CeMAP glossary
66 key terms in plain English, accurate for the 2025/26 syllabus.
A
APRC (annual percentage rate of charge)
The total cost of a mortgage expressed as a yearly percentage, taking into account the interest rate plus most fees and charges over the full term. Lenders must show the APRC in the mortgage illustration so borrowers can compare deals on a like-for-like basis. Because it assumes the borrower keeps the loan for the whole term, it can be less useful for people who expect to switch deals after an initial rate period, which is why a second APRC based on the reversion rate is also shown.
Arrears
Missed payments that have fallen due on a mortgage or other credit agreement but have not been paid. Under MCOB rules a lender must treat customers in arrears fairly, tell them about sources of free debt advice, and consider possession only as a last resort. Arrears are recorded on the borrower's credit file and can make future borrowing harder or more expensive.
Assured shorthold tenancy (AST)
The most common form of residential tenancy in England and Wales, used by private landlords to let property to tenants. Buy-to-let lenders normally require the property to be let on an AST because it gives the landlord a clear route to recover possession, subject to the statutory notice and court process. The tenant's deposit must be protected in a government-approved tenancy deposit scheme.
B
Bank Rate
The official interest rate set by the Bank of England's Monetary Policy Committee, used as the main tool for keeping inflation at the 2% target. It is the rate the Bank pays on reserves held by commercial banks and it strongly influences the pricing of savings and mortgage products. Tracker mortgages move directly in line with Bank Rate, and lenders often adjust their standard variable rates when it changes.
Bridging loan
A short-term loan, typically running for a few months up to around a year, used to 'bridge' a gap in funding - for example buying a new home before selling the current one, or buying at auction. Interest rates and fees are much higher than for ordinary mortgages, and interest is often rolled up and paid at the end. The lender will always want a clear exit strategy, such as a sale or a remortgage, showing how the loan will be repaid.
Buildings insurance
Insurance covering the structure of a property - walls, roof, floors and permanent fixtures - against risks such as fire, flood, storm and subsidence. The sum insured should be the reinstatement value, meaning the full cost of rebuilding the property including demolition, site clearance and professional fees, which is not the same as its market value. Mortgage lenders require buildings insurance to be in place from exchange of contracts (in England and Wales) because the property is their security.
Buy-to-let mortgage
A mortgage taken out to purchase or remortgage a property that will be let to tenants rather than lived in by the borrower. Lending is assessed mainly on the expected rental income using an interest coverage ratio, alongside checks on the landlord's own finances. Most buy-to-let lending to professional landlords is not FCA-regulated, although consumer buy-to-let and lending to 'accidental landlords' is treated differently.
C
Capped rate
A variable-rate mortgage with an upper limit (the cap) beyond which the interest rate cannot rise during a set period. The borrower benefits if rates fall but has certainty that payments will never exceed the capped level. Some products also have a lower limit, called a collar or floor, below which the rate will not drop.
Cashback mortgage
A mortgage that pays the borrower a lump sum, either a fixed amount or a percentage of the loan, on completion. The cashback can help with moving costs, but these deals often carry a slightly higher interest rate or fees than equivalent products without cashback. If the borrower repays or switches early, the lender may claw back some or all of the cashback under the product terms.
Chain
A series of linked property transactions where each sale depends on another completing - for example a first-time buyer purchasing from a seller who is buying another home, and so on. Every link must be ready before contracts can be exchanged, so a problem anywhere in the chain can delay or collapse all the transactions. Chain-free buyers, such as first-time buyers and cash purchasers, are often more attractive to sellers.
Charge (legal charge)
The legal interest a lender takes over a property as security for a loan, registered against the title at HM Land Registry. It gives the lender the right to take possession and sell the property if the borrower fails to repay. A first charge ranks ahead of any later (second or subsequent) charges, so the first-charge lender is repaid first from sale proceeds.
