Mortgage acronyms terms, explained

Mortgage acronym cheat sheet

Here’s a quick reference list of the key mortgage acronyms covered in this guide:

• AIP/DIP – Agreement/Decision in Principle
• APR – Annual Percentage Rate
• BBR – Bank of England Base Rate
• BTL – Buy to Let
• CCJ – County Court Judgment
• CI/CIC – Critical Illness Cover
• DTI – Debt to Income
• ERC – Early Repayment Charge
• ESIS – European Standardised Information Sheet
• LTV – Loan to Value
• RIO – Retirement Interest Only mortgage
• RTB – Right to Buy
• SVR – Standard Variable Rate

Mortgage acronyms might seem overwhelming at first, but once you know what they mean, you’ll be in a much stronger position to compare deals and ask the right questions. And if you’re ever unsure, a mortgage broker can guide you through the jargon and find the best option for your circumstances.

Mortgage acronyms and abbreviations

AIP (Agreement in Principle)

You’ll often hear of the abbreviation ‘AIP’, meaning Agreement in Principle. It’s the same thing as a Decision in Principle and both terms are used interchangeably.

Think of it as a pre-approval: it doesn’t guarantee you a mortgage, but it’s an important step on your journey to buying a home. 

Keep reading: Agreement In Principle: What can go wrong?

APR (Annual Percentage Rate)

Wondering what APR means on a mortgage? It stands for Annual Percentage Rate. Unlike the interest rate you see advertised, the APR gives you the true cost of a mortgage because it includes:

• Your initial interest rate
• The lender’s fees (like arrangement fees)
• Your follow-on rate (usually the SVR you’ll move onto when the deal ends)

That’s why the APR is usually higher than the simple interest rate shown in headlines. Comparing APRs across different deals gives you a more accurate picture of which mortgage will actually be cheapest over time.

BBR (Bank of England Base Rate)

The UK’s base rate of interest, set by the Bank of England. Many tracker mortgages are linked to the BBR, meaning your payments go up or down depending on rate changes.

BTL (Buy to Let)

A Buy to Let mortgage is a type of mortgage for landlords buying a property they plan to rent out, rather than a residential mortgage which is better suited if you’re buying a home to live in yourself. 

You might like: Should I rent out my first home?

CCJ (County Court Judgment)

A legal order that appears on your credit record if you’ve failed to repay a debt. You’ll usually find it harder to get a mortgage with a CCJ, but that doesn’t mean it’s impossible. To boost your chances, speak to a mortgage broker who specialises in bad credit mortgages. 

Read more: What is adverse credit and how does it impact getting a mortgage?

CI or CIC (Critical Illness Cover)

An insurance policy that pays off your mortgage if you’re diagnosed with a serious illness, like cancer or heart disease.

Did you know? Tembo advises on Life Insurance, Income Protection and Critical Illness.

DIP (Decision in Principle)

The DIP abbreviation stands for Decision in Principle. It’s also sometimes called an Agreement in Principle (AIP).

A DIP is a statement from a lender confirming how much they’re likely to lend you, based on your income and a credit check. It usually lasts between 30–90 days. Be careful about applying for multiple DIPs with different lenders, as too many checks can make you look risky to future lenders.

DTI (Debt to Income)

The amount of your monthly debt repayments compared to your income. Lenders use this to check whether you can realistically afford your mortgage.

ESIS (European Standardised Information Sheet)

If you use a mortgage broker, they’ll give you an ESIS at the start of the mortgage application process. This is basically a document breaking down everything you need to know about the mortgage deal you’re applying for, covering everything from your interest rate to any early repayment charges. 

ERC (Early Repayment Charge)

A penalty fee you’ll pay if you leave a mortgage deal before the end of the term. This is usually around 1–3% of the remaining loan, which could cost you thousands.

LTV (Loan to Value)

No, it’s not the name of Elon Musk’s latest child. Loan to Value (LTV) is actually a percentage showing how much of the property’s value you’re borrowing compared to how much deposit you’ve put in. For example, a £250,000 mortgage on a £300,000 property equals an 83% LTV. 

The lower your LTV, the lower the risk for lenders — and the cheaper your interest rate is likely to be.

To see what interest rates you could get with different LTVs, check out our Interest Rate Tracker.

RIO (Retirement Interest Only)

Retirement Interest Only mortgages are designed for people over 55 who want to release equity in their home. If you take out an RIO mortgage, you’ll pay interest every month but you won’t repay the loan itself until the property is sold, you move into long-term care, or you pass away.

The equity can be used for all sorts of reasons, like funding retirement plans or helping friends or family get on the ladder. With a Deposit Boost, for example, it’s possible to release equity from one property and use it as the deposit on another. This can be ideal for first-time buyers who are struggling to save a deposit of their own but have a homeowning family member who’s managed to build up substantial equity in their home over the years. 

You might also like: How to reduce your inheritance tax liability

RTB (Right to Buy)

The Right to Buy scheme lets eligible council tenants buy their home at a discount. To be eligible, the property must be self contained, your only or main home, and you must be a secure tenant. You’ll also need to have had a public sector landlord for three years.

SVR (Standard Variable Rate)

The interest rate you’ll automatically move onto when your fixed or tracker mortgage deal ends, unless you remortgage. SVRs are usually higher than fixed rates, which is why it’s a good idea to start comparing mortgage deals around 3 to 6 months before your fixed term ends. 

Learn more: What to do if you can’t afford to remortgage