving the County Court Judgement it stays on your credit report for six years raising a red flag to mortgage lenders that you are a financial risk.
Do say: "CCJ's can happen to anyone. Boris Johnson got one last week!"
What does BTL mean?
Do say: "Falling buy-to-let rates are making property a tempting investment."
Don't say: "BTL is the only thing I miss since going vegan."
You might like: Should I rent out my first home?
What does RIO mean?
ROI stands for Retirement Interest Only mortgage. This type of mortgage has been designed to help homeowners aged 55 and over unlock some of the equity they have built up. The equity can be used for all sorts of reasons, like funding retirement plans or gifting it to family or friends to get them on the ladder too with a gifted Deposit Boost.
A Deposit Boost can help someone close to you who has little or no deposit of their own begin their homeownership journey with an affordable monthly mortgage payment.
Retirement Interest Only mortgages are only repaid if you die, move into long-term care or sell your home. Borrowers only have to pay the interest on the loan, so the monthly mortgage payment is affordable for them too.
Do say: "RIO mortgages are a popular alternative to equity release."
Learn more: What is equity release?
You might also like: How to reduce your inheritance tax liability
What does RTB mean?
RTB stands for Right to Buy. This is when you want to buy a local authority or council property that you currently rent. Right to Buy was introduced by Margaret Thatcher and entitles social housing tenants to a discount if they want to buy their home. But to have the Right to Buy, you must have lived in the property for at least three years.
Do say: "Margaret Thatcher introduced RTB in the 80s, and by 1995 over 2.1million council homes had been sold."
What does CI or CIC mean?
CI or CIC stands for Critical Illness Cover. It's a type of insurance you can buy to pay off your mortgage if you are diagnosed with a critical illness such as cancer. The principle is the same as life assurance which, if bought, pays out a lump sum on your death to repay the entire mortgage leaving your family financially secured. Critical Illness Cover pays out on diagnosis, so you can begin treatment without any financial burden. If you survive the illness, you’ll be mortgage free.
Do say: "In the context of the pandemic, CIC can be more important than ever for homebuyers."
Don't say: "A CIC is a medieval wood carving tool."
Did you know? Tembo advises on Life Insurance, Income Protection and Critical Illness.
What does BBR mean?
BBR stands for the Bank of England Base Rate. This interest rate is set by the UK’s central bank. Lots of mortgage deals are linked to the Bank of England Base Rate. These are known as tracker mortgages or base rate tracker mortgages. For example, if you have a mortgage that tracks the Bank of England Base Rate by 1%, that means you pay whatever the base rate is plus 1%.
Do say: "The BBR remains at a historic low after its Monetary Policy Committee voted unanimously to hold interest rates at 0.1 percent."
Don't say: "Just popping out to get some milk. BBR."
See what the current base rate is with our Base Rate Tracker.
What does ESIS mean?
ESIS stands for a European Standardised Information Sheet. This is a document that replaced the Key Facts Illustration in 2019 and is basically a complete A to Z of the mortgage deal you are applying for. It breaks down everything from your interest rate to early repayment charges as well as each fee you will pay over the life of the mortgage. You’ll be given one by your mortgage broker at the start of the mortgage process.
Do say: "An ESIS gives you all the detail you need on your mortgage, including monthly repayments and any fees you might be charged upfront."
Don't say: "Bless you!"
There we have it. Mortgage-land's most touted acronyms, explained!
Need help understanding mortgages?
At Tembo, we specialise in helping first time buyers, movers and remortgages boost their mortgage affordability so they can get on the ladder sooner or get access to better mortgage deals. Your dedicated advisor from our award-winning team is on hand through every step of your journey to answer your questions and make everything run smoothly.