The A-Z, well V, of mortgages explained.

Agreement in principle

A document from a mortgage lender with an estimate of how much money you may be able to borrow. You can use this to prove to a seller that you can afford to buy their property.

Annual percentage rate (APR)

The overall cost of a mortgage, including the interest and fees.  It assumes you have the mortgage for the whole term.

Arrangement fee

A set-up fee for your mortgage.

Base rate

The interest rate the Bank of England charges other banks and lenders when they borrow money.

Buildings insurance

Covers you for damage to the structure of your home – you’ll need to have a policy in place when you take out a mortgage.

Capital

The amount of money you borrow to buy a property.

Conveyancing

The legal process you go through when you buy or sell a property done by a licensed conveyancer or solicitor.

Deposit

The amount you need to put down in cash towards the cost of a property.

Equity

The amount of the property that you own outright – your deposit as well as the capital you’ve paid off on your mortgage.

Fixed-rate mortgage

The interest rate on the mortgage stays the same for the initial period of the deal. Your rate won’t change with the Bank of England base rate during this time.

Flexible mortgage

Allows you to underpay, overpay or take a payment holiday from your mortgage – they are usually more expensive than conventional mortgages.

Freehold

You own the building and the land it stands on.

Gazumping

When an offer has been accepted on a property but a different buyer makes a higher offer, which the seller accepts.

Guarantor

A third party who agrees to meet the monthly mortgage repayments if you can’t.

Help-to-Buy

The government has introduced various Help to Buy schemes to make buying a home easier, including equity loans, mortgage guarantees, ISAs and specific schemes for Scotland and Wales.

Interest-only mortgage

You only pay the interest on your mortgage each month without repaying the capital.

Joint mortgage

A mortgage taken out by two or more people.

Land Registry

The official body responsible for maintaining details of property ownership.

Leasehold

You own the building but not the land it stands on, and only for a set period.

Loan-to-value

The size of your mortgage as a percentage of the property value.

Porting

Allows you to transfer your borrowing from one property to another if you move, without paying arrangement fees.

Repayment mortgage

You pay off interest and part of your capital each month.

Stamp duty

You’ll need to pay stamp duty land tax when you buy a property over a certain price.

Standard variable rate (SVR)

The default interest rate your lender will charge after your initial mortgage period ends.

Tracker mortgage

The interest rate on your mortgage tracks the Bank of England base rate at a set margin above or below it.

Valuation survey

Lenders will carry one of these out to check whether the property is worth around the amount you’re paying for it.