Glossary of Terms
At Mercantile Trust, we aim to make specialist property finance clear and accessible. Whether you're a landlord, homeowner, or investor, our glossary explains the key terms used across Bridging Loans, Buy to Let Mortgages, and Business Loans—so you can make informed decisions with confidence.
Borrower Status & Roles
Terms describing individuals or entities involved in the property finance process.
Adverse Credit
A history of financial issues such as missed payments, defaults, or County Court Judgments (CCJs).
Arrears
When a borrower falls behind on agreed loan repayments. Being in arrears can negatively impact credit history and may lead to legal or recovery action if not resolved.
CCJ (County Court Judgment)
A legal ruling issued against an individual or business who has failed to repay a debt. It affects credit rating and may influence lending decisions.
Homeowner
An individual who owns and occupies a residential property as their primary home. May own outright or have a mortgage. Often relevant to residential lending rather than investment.
Landlord
A person or business that owns property which is rented out to tenants. Landlords may own multiple properties and operate personally or through a limited company.
Portfolio Landlord
A landlord with four or more mortgaged buy to let properties.
Intermediary
A broker or adviser who acts between the borrower and the lender to arrange finance.
Personal Guarantee
A legal promise by an individual to repay a loan if the main borrower defaults.
Loan Types & Structures
Different types of finance products available for property purchases and investments.
Bridging Loan
A short-term loan used to ‘bridge’ the gap between the purchase of a new property and the sale or refinancing of an existing one.
Buy to Let Mortgage
A loan secured on a property that is let to tenants, typically for investment purposes.
First Charge Mortgage
A loan secured as the primary charge against a property. It takes precedence over any other loans.
Second Charge Loan
A secured loan that sits behind the first charge mortgage on a property. The first lender has priority if the property is sold.
Repayment Methods & Terms
How loans are structured, repaid, and scheduled over time.
Capital Repayment
A mortgage repayment method where the borrower pays both the interest and a portion of the loan amount each month. The entire loan is repaid by the end of the term.
Early Repayment Charge (ERC)
A fee charged by the lender if the borrower repays a loan before the agreed end date. Designed to cover the lender’s costs and potential loss of interest. ERCs are more common in fixed-rate mortgage products but can also apply to certain bridging and buy to let loans.
Interest-Only Payment
A repayment method where only the interest is paid each month, with the capital repaid in full at the end of the term. Common in bridging and buy-to-let mortgages.
Loan Redemption
The process of fully repaying a loan, either at the end of its term or earlier if the borrower chooses to repay early.
Mortgage Term
The length of time over which a mortgage is agreed, e.g., 25 years for a buy-to-let or 18 months for a bridging loan.
Property Types & Investment Structures
Property classifications relevant to specialist lending.
HMO (House in Multiple Occupation)
A property rented out by at least three unrelated tenants who share facilities such as a kitchen or bathroom. HMOs are subject to specific licensing and regulation.
MUFB (Multi-Unit Freehold Block)
A freehold property that contains multiple self-contained units (e.g. flats) under one title. Popular with landlords seeking higher rental yields and capital growth.
Student Buy to Let
A Buy to Let Mortgage used to purchase property rented specifically to students. These properties often accommodate multiple tenants and may require HMO licensing. Lenders typically assess them differently due to seasonal demand, tenancy turnover, and local authority rules.
Lending Process & Documentation
Key stages, actions, and documents involved in getting a loan approved.
Agreement in Principle (AIP)
A non-binding indication from a lender of how much they may be willing to lend, subject to full underwriting.
Completion
The final stage of a property transaction when funds are transferred and legal ownership changes hands.
Exit Strategy
A borrower’s planned method of repaying a bridging loan, such as sale of property, refinancing, or inheritance.
Refinance
Replacing an existing loan with a new one, often used as an exit strategy for bridging finance.
Underwriting
The process a lender uses to assess risk, verify information, and decide whether to approve a loan.
Valuation & Security
Terms that deal with assessing the value of a property and securing the loan.
Automated Valuation Model (AVM)
A computer-generated property valuation based on market data, often used for lower-risk loans to speed up the application process.
Security
An asset (usually property) used as collateral to secure a loan.
Title Deed
A legal document proving ownership of a property.
Valuation
An assessment of the property’s market value, conducted by a qualified surveyor or via an AVM, used to support lending decisions.
Financial Calculations & Metrics
Key measures used in determining borrowing amounts, affordability, and return on investment
Annual Percentage Rate (APR)
The total cost of borrowing over a year, including interest and fees, expressed as a percentage.
Equity
The value of ownership in a property after subtracting outstanding debts (e.g., mortgage balance).
Gross Loan
The total amount borrowed before any fees or deductions.
Net Loan
The amount of money actually received by the borrower after any fees, charges, or deductions have been taken from the gross loan amount. This is the figure the borrower can use for their intended purpose.
Loan-to-Value (LTV)
The percentage of the property’s value that is being borrowed. For example, a £75,000 loan on a £100,000 property = 75% LTV.
ROI (Return on Investment)
A measure used to evaluate the profitability of an investment. In property, ROI is typically calculated by dividing the annual rental income or net profit by the total investment cost (including purchase price, fees, and refurbishment), then multiplying by 100 to express it as a percentage. A higher ROI indicates a more profitable investment.
Stress Rate
An interest rate used by lenders to test affordability. Even if a loan has a lower pay rate, affordability is assessed using the higher stress rate to ensure the borrower could still manage repayments if rates rise.
Yield
A measure of rental income as a percentage of the property's value or purchase price.
Legal & Regulatory
Terms that relate to legal or government requirements in property transactions.
Stamp Duty
A government tax paid on property purchases in the UK. The amount varies depending on property price and whether the buyer is a landlord or homeowner.
EPC (Energy Performance Certificate)
A legal document that rates a property's energy efficiency from A (most efficient) to G (least efficient). Landlords are required to meet minimum EPC standards before letting a property in the UK.
Anti-Money Laundering (AML)
Legal requirements that lenders, brokers, and solicitors must follow to prevent the use of property finance for money laundering. This includes verifying identity and source of funds.