Consumer buy-to-let
A buy-to-let mortgage taken out by someone who is not acting for business purposes - typically an 'accidental landlord' who lets out a home they previously lived in or inherited rather than one bought as an investment. These loans are regulated under the Mortgage Credit Directive Order 2015, so firms arranging or lending on them must be registered with the FCA and follow conduct standards similar to those for regulated mortgages. Ordinary investment buy-to-let for business purposes sits outside this regime.
Consumer Duty
An FCA regime, in force since July 2023, requiring firms to act to deliver good outcomes for retail customers. It sets a higher standard than simply treating customers fairly, with outcomes covering products and services, price and fair value, consumer understanding, and consumer support. Firms must be able to evidence that their products and communications actually deliver good outcomes, including for vulnerable customers.
Conveyancing
The legal process of transferring ownership of land or property from seller to buyer, carried out by a solicitor or licensed conveyancer. It includes checking the title, raising searches and enquiries, exchanging contracts, completing the purchase and registering the new owner (and any mortgage) at HM Land Registry. The conveyancer usually also acts for the lender to ensure its charge is properly secured.
County court judgment (CCJ)
A court order in England and Wales confirming that someone owes a debt they have failed to pay. A CCJ stays on the Register of Judgments and on credit files for six years unless it is paid in full within one month of the judgment, and it significantly damages the person's ability to get credit. Borrowers with CCJs may only be able to obtain a mortgage from specialist 'adverse credit' lenders, usually at higher rates.
Critical illness cover
Insurance that pays a tax-free lump sum if the policyholder is diagnosed with one of a list of specified serious conditions, such as cancer, heart attack or stroke, and survives any qualifying period. It is often sold alongside life cover on a mortgage so the loan can be cleared if serious illness strikes. It is not the same as income protection: it pays once, on diagnosis of a listed condition, rather than replacing ongoing income.
D
Decision in principle (DIP)
A lender's initial indication, based on basic information and usually a credit check, of how much it would be willing to lend to a borrower. Also called an agreement in principle or mortgage promise, it helps buyers show estate agents they are serious and can afford to proceed. It is not a binding offer - the full application, evidence of income and a valuation must still be completed before a formal mortgage offer is issued.
Decreasing term assurance
Life insurance where the sum assured reduces over the policy term, usually in line with the outstanding balance of a repayment mortgage. Because the cover shrinks, premiums are lower than for level term assurance. It is designed to repay the mortgage if the borrower dies during the term, and is sometimes called mortgage protection assurance.
Deposit
The part of a property's purchase price the buyer funds from their own money rather than the mortgage, expressed alongside the loan-to-value - for example a 10% deposit means borrowing at 90% LTV. A bigger deposit usually unlocks cheaper interest rates because the lender takes less risk. Separately, on exchange of contracts the buyer normally pays a contractual deposit (traditionally 10%) which can be forfeited if they fail to complete.
Discounted rate
A variable mortgage rate set at a fixed margin below the lender's standard variable rate for an introductory period - for example SVR minus 1.5% for two years. Because it tracks the SVR, the pay rate can rise or fall whenever the lender changes its SVR, which the lender can do at its own discretion. At the end of the discount period the borrower reverts to the full SVR unless they switch products.
E
Early repayment charge (ERC)
A fee a lender can charge if a borrower repays all or part of the mortgage, or leaves the deal, during a tie-in period - typically during a fixed or discounted rate. It is usually a percentage of the amount repaid, often stepping down each year of the deal. Most products allow limited penalty-free overpayments, commonly around 10% of the balance a year, before an ERC applies.
Equity
The part of a property's value the owner actually owns outright - the market value minus any mortgage or other loans secured on it. Equity grows as the mortgage is repaid or as the property's value rises. Homeowners can sometimes borrow against equity through a further advance, remortgage or second charge loan.
Equity release
Products that let older homeowners unlock cash from the value of their home without having to sell and move out. The two main types are lifetime mortgages, where a loan is secured on the home and usually repaid from the eventual sale, and home reversion plans, where the provider buys a share of the property in return for a lump sum and a lifetime lease. Advising on equity release requires specialist qualifications beyond CeMAP, and the market is FCA-regulated.
