A-Z of Buying Property

Buying or selling property can be an exciting experience, but it can also be frustrating and bewildering. This guide will set you straight on the most commonly used property jargon.

Annual percentage rate (APR)

You will often come across this term in relation to mortgages. APR takes into account the interest rate of your loan, repayment arrangements and any other associated fees to give you an indication of the overall cost of the loan.

Arrears

If someone is in arrears it means they have fallen behind with mortgage payments. If this happens, the mortgage lender may take action to repossess the property.

Building survey

This is sometimes called a full structural survey. It is a thorough inspection of a property carried out by a chartered surveyor. They write a report detailing any defects in the property you are looking to buy. Building surveys are often carried out when people are buying older homes with potentially costly structural problems, or properties that have been heavily altered or poorly maintained. All Colain Homes are offered with a 10 year warranty.

Bridging Loan

A loan to “bridge the gap” between the sale of your present property and the purchase of your new home, when the dates don't coincide (or until long term finance comes through from your mortgage lender).

Completion

The finalising of the sale when all the monies are passed over and the buyer has legal right to the property.

Contract

Entered into by the seller and buyer of a property which only becomes binding on exchange of contracts, i.e. when both parties have signed the contract and the purchaser has handed over the agreed deposit to the solicitor.

Conveyancing

This is any legal work involved in buying and selling a property, including advising buyers and sellers of their rights, researching legal ownership of properties, drafting contracts and leases, and liaising with mortgage lenders and estate agents. A conveyancer is a solicitor, or other legally qualified individual, who deals with this work.

Covenant

A restriction or condition affecting the property, which must be complied with. Deeds All the legal documents relating to the property.

Deposit

A part payment of the agreed purchase price paid by the buyer on