Buy to Let Jargon Buster

A

Agreement in Principle (AIP / DIP): A lender’s initial “yes, in principle” (sometimes called a Decision in Principle) saying they’d expect to lend you a certain amount, based on a first look at your details. It’s not a guarantee, but it shows agents and sellers you’re serious, and I can usually get one in place within a day or two.
Article 4 Direction: A rule some councils use to remove permitted development rights in a defined area, most commonly the right to convert a family home into a small HMO without planning permission. If you’re buying an HMO in an Article 4 area, planning status matters enormously, and lenders will want it confirmed.
AST (Assured Shorthold Tenancy): The standard tenancy agreement used for most private lettings in England and Wales, and the tenancy type most buy to let lenders expect to see. (See also the Renters’ Rights Act 2025, which is reshaping this landscape.)

B

Bridging loan: Short-term finance (typically a few months to a couple of years) used to “bridge” a gap: buying at auction, breaking a chain, or funding a refurbishment before refinancing onto a normal mortgage. Fast and flexible, but more expensive, so it only works with a clear exit strategy. That exit is the first thing I’ll pin down with you.
Buy to let (BTL) mortgage: A mortgage designed for property you’ll rent out rather than live in. Lending is based mainly on the rent the property can earn, not just your salary, and most are unregulated by the FCA because they’re treated as business lending.

C

Commercial valuation: A valuation based on the property’s income as a business (used for larger HMOs, semi-commercial and commercial property) rather than simply comparing it with similar houses nearby (a “bricks and mortar” valuation). On the right property, a commercial valuation can support significantly more borrowing.
Completion: The finish line: the day the money moves, ownership transfers and you get the keys. On a remortgage, it’s the day your new lender pays off the old one.
Consent to let: Permission from your residential mortgage lender to let out a home you originally bought to live in, usually a temporary fix. If letting becomes long term, most lenders expect you to move onto a proper buy to let mortgage. Letting without consent breaches your mortgage terms, so don’t be tempted.
Conveyancing: The legal work of transferring property ownership: searches, contracts, and registering you (or your company) at the Land Registry. Done by a solicitor or licensed conveyancer, and one of the parties I’ll be chasing on your behalf.
Corporation tax: The tax a limited company pays on its profits, including rental profit after deducting expenses and, crucially, all its mortgage interest. It’s a big part of why many landlords now buy through a company, but tax depends on your circumstances, so please take advice from a qualified tax adviser.

D

Director’s loan: Money you lend to your own company, typically your deposit going into your SPV. The company owes it back to you, and can repay it from future rental profits without the tax charge dividends attract. Lenders will want to see where the money came from, which is entirely standard.

E

Early Repayment Charge (ERC): A penalty for paying off (or leaving) a mortgage during its initial deal period, often a percentage of the loan that steps down each year. If you’re planning to sell or refinance early, I’ll factor ERCs into the recommendation from the start, not as an afterthought.
EPC (Energy Performance Certificate): The A-to-G energy rating every rental property must have. Rental properties currently need at least an E to be let legally (with some exemptions), and government has proposed raising the bar, so the EPC is worth checking before you buy, not after.
Exchange (of contracts): The moment a purchase becomes legally binding. You pay your deposit, a completion date is fixed, and neither side can walk away without serious cost. Champagne stays on ice until completion, though.

F

Fixed rate: A mortgage where the interest rate, and so your payment, stays the same for a set period, typically two or five years. You’re buying certainty; the trade-off is usually an ERC if you leave early.
Freehold / Leasehold: Freehold means you own the building and the land outright. Leasehold means you own the property for the length of a lease (common with flats) and pay ground rent and service charges to a freeholder. Lenders care about lease length: short leases can limit your options, so I always check early.

G

Gross yield / Net yield: Gross yield is the annual rent as a percentage of the purchase price, quick and useful for comparing deals. Net yield deducts your costs (mortgage interest, insurance, management, maintenance, voids) and tells you what you’re actually making. Agents quote gross; I’ll always make you look at net.

H

HMO (House in Multiple Occupation): A property let to three or more tenants from more than one household who share facilities like a kitchen or bathroom: think professional house shares and student lets. Higher rents, more management, and a specialist corner of the mortgage market where lender choice really matters.

I

ICR (Interest Cover Ratio): The heart of every buy to let calculation: the rent must typically cover 125%-145% of a stressed mortgage payment (the payment calculated at a higher “what if rates rise” rate, not your actual rate). Limited companies and basic-rate taxpayers usually get the friendlier 125%; higher-rate taxpayers borrowing personally often face 145%. Making the ICR work is where I earn my keep.
Intercompany loan: A loan from one of your companies to another, most often your trading company lending the deposit to your property SPV, without you drawing the money out personally and paying income tax on it first. Some lenders love these, some tolerate them, some won’t touch them; knowing which is which is exactly what I’m for.
Interest-only: You pay just the interest each month and the loan itself is repaid at the end, usually by selling or refinancing. It’s how most landlords run buy to lets: lower monthly costs, better cash flow, and the ICR calculation works harder for you.

L

Licensing (HMO licensing): Mandatory HMO licensing applies to properties with 5 or more occupants from 2 or more households. The landlord must hold a licence from the council. Many councils also run “additional” or “selective” licensing schemes covering smaller HMOs or whole areas, so always check the local rules. Lenders will expect the right licence to be in place or achievable.
Loan to Value (LTV): The mortgage as a percentage of the property’s value. A £150,000 mortgage on a £200,000 property is 75% LTV. Most buy to lets sit at 75% or below, and the sharpest rates usually live at 60% LTV or less.

