Jargon Busters

APR (annual percentage rate):

Total cost of a loan, including all costs, interest charges and arrangement fees. This is shown as a percentage rate.

Arrangement Fees:

The fee charged by a mortgage lender or mortgage broker to arrange a loan.

Additional Enquiries:

Questions raised by the buyer’s solicitor/conveyancer, they will often relate to matters shown on a survey or to the title on your property.

Auction:

The sale of a property to the highest bidder with a legally binding contract on the drop of a hammer.  The modern auction method (or conditional auction) is similar to a normal property purchase however on acceptance of an offer, the purchaser will pay a non refundable reservation fee to secure the property and buyer then has 28 days to exchange contracts and a further 28 days to complete the purchase.
Properties for sale via auction usually have an undisclosed reserve price and the guide price is a lower starting price.  Properties can sell without going to the auction room but will still be subject to auction terms.

Buildings & Contents Insurance:

This Insurance covers damage to or loss of your home and its contents as an example in the event of a fire.

Bridging Loan:

This is a temporary loan that will provide financial cover whilst a buyer is completing on the purchase of a new property before selling their previous property.

Buy To Let Mortgage

A mortgage available to investors looking to rent the property out. This normally requires a higher deposit and sometimes has a higher interest rate.

Basic Variable Rate

A standard rate of interest that is charged by a mortgage lender and this may be increased or decreased periodically by the lender depending on predominant economic conditions.

Chain:

The chain of properties/people involved in a purchase - when a purchaser is reliant on the completion of their home in order to complete the purchase of a new property.

Completion:

The point at which all transactions concerning the property sale are conducted and legal transfer of ownership passes to the buyer. Invariably, this is also the day of moving.

Conveyancer:

A qualified solicitor or a licensed conveyancer who will deal with all the legal aspects of buying or selling a property.

Covenants:

Some properties have rules and regulations that govern what can and can’t be done and would be lodged with the title deeds or lease of the property.

Contents Insurance:

Insurance that provides cover for the loss or damage to possessions inside of the property

Conveyancing:

The legal work involved in the sale and purchase of a property.

Contract:

An agreement that is legally binding between the buyer and seller of a property. It binds both parties to complete the transaction at any agreed time.

Conditions of Sale

These details determine the right and duties of the buyer and seller. They can be imposed by the law society or specifically devised by your solicitors.

Deeds:

Legal Title documents that will prove ownership of the property. Normally the Deeds will be held by the mortgage lender when there is a mortgage lodged against the property.

Deposit:

When you exchange contracts a sum of money will be paid by the purchaser to the solicitors than will normally be between 5% and 10% of the overall property value.

Disbursements:

Fees that are paid by the buyer’s solicitor on the buyer’s behalf such as land registry, stamp duty and search fees.

Draft Contract:

An unconfirmed and preliminary version of the contract.

Downvaluation:        

If a property does not value up to the agreed sale amount, the mortgage lender may turn down the mortgage application.

Early Redemption Charge:

When a borrower terminates their mortgage prior to the terms that have initially been agreed by the lender, an early redemption charge can be payable. This will mainly occur when a borrower has had the benefit of a reduced payment or has had cash back in the initial period of a mortgage.

Exchange of Contracts:

 Signed contracts are physically exchanged, legally.  The property sale and purchase is now legally binding.  Occasionally a ‘conditional exchange of contracts’ can take place e.g. if a developer purchases a house with land he wants to build on, he can exchange contracts subject to getting planning permission on the land. If planning permission is not granted the sale does not need to go ahead (usually the deposit is retained by the vendor)

Equity:

The difference between the value of a property and the amount of mortgage that is still owed or other charge against the property.

Fixed Rate Mortgage:

A mortgage where an interest rate is set for a brief period of time at a fixed rate.

Fixtures and fittings:

Items that have been agreed to be included in the purchase of a property but do not form part of the structure.

Flexible Mortgage:

A mortgage where the lender will permit increased or decreased payments during a specified term.

Flying Freehold:

Where part of a freehold property is over (or under) another freehold property.

Freehold:

Freehold is the description that is given to the type of ownership for a property; meaning that it belongs to the owner without any type of time limitation.

Gazumping:

Purchasers generally misunderstand this term. Gazumping only occurs when a seller accepts a higher offer from a third party on a property that exceeds the initial asking price. This can only occur when a sale has been agreed prior to legal exchange of contracts.