ESIS (European Standardised Information Sheet) / mortgage illustration
The standardised disclosure document a firm must give a customer before they apply for a regulated mortgage, setting out the loan amount, interest rate, APRC, monthly payments, fees, early repayment charges and risk warnings in a prescribed format. Its purpose is to let customers compare offers from different lenders on a consistent basis. UK firms may use the ESIS or an MCD-compliant illustration containing the required information.
Exchange of contracts
The point in an English or Welsh property purchase when signed contracts are swapped between the buyer's and seller's conveyancers and the transaction becomes legally binding. The buyer normally pays a deposit at exchange and a completion date is fixed; withdrawing after exchange means losing the deposit and possibly facing further claims. Risk in the property usually passes to the buyer at exchange, which is why buildings insurance should start then.
F
Family income benefit
A form of term assurance that pays a regular tax-free income, rather than a lump sum, from the date of the policyholder's death until the end of the policy term. Because the total potential payout falls as the term runs down, it is one of the cheapest ways to protect a family's ongoing living costs while children are dependent. It suits households that would find a monthly income easier to manage than investing a large lump sum.
Financial Conduct Authority (FCA)
The UK regulator responsible for the conduct of financial services firms and for the prudential supervision of most firms not regulated by the PRA. Its statutory objectives are to protect consumers, protect and enhance the integrity of the UK financial system, and promote effective competition. Mortgage lenders, intermediaries and advisers must be authorised by the FCA and follow its Handbook, including MCOB and the Consumer Duty.
Financial Ombudsman Service (FOS)
The free, independent body that settles complaints between consumers (and small businesses) and financial firms when the firm's own complaints process has not resolved the matter. Firms generally have eight weeks to give a final response before the customer can go to the FOS, and there are time limits for referring a complaint. The ombudsman can order firms to pay compensation up to a maximum award limit, which is reviewed and updated annually, and its decisions are binding on the firm if the consumer accepts them.
Financial promotion
Any invitation or inducement to engage in investment activity, such as an advert for mortgages or insurance, communicated in the course of business. Under the Financial Services and Markets Act 2000, a financial promotion must be issued or approved by an appropriately authorised firm unless an exemption applies. Promotions must be clear, fair and not misleading, with required risk warnings such as the statement that the home may be repossessed if repayments are not kept up.
Financial Services Compensation Scheme (FSCS)
The UK's statutory compensation fund of last resort, which pays out when an authorised financial firm fails and cannot meet claims against it. Deposits are protected up to £120,000 per person, per authorised firm (raised from £85,000 for failures from 1 December 2025), with temporary high balances (such as house sale proceeds) protected up to £1.4 million for six months. Different limits apply to other claim types, such as insurance and mortgage advice, and the scheme is funded by levies on the industry.
First-time buyer relief
A Stamp Duty Land Tax relief in England and Northern Ireland for people who have never owned a residential property anywhere in the world and are buying a home to live in. Under the rates applying from April 2025, eligible buyers pay no SDLT on the first £300,000 of the price, provided the property costs no more than £500,000; above that ceiling the relief is lost entirely. All joint purchasers must qualify as first-time buyers for the relief to apply, and Scotland and Wales operate their own separate land taxes and reliefs.
Fixed rate
A mortgage where the interest rate stays the same for a set period, commonly two, three or five years, so monthly payments are certain regardless of what happens to Bank Rate. Early repayment charges usually apply if the borrower leaves during the fixed period. At the end of the fix the loan reverts to the lender's standard variable rate unless the borrower remortgages or takes a product transfer.
Forbearance
Measures a lender uses to support a borrower in, or at risk of, payment difficulty rather than moving straight to enforcement. Options include temporary payment reductions or holidays, extending the term, switching to interest-only for a period, or capitalising arrears. MCOB requires lenders to treat customers in financial difficulty fairly, explore forbearance appropriate to their circumstances, and use repossession only as a last resort.
