Occasionally I write emails to customers and include words and phrases that we use in the industry without really thinking. I then receive an email back asking what it means.
I thought it would be a good idea to write a list of common words, phrases and acronyms or some sort of Mortgage Jargon buster.
If you come across a term that you are unsure of, customer or not, fire over an email on our contact form and we will do our best to help and possibly add it to the list.
Mortgage Jargon Buster
DIP, also known as an AIP or MIP:
These are all the same thing. They stand for Decision in Principle, Agreement in Principle or Mortgage in Principle. But what do they mean I hear you ask… A DIP is effectively a shortened application form and possibly a credit check to see if in principle you pass the most common bits of criteria and affordability checks. It does not necessarily mean you will get a Mortgage if you have a DIP, but it is an indication.
LTV or Loan to value:
This is a calculation lenders used to help determine which products you can have. As a simple example, if you are buying a home for £100,000 and you apply for a Mortgage of £70,000 you have a LTV of 70%.
Credit check
Everyone has a credit history, some are better than others. Your credit report lists most of your credit commitments, your bank account(s), mobile phones, utility bills, credit cards etc and shows your payment history. A credit report will also display your address history among other things and many lenders will use the information from your credit report to help them make a decision on whether to lend to you or not.
A credit report will list your payment history for the last 6 years and it is your credit report that will detail any defaults and CCJs you may have.
KFI or ESIS
When providing you with a breakdown of the deal you are applying for, we will send our customers an Illustration. Historically they were called KFI which stands for Key Facts Illustration. More recently with thanks to the EU, the name is changing as is the format of the document to ESIS or European Standardised Information Sheet… it rolls off the tongue doesn’t it. This illustration will detail everything about your Mortgage, the rate, the term, the repayments, fees and any features such as overpayment facilities etc.
Exit Strategy
The term “exit strategy” is usually used on Loans/Mortgages which are on an interest only basis. At the end of the Mortgage term, whether that be 1 month or 30 years will need paying off. An exit strategy is a plan of how you plan to clear that loan/Mortgage. Common Exit Strategies are: Endowments, ISAs, Pensions, Sale of Property. Not all are accepted by all lenders, so it is important to ensure your exit strategy is acceptable to the lender.