Ground Rent:

Ground Rent is an annual charge that is made by the freeholder to the lease holder payable every year.

Guarantor:

A third party who undertakes to ensure that all mortgage payments are maintained, and who will also promise to pay the borrowers debt if the borrower defaults on their mortgage.

Interest only mortgage:

 Where the monthly payments to the lender only cover interest on the outstanding loan. The lender will normally request that you have a savings plan that designed to pay the outstanding amount of the loan at the end of the mortgage term. If you choose an interest only mortgage, you are responsible for ensuring that you have sufficient funds available to repay your mortgage at the end of the agreed term.

Interest charges:

The charges that are made on your loan by the bank or building society. They are calculated as a percentage of the amount that has been borrowed and or is still outstanding.

Land Registry fee:

Apayment to the Land Registry that will register legal ownership of a property.

Legal fees:

The payment to your conveyancer for their services and for any costs that they have incurred on your behalf.

Leasehold:

The type of ownership of a property by way of it’s tenure with a given timescale for that ownership. The length of term can vary from 99 years to 125 years or 999 years.

Listed building:

Generally considered to be of special architectural or historic interest. It can not be altered or demolished without the consent of the local government.

Local Authority Search:

These are the enquiries that are raised by the purchaser’s conveyancer. They are sent to the local authority regarding any outstanding enforcement or future development issues within the immediate area surrounding that property. i.e. road alteration scheme or where there may be new development that are underway or may be in the future.

Loan to Value:

This is the amount of mortgage expressed as a percentage of the property’s total value.

Maintenance Charge:

The costs that are incurred by a freeholder for repairing and maintaining internal and external communal parts of a building which is passed to the leaseholder.

Maisonette:

A property that is over more than one floor, but forming part of a shared property.

Mortgage:

The sum of money that is given by a lender to the borrower that is secured against the property.

Mortgage deed:

The mortgage deed is the legal document that relates to the mortgage lender’s interest in the property and it contains all of the terms and conditions of the mortgage.

Mortgage Offer:

This is the formal document that is given by the mortgage company approving the mortgage amount that a buyer has requested which details all terms and conditions that will apply.

Mortgage Rate:

This is the rate of interest that is to be paid to the mortgage lender

Negative Equity:

Negative Equity may occur when the value of a property falls below the outstanding mortgage amount.

Peppercorn Ground Rent:

A very nominal periodic rent usually paid per annum and possibly in the region of a couple of pounds.

Preliminary enquiries:

Initial enquiries that are raised about the property that is being sold by the legal conveyancer for the purchaser. The seller must answer before exchange of contracts can take place.

Probate:

Probate is the disposal of a property by an executor of a will following the death of the owner.

Purchaser:

Anyone who is buying a property.

Repayment Mortgage:

Your monthly payments which may cover both interest and capital so that the amount that is outstanding will gradually decrease until the mortgage is fully repaid at the end of the agreed term.

Re-mortgage:

The re-financing of a property. It can be done by either switching lenders or by taking a second mortgage to draw on the equity that has been gained by the rise in capital value of the property over the previous years of ownership.

Repossession:

This occurs when the mortgage lender takes possession of the property due to the non payment of the agreed mortgage.

Retention:

A mortgage lender may retain part of a loan until repairs or specified works to the property have been satisfactorily competed.

Search:

A request or enquiry relating to information about the property that is held by the local authority or the land registry department.

Sole Agent:

Where a single estate agent is instructed to sell a property for an agreed term.

Stamp Duty:

The tax that is paid by the purchaser on a property where the purchase price exceeds £125,000. The rates can vary dependant of the purchase price of the home, it can be any where from 1% to 4%. Some areas may be exempt from this charge depending on local conditions

Subject to Contract:

The term used to confirm that a transaction is not legally binding.

Surveyor:

A professionally qualified expert who carries out any instructed survey.

Tenure:

The conditions on which a property is held (i.e. freehold or leasehold).

Title Deeds:

These are the documents showing the legal ownership of a property.

Transfer Deeds:

A legal document that transfers the ownership of a property from the seller to the buyer.

Under Offer:

This is when a seller has accepted an offer from a purchaser but no exchange of contract has yet taken place.

Valuation:

A basic survey for a property to estimate its value. This is normally for mortgage purposes. Any of the mortgage lenders will insist that you have this as a minimum requirement before agreeing to lend any money against the property

Vendor:

A person who is selling a property.