Mortgage glossary: plain-English definitions

Last reviewed: 30 June 2026

This is a plain-English glossary of the UK mortgage terms people meet most: SA302, SPV, ICR, ERC, RIO, LTV, AIP, product transfer, day rate, retained profit and more. Each is defined in one or two sentences, with a link to the fuller guide where there is one. Jargon hides simple ideas, and this list translates them.

Agreement in principle (AIP / DIP)

An early indication from a lender of roughly how much it might lend, based on a quick check. Also called a decision in principle or mortgage in principle. Not a full offer. Read more about agreement in principle (aip / dip).

Affordability assessment

The lender's check that your income comfortably covers the mortgage payment, tested at a higher stressed interest rate, alongside your outgoings.

Day rate

A contractor's daily fee. Contractor-friendly lenders annualise it (day rate times days per week times weeks per year) to set income, rather than using accounts. Read more about day rate.

Early repayment charge (ERC)

A fee for leaving your mortgage deal before the fixed or discounted period ends, usually a percentage of the balance that often steps down each year. Read more about early repayment charge (erc).

Gifted deposit

Money given (usually by close family) for your deposit, confirmed by a gift letter as a genuine gift, not a loan, with no stake in the property. Read more about gifted deposit.

Guarantor

A family member who agrees to cover the mortgage if you cannot, backing it with their income, savings or property. Read more about guarantor.

Interest cover ratio (ICR)

The buy-to-let rental cover test: the rent must exceed the mortgage interest by a set percentage at a stressed rate for the lender to lend. Read more about interest cover ratio (icr).

JBSP (joint borrower sole proprietor)

A mortgage where extra people (often a parent) are jointly liable to boost borrowing, but only one person owns the home and is on the deeds. Read more about jbsp (joint borrower sole proprietor).

Loan-to-value (LTV)

The mortgage as a percentage of the property value. A 10% deposit is a 90% LTV mortgage. Lower LTV usually means a better rate. Read more about loan-to-value (ltv).

Procuration fee

The commission a lender pays a broker for introducing a completed mortgage. Paid by the lender, not added to your loan, and it does not change your rate. Read more about procuration fee.

Product transfer

Taking a new rate from your current lender at the end of a deal, usually with little or no re-underwriting. The alternative to remortgaging to a new lender. Read more about product transfer.

Remortgage

Moving your mortgage to a new lender, with a fresh application and affordability check, typically for a better rate or to release equity. Read more about remortgage.

Retained profit

Company profit left in the business rather than drawn as dividends. Some lenders use a director's share of it as income, which can sharply raise borrowing. Read more about retained profit.

RIO (retirement interest-only)

A mortgage for older borrowers where you pay only the interest each month, with the loan repaid when the home is sold, you move into care, or you die.

SA302

A document from HMRC summarising your income and tax for a tax year. With the tax-year overview, it is standard proof of income for self-employed applicants. Read more about sa302.

Shared ownership

Buying a share of a home (often 25% to 75%) with a mortgage and paying rent on the rest, with the option to buy more shares (staircasing) over time. Read more about shared ownership.

SPV (special purpose vehicle)

A limited company set up only to hold and let property. Buy-to-let lenders prefer a clean SPV with the right property SIC codes. Read more about spv (special purpose vehicle).

Standard variable rate (SVR)

The default rate your lender reverts you to when a deal ends. Set by the lender, usually well above deal rates, and changeable at any time. Read more about standard variable rate (svr).

Stress test

Checking you could still afford the mortgage if rates were higher than the pay rate. Used in both residential affordability and buy-to-let rental cover.

Swap rate

The market cost to a lender of fixing its funding for a set term. Fixed mortgage rates are priced off swaps, which is why a fix can differ from the base rate. Read more about swap rate.

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