Need to Know Mortgage Terminology

Posted by

 If you are a first time home buyer, you may be intimidated by all of the important information and terms concerning mortgages. Establishing a solid mortgage vocabulary is a crucial first step in the process of acquiring a mortgage loan. Having such a vocabulary allows the borrower to feel more comfortable communicating with brokers and lenders. We will endeavor to teach you some of the most important terms and phrases that you should know before applying for a mortgage.


APR – Annual Percentage Rate

The rate of interest charged by a bank over one year. This rate may also include other charges and fees.

The two main types of rates are:

  • Standard Variable Rate: A rate that can change over time, for example whenever a bank chooses to change their rates.
  • Fixed Interest Rate: An interest rate that does not change over the entire course of a specified amount of time on a loan.

Approval in Principle

An official approval for a specific amount on a mortgage loan. Acquiring Approval in Principle is an important step in the process of buying a new home as it allows borrowers to begin looking for a new home with an understanding of how much they are going to be able to borrow.



An advisor on mortgages available through lenders independent of banks 



The total amount borrowed with costs and interest excluded, can also be referred to as Principal.

Credit Score

A three digit number calculated based off of an individual’s credit history and ability to keep up with payments. Used by lenders to determine the creditworthiness of prospective borrowers.


Deferred Start

Sometimes borrowers might choose to delay their first payment on a mortgage for up to 6 months. This is known as a Deferred Start Mortgage.


The initial amount paid to a lender towards the cost of the new home. This amount is typically the difference between the cost of the property and the amount borrowed.



The difference between the value of the home and what is still owed on a mortgage.


Fixed Interest Rate

See definition for “APR – Annual Percentage Rate” above.


The indefinite ownership of both the property and land that is being purchased. Usually used to refer to land on which a property is built, which may have separate ownership from the actual property.


Home Insurance Protection

Insurance against any kind of serious damage to your home. It is important to acquire this type of insurance before beginning a mortgage.



The right to occupy land and buildings for a period of time. Usually used to refer to land on which a property is built, which may have separate ownership from the actual property.


Maturity Date

The date on which the mortgage loan must be fully repaid or the agreement can be renewed.


A payment holiday allowed on a mortgage which grants the borrower the opportunity to take a break from repayments, or just pay interest.


Principal private residence

The place where you live.

Payment Protection Insurance

Insurance coverage that allows you to cover mortgage repayments for up to 12 months in case of unemployment, illness, and accidents.


Standard Variable Rate

See definition for “APR – Annual Percentage Rate” above.



A report setting the market value of a property before mortgage is finalized.