Property finance and investment come with a vocabulary that can feel impenetrable if you are not already familiar with it. This glossary defines the terms you are most likely to encounter when working with specialist lenders, development finance, bridging loans, portfolio investments and protection products.
Each definition is written in plain language, with a note on why the term matters in practice. Where a term relates to a product or topic covered in more detail elsewhere on this site, there is a link to the relevant guide.
This glossary is for reference and education. It does not constitute financial, legal or tax advice. Definitions may vary between lenders and in different contexts.
A
Adverse Credit
A term used to describe a borrower who has negative marks on their credit history, such as missed payments, defaults, county court judgments or a previous bankruptcy. Adverse credit does not automatically prevent someone from getting a mortgage, but it affects which lenders are available and the rates they offer. Specialist lenders assess adverse credit cases individually and consider the nature, severity and age of the issues.
Arrangement Fee
A fee charged by a lender for setting up a loan or mortgage. Arrangement fees are common in specialist finance products including bridging loans, development finance and some buy-to-let mortgages. They are typically expressed as a percentage of the loan amount, often 1% to 2%, and can be paid upfront or added to the loan. Adding the fee to the loan means you pay interest on it for the duration of the term.
B
BMV (Below Market Value)
A property purchased at a price lower than its estimated open market value. BMV purchases are sought by investors who identify properties where a motivated seller, a distressed sale or other circumstances create an opportunity to buy at a discount. Some specialist lenders will lend against the open market value rather than the purchase price, potentially allowing the investor to borrow more relative to what they paid. Read more in our guide to OMV, BMV and GDV lending.
Bridging Finance
A short-term loan secured against property, used to fill a gap between two events: a purchase and a sale, a property acquisition and longer-term financing, or a development phase and the final exit. Bridging loans are typically arranged for one to twenty-four months and are repaid in full at the end of the term through the agreed exit strategy. Read more in our plain English guide to bridging finance.
Buy-to-Let (BTL)
A property purchased specifically to rent out rather than to live in. Buy-to-let mortgages are designed for this purpose and are assessed differently from residential mortgages, with rental income the primary affordability consideration. BTL mortgages are not regulated by the FCA except in specific circumstances.
C
Capital Raise
Borrowing additional funds against an existing property, either by increasing an existing mortgage or taking out a second charge loan. Capital raises are used to fund home improvements, property investment deposits, business investment or other purposes. The additional borrowing is secured against the property and must be repaid in the same way as the original mortgage.
CIS (Construction Industry Scheme)
A tax arrangement under which contractors in the construction industry deduct money from subcontractor payments and pass it to HMRC as advance payments toward the subcontractor's tax and National Insurance liability. CIS workers are self-employed but have tax deducted at source, which creates specific challenges for mortgage applications. Read more in our CIS mortgage guide.
Cross-Collateralisation
A finance structure in which more than one property is used as security for a single loan or a group of loans. Cross-collateralisation allows a borrower to use the equity in one property to supplement the security available on another, potentially enabling a purchase that would not be possible on a single-property basis. Read more in our cross bridging and cross-collateralisation guide.
D
Deferred Period
Used in income protection insurance, the deferred period is the time between when a policyholder stops working due to illness or injury and when the policy starts paying a benefit. Common deferred periods are four, eight, thirteen, twenty-six or fifty-two weeks. A longer deferred period typically means a lower premium.
Development Finance
A specialist loan designed to fund the construction or major conversion of property. Development finance is typically drawn down in stages linked to build milestones rather than released as a lump sum, and is assessed primarily on the gross development value of the completed project. Read more in our development finance explained guide.
Drawdown
The process of releasing funds from an approved loan facility in stages. In development finance, drawdowns are triggered by the completion of specific build milestones and confirmed by a monitoring surveyor. Interest typically only accrues on funds that have been drawn rather than on the total approved facility.
E
Early Repayment Charge (ERC)
A penalty charged by a lender if a mortgage or loan is repaid before the end of a fixed rate or agreed period. ERCs are common on fixed rate mortgages and some bridging loans. They are typically expressed as a percentage of the outstanding loan amount and can be significant if you are considering remortgaging or selling before the fixed period ends.
Exit Strategy
The plan for how a short-term loan, such as a bridging loan or development finance, will be repaid at the end of its term. Common exit strategies include the sale of the property, refinancing onto a long-term mortgage, or the completion of a development project and the resulting sale or refinance of the finished units. Lenders will assess the viability and credibility of the proposed exit before approving a short-term loan.
G
GDV (Gross Development Value)
The estimated total market value of a completed development project, either as individual units for sale or as an investment asset. GDV is the primary metric that development finance lenders use to determine how much they will lend. Most lenders will advance up to 60% to 70% of GDV, subject to individual circumstances. Read more in our development finance explained guide.
H
HMO (House in Multiple Occupation)
A property occupied by three or more people who form more than one household and share facilities such as a kitchen or bathroom. HMOs require specific mortgage products and, in most cases, a licence from the local authority. The definition and licensing requirements vary between property types and local authorities. Read more in our HMO mortgage guide.
I
ICR (Interest Coverage Ratio)
The ratio of rental income to mortgage interest payments, used by buy-to-let lenders to assess whether a property generates sufficient income to service the mortgage. Most lenders require the rental income to cover the interest payment by 125% to 145%, calculated at a stressed interest rate. ICR is one of the primary affordability tests for buy-to-let mortgages.