M

MUFB (Multi Unit Freehold Block): One freehold title containing several self-contained flats: a converted house split into three flats, say, or a small purpose-built block. One mortgage covers the lot, but it’s a specialist product: fewer lenders, and valuation method matters. I know which lenders actually want these deals.

P

Personal guarantee: Almost every limited company buy to let lender requires the directors (and often major shareholders) to personally guarantee the company’s mortgage: if the company can’t pay, you’re on the hook. You’ll usually need independent legal advice before signing. It sounds alarming, but it’s a standard part of virtually every company buy to let.
Portfolio landlord: The regulator’s label for a landlord with 4 or more mortgaged buy to lets. It changes how lenders underwrite you: they’ll want a portfolio schedule, background stress tests across everything you own, and often a business plan. I prepare all of that with you so the application lands well first time.
Procuration fee: The fee a lender pays a broker for arranging the mortgage. I receive one on completion, and I’ll always disclose exactly what it is. It never changes my recommendation, which is based on what’s right for you.
Product transfer: Switching to a new deal with your existing lender when your current one ends, quick and paperwork-light, but you only see one lender’s shelf. I’ll compare it against the whole market so you know whether staying put actually is the best deal.

R

Remortgage: Moving your mortgage to a new lender, to get a better rate, or to release equity, which is the most common way landlords fund the deposit for their next purchase. I’ll check the sums work across both properties before you commit.
Renters’ Rights Act 2025: The biggest shake-up of private renting in a generation: it abolishes Section 21 “no fault” evictions, moves tenancies to periodic (rolling) arrangements, and strengthens tenants’ rights on rent increases and pets, among much else. Well-run portfolios adapt fine, but it makes good advice and good management more valuable than ever.
Right to Rent checks: The legal requirement (in England) for landlords to check that every adult tenant has the right to rent property in the UK before the tenancy starts, usually by checking passports or using the government’s online service. Your letting agent can do it, but the legal responsibility sits with the landlord.

S

Section 24: The tax change that restricted mortgage interest relief for individual landlords: instead of deducting mortgage interest from rental income, you get only a basic-rate tax credit. It bites hardest for higher-rate taxpayers, and it’s the main reason so many landlords now buy through limited companies, where interest remains fully deductible. Take tax advice for your own numbers.
Semi-commercial property: A property mixing commercial and residential use: the classic shop with a flat above. It sits between two lending worlds, needs a lender comfortable with both, and can benefit from paying commercial rates of stamp duty rather than the residential surcharge.
SIC codes: The Companies House classifications describing what your company does. For a property SPV, lenders expect to see the property codes: 68100 (buying and selling own real estate) and 68209 (letting and operating own or leased real estate) are the usual pair. Wrong codes can mean an automatic decline, so it’s one of the first things I check.
SPV (Special Purpose Vehicle): A limited company set up purely to buy and hold property, and nothing else. Clean, quick to underwrite, and the structure most limited company buy to let lenders prefer. Setting one up costs little and takes a day, but do it with the right SIC codes from the start.
Stamp Duty Land Tax (SDLT): The tax paid when buying property in England and Northern Ireland. Buy to let and second properties attract the additional-dwellings surcharge (5% on top of the standard rates), and companies pay the surcharge on every residential purchase. Factor it into your numbers on day one; it’s often the biggest single cost of a purchase.
Stress test: The lender’s “what if” check: can the rent still cover the mortgage if rates rise? They calculate the ICR using a stressed rate higher than the one you’ll actually pay. Different lenders stress at very different rates, which is why the same property can borrow £30,000 more with one lender than another, and why I compare the whole market.
Sui generis: Latin for “of its own kind”: a planning use class for properties that don’t fit the standard categories. Large HMOs (7 or more occupants) are sui generis, meaning they always need planning permission. If you’re buying or creating a large HMO, planning status is one of the first things to nail down.

T

Top slicing: When the rent alone doesn’t quite pass the lender’s stress test, some lenders let you use surplus personal income to “top up” the shortfall. Not every lender offers it and each does it differently, but on the right case it can rescue a deal that looks dead on paper.
Tracker rate: A mortgage rate that follows the Bank of England base rate at a set margin (base plus 1%, say), so your payment moves when the base rate does. More flexible than a fix (often with no ERCs), but you carry the rate risk.

U

Underwriting: The lender’s detailed assessment of you, your company and the property before they’ll formally offer the mortgage: income, credit, portfolio, valuation, the lot. A well-packaged application sails through underwriting; a scrappy one gets stuck in questions. Packaging it properly is a big part of my job.

V

Valuation: The lender’s inspection of the property to confirm what it’s worth and what rent it should achieve. Both feed straight into how much you can borrow. Not to be confused with a survey done for your benefit; the valuation is for the lender.
Vanilla BTL: Broker shorthand for a straightforward buy to let: a standard house or flat, let on a single AST to a family or couple, bought in a personal name or simple SPV. The widest lender choice and the sharpest rates live here.
Void period: Any spell when the property sits empty and earns no rent, between tenants, or during refurbishment. The mortgage still needs paying, so I’d always want to see a sensible buffer in your numbers. Budgeting for voids is the difference between a resilient portfolio and a stressful one.

Still confused by something? Just ask me

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