Freehold
Outright ownership of a property and the land it stands on for unlimited time. The freeholder is responsible for maintaining the building and does not pay ground rent or service charges to a superior landlord. Houses are usually sold freehold, whereas flats have traditionally been leasehold, although commonhold and share-of-freehold arrangements also exist.
Further advance
Additional borrowing taken from the borrower's existing mortgage lender, secured on the same property under the same first charge. It is commonly used to fund home improvements, a deposit for another property or debt consolidation, and is often priced differently from the original loan. The lender will reassess affordability and usually requires an up-to-date valuation, and the advice rules for regulated mortgages apply.
G
Gifted deposit
Money given, usually by a family member, to help a buyer fund the deposit on a property, with no expectation of repayment and no stake in the home. Lenders normally require a signed letter confirming the money is a genuine gift, and both lender and conveyancer will verify the source of the funds to meet anti-money-laundering rules. Large gifts may have inheritance tax implications for the giver if they die within seven years.
Guarantor
A person, often a parent, who agrees to be legally responsible for a borrower's mortgage payments if the borrower fails to pay. The guarantor's income, and sometimes their savings or their own home, stand behind the loan, and they must usually take independent legal advice so they understand the risk. Modern variants include joint borrower sole proprietor arrangements, where a helper joins the mortgage but not the property title.
H
Higher lending charge (HLC)
A fee some lenders charge on high loan-to-value mortgages to buy insurance protecting the lender against loss if the property is repossessed and sold for less than the debt. Crucially, the insurance protects the lender, not the borrower - the insurer can still pursue the borrower for the shortfall. HLCs are far less common than they once were, but the concept remains examinable and appears in disclosure documents where charged.
I
Income protection insurance
Insurance that pays a regular replacement income, typically 50-65% of gross earnings, if the policyholder cannot work because of illness or injury. Payments start after a chosen deferred period and can continue until the person returns to work, the policy term ends or they retire. Unlike critical illness cover it is not limited to a list of conditions, and unlike short-term accident, sickness and unemployment cover it can pay out for many years.
Interest coverage ratio (ICR)
The affordability test used for buy-to-let mortgages, comparing the expected rental income with the mortgage interest. Lenders typically require rent to cover at least 125% of the interest calculated at a stressed rate, with higher ratios (often 145%) for higher-rate taxpayers to reflect the restricted tax relief on mortgage interest. If the rent does not stretch far enough, some lenders allow 'top-slicing', using the landlord's personal income to make up the gap.
Interest-only mortgage
A mortgage where monthly payments cover only the interest, so the capital balance stays the same and must be repaid in full at the end of the term. Regulated lenders must check the borrower has a credible repayment strategy, such as investments, other property or downsizing plans, and review it during the term. Payments are lower than on a repayment mortgage, but the total interest paid over the term is higher and the borrower carries the risk that the repayment vehicle falls short.
J
Joint tenants
A way for two or more people to co-own property in which they own the whole property together rather than in distinct shares. On the death of one owner their interest passes automatically to the survivor(s) under the right of survivorship, regardless of any will. It is the usual choice for married couples and civil partners; co-owners who want defined, separate shares choose tenants in common instead.
L
Leasehold
Ownership of a property for a fixed period under a lease granted by the freeholder, common for flats in England and Wales. Leaseholders usually pay service charges, and older leases may include ground rent, although the Leasehold Reform (Ground Rent) Act 2022 reduced ground rent to a peppercorn on most new residential leases. Lenders are wary of short leases - as the remaining term shrinks the property becomes harder to mortgage and more expensive to extend, though recent leasehold reform has been making extension rights cheaper and simpler.
Lifetime ISA (LISA)
A tax-free savings account for people aged 18 to 39 designed to help with a first home or retirement, allowing contributions of up to £4,000 a year with a 25% government bonus. The funds can be used penalty-free to buy a first home costing up to £450,000 (after the account has been open at least 12 months) or withdrawn from age 60. Withdrawals for any other reason incur a 25% government charge, which claws back the bonus and some of the saver's own money.
Lifetime mortgage
The most common form of equity release: a loan secured on the borrower's home, usually available from around age 55, with no required monthly repayments. Interest rolls up and the loan plus interest is repaid when the borrower dies or moves permanently into long-term care, normally from the sale of the home. Products meeting Equity Release Council standards include a no-negative-equity guarantee, so the estate never owes more than the property sells for.
Loan-to-value (LTV)
The size of a mortgage as a percentage of the property's value or purchase price, whichever the lender uses - borrowing £180,000 against a £200,000 home is 90% LTV. LTV is a key measure of lender risk: lower LTV bands attract cheaper rates, while high-LTV loans cost more and may carry extra requirements. Lenders set maximum LTVs by product type, with buy-to-let and interest-only lending typically capped lower than standard residential loans.
M
MCOB (Mortgages and Home Finance: Conduct of Business sourcebook)
The part of the FCA Handbook containing the conduct rules for regulated mortgage contracts, home purchase plans, home reversion plans and regulated sale-and-rent-back. It covers advised and execution-only sales, disclosure documents such as the ESIS, responsible lending and affordability, charges, and the fair treatment of customers in arrears and facing possession. Firms carrying on regulated mortgage business must comply with MCOB alongside the Consumer Duty.
Money laundering
The process of disguising the proceeds of crime so they appear to come from a legitimate source, traditionally described in three stages: placement, layering and integration. Property transactions are a known laundering route, so firms must carry out customer due diligence, verify identity and source of funds, keep records and report suspicions to the National Crime Agency via a Suspicious Activity Report. The main UK rules are in the Proceeds of Crime Act 2002, the Terrorism Act 2000 and the Money Laundering Regulations 2017, and 'tipping off' a suspect is itself an offence.
N
Negative equity
The situation where the outstanding mortgage is greater than the current market value of the property, usually because prices have fallen after buying with a small deposit. Borrowers in negative equity cannot normally remortgage to a new lender and may be unable to move without repaying the shortfall. If the property is repossessed and sold for less than the debt, the borrower remains liable for the difference.
O
Offset mortgage
A mortgage linked to a savings (and sometimes current) account with the same lender, where the savings balance is set against the loan so interest is charged only on the net amount. The saver gives up interest on the savings but effectively earns the mortgage rate tax-free, and can usually still access the money. Offsetting can shorten the term or reduce payments, and suits people with sizeable savings, such as higher-rate taxpayers or the self-employed holding money for tax bills.
P
Porting
Transferring an existing mortgage product, with its interest rate and terms, from one property to another when the borrower moves home. Porting avoids early repayment charges on the existing deal, but it is a fresh application - the lender re-underwrites affordability and values the new property, and any extra borrowing is usually put on a separate current product. If the new loan is smaller, an ERC may still be charged on the amount repaid.
Possession
The legal process by which a lender takes over a mortgaged property, usually after serious arrears, so it can be sold to repay the debt - commonly called repossession. In England and Wales the lender normally needs a court order, and the court can delay possession if the borrower can show they will clear the arrears within a reasonable period. MCOB requires firms to treat possession as a last resort after considering forbearance, and any surplus from the sale after the debt and costs belongs to the borrower.
Product transfer
Switching to a new mortgage deal with the same lender, typically when an existing fixed or discounted rate ends, without changing the amount borrowed or the security. It usually involves no new affordability assessment, legal work or full valuation, making it faster and cheaper than remortgaging - but the borrower only sees that lender's range, so a remortgage elsewhere might be cheaper. Advisers must consider both options when recommending a course of action.
Prudential Regulation Authority (PRA)
Part of the Bank of England responsible for the prudential regulation of banks, building societies, credit unions, insurers and major investment firms. It focuses on the safety and soundness of firms - capital, liquidity and risk management - rather than how they treat customers, which is the FCA's job. Banks and building societies are therefore 'dual-regulated': prudentially by the PRA and for conduct by the FCA.
R
Remortgage
Repaying an existing mortgage and replacing it with a new one from a different lender, secured on the same property, without moving home. Borrowers remortgage to get a better rate when a deal ends, to borrow more, or to change the loan's structure or term. It involves a full application, valuation and legal work (often provided free or discounted by the new lender), unlike a product transfer with the existing lender.
Repayment mortgage
A mortgage where each monthly payment covers the interest due plus some of the capital, so the balance falls over time and the loan is guaranteed to be fully repaid at the end of the term if all payments are made. Also called a capital-and-interest mortgage, it is the standard structure for residential lending. In the early years most of each payment is interest, with the capital element growing as the balance shrinks.
Retention
Part of an agreed mortgage advance that the lender holds back until specified repairs or works to the property are completed - for example fixing damp or rewiring identified by the valuer. The buyer must fund the purchase shortfall in the meantime and the retained money is released after a re-inspection confirms the work. Retentions are common on properties in poor condition and on some self-build stage releases.
Retirement interest-only (RIO) mortgage
An interest-only mortgage for older borrowers with no fixed end date: the borrower pays interest each month and the capital is repaid when they die, move into long-term care or sell the home. Unlike a lifetime mortgage, interest does not roll up, so the debt does not grow, but affordability of the monthly interest must be proven - including on the survivor's sole income for joint borrowers. RIOs are regulated as standard mortgages rather than as equity release.
S
Second charge mortgage
A loan secured on a property that already has a mortgage, ranking behind the first lender's charge for repayment if the property is sold or repossessed. Borrowers use second charges to raise money without disturbing a valuable first-mortgage rate or where a further advance is unavailable, though rates are usually higher to reflect the extra risk. Second charge lending on a home is a regulated mortgage activity under FCA rules, and advisers discussing capital raising should consider it alongside remortgages and further advances.
Stamp Duty Land Tax (SDLT)
The tax payable on purchases of land and property in England and Northern Ireland, charged in slices at increasing rates above a nil-rate threshold. Buyers of additional residential properties, such as second homes and buy-to-lets, pay a surcharge on top of the standard rates, and first-time buyers can claim relief on eligible purchases. The return and payment are due within 14 days of completion; Scotland charges Land and Buildings Transaction Tax and Wales charges Land Transaction Tax instead.
Standard variable rate (SVR)
A lender's default mortgage rate, set at the lender's own discretion, which borrowers usually move onto when an initial fixed, discounted or tracker deal ends. It is not directly linked to Bank Rate, although lenders often change it when Bank Rate moves, and it is typically much higher than new-business rates. There are normally no early repayment charges on SVR, so borrowers are free to remortgage or take a product transfer at any time.
T
Tenants in common
A form of co-ownership where each owner holds a distinct share of the property, which can be equal or unequal - useful where people contribute different deposits. There is no right of survivorship: on death an owner's share passes under their will or the intestacy rules, not automatically to the co-owner. The shares are usually recorded in a declaration of trust, and a restriction is entered at HM Land Registry.
Tracker mortgage
A variable-rate mortgage whose interest rate moves automatically in line with an external reference rate, almost always Bank Rate, plus a set margin - for example Bank Rate plus 0.75%. Payments rise and fall with the reference rate, giving transparency the SVR lacks, though some products have a floor below which the rate will not fall. Trackers can run for an introductory period or for the whole term, and some carry no early repayment charges.
Transfer of equity
A legal change to the ownership of a property that adds or removes a person from the title while at least one original owner stays on - common after marriage, divorce, separation or estate planning. Where there is a mortgage, the lender's consent is needed because the borrowers on the loan must match the owners taking on liability, and the remaining owner must pass affordability checks alone if a party is removed. SDLT can be payable if the person taking on a share also takes on a slice of the mortgage debt above the threshold.
V
Valuation
The lender's assessment of a property's value and suitability as security, carried out before a mortgage offer is issued - either by physical inspection, a drive-by, or a desktop/automated valuation. It is done for the lender's benefit and is not a condition survey, so buyers wanting detail on the property's state should commission their own RICS Home Survey. A 'down-valuation', where the valuer's figure is below the agreed price, can reduce the loan available or force renegotiation.
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