Interest Roll-Up
A structure in which interest on a loan is not paid monthly but is added to the outstanding loan balance and repaid in full at the end of the term. Interest roll-up is common in bridging loans and some development finance products, where monthly interest payments would place additional pressure on cash flow during a project. The total interest cost under a roll-up structure is the same as monthly servicing over the same period, though the cash flow impact is different.
J
JV (Joint Venture)
A business arrangement in which two or more parties combine resources to undertake a specific project or investment. In property, JVs are commonly used for development projects where one party brings capital and another brings expertise or land. JV structures create specific legal and financial considerations, including the protection arrangements that should be in place if one party is unable to continue their involvement. Read more in our business protection for property partnerships guide.
K
Key Person
An individual whose skills, knowledge or relationships are essential to the operation of a business or project. In property development, a key person might be the site manager who holds all the contractor relationships or the director who manages the bank relationship. Key person insurance protects the business against the financial impact of losing that individual to illness or death. Read more in our key person insurance guide.
L
LTV (Loan to Value)
The ratio of a loan to the value of the property used as security, expressed as a percentage. A property worth £400,000 with a mortgage of £300,000 has an LTV of 75%. Lower LTVs typically attract lower interest rates because the lender has more security relative to the outstanding debt. Maximum LTVs vary by product type, lender and the borrower's circumstances.
M
MUFB (Multi-Unit Freehold Block)
A single building containing multiple self-contained residential units held under one freehold title, rather than on separate leases. MUFBs are treated differently from individual flats by lenders and require specialist finance products. They are often attractive to investors because of the yield potential and the ability to manage multiple units under one legal entity.
O
OMV (Open Market Value)
The price a property would achieve on the open market between a willing buyer and a willing seller, with both parties having access to all relevant information and neither being under pressure to complete. OMV is used by specialist lenders as an alternative to purchase price, allowing them to lend against the true value of a property rather than the discounted price paid in a BMV transaction. Read more in our OMV, BMV and GDV lending guide.
P
PDR (Permitted Development Rights)
Rights that allow certain types of development to take place without the need for full planning permission. Common PDR conversions in the property investment market include office to residential under Class MA and agricultural to residential under Class Q. PDR projects are subject to specific conditions and prior approval requirements, and specialist finance products exist to fund them. Read more in our commercial to residential conversion guide.
Personal Guarantee (PG)
A personal commitment by an individual to be personally liable for the debts of a company or other legal entity if that entity cannot meet its obligations. Personal guarantees are standard practice in limited company buy-to-let mortgages and most commercial and development finance. Even where the loan is in a company name, the directors are typically required to provide personal guarantees.
R
Rental Yield
The annual rental income from a property expressed as a percentage of its value. Gross yield is calculated before costs and voids. Net yield accounts for running costs including management fees, maintenance, insurance and void periods. Net yield is always lower than gross yield and provides a more accurate picture of the actual return on investment.
Retention
An amount held back by a lender until specific conditions are met. In development finance, retentions are common where works are not yet complete at the time of assessment. In standard mortgages, a retention may be applied where a property has defects that need to be remedied before the full loan is released.
S
SDLT (Stamp Duty Land Tax)
A tax payable on property purchases in England and Northern Ireland above certain thresholds. SDLT rates and thresholds are set by the government and are subject to change. Additional surcharges apply to purchases of additional residential properties and to purchases by non-UK residents. The specific rates applicable to your purchase should be verified with HMRC or a qualified solicitor before proceeding, as figures quoted in guides may not reflect the current position.
Second Charge Mortgage
A loan secured against a property that already has a first charge mortgage in place. The second charge lender has a secondary claim on the property in the event of default, which is why second charge rates are typically higher than first charge rates. Second charge mortgages are used to release equity without disturbing an existing first charge mortgage, which is particularly useful when the existing mortgage has a low rate or a significant early repayment charge. Read more in our second charge mortgages guide.
Section 24
The changes to tax rules introduced under the Finance Act 2015 that phased out mortgage interest relief for individual residential landlords from 2017 to 2020. Under Section 24, individual landlords can no longer deduct mortgage interest as a business expense against rental income. Instead, they receive a basic-rate tax credit. This change significantly increased the tax burden for higher and additional rate taxpayers holding buy-to-let property personally and is one of the main reasons many landlords have moved to or are considering limited company ownership structures.
SPV (Special Purpose Vehicle)
A limited company set up specifically to hold property assets, rather than a general trading company. SPVs are commonly used for buy-to-let investment and development projects, both for tax efficiency and to separate the property business from other commercial activities. Most specialist buy-to-let and development finance lenders prefer lending to SPVs rather than trading companies and require an appropriate SIC code.
Stress Test
An assessment by a lender of whether a borrower could continue to service their mortgage or loan if interest rates increased. Stress tests are applied to buy-to-let mortgages as part of the interest coverage ratio calculation, using a rate higher than the actual product rate to assess affordability under less favourable conditions. The stress rate and coverage requirement vary between lenders.
T
Title Split
The process of separating a multi-unit property into individually titled units, each with its own Land Registry title. Title splitting allows investors to sell or mortgage units individually rather than as a whole. It can unlock additional value in a property by allowing individual units to be valued and mortgaged at their residential market values rather than as a single investment asset. Read more in our title splitting finance guide.
Last updated: 10 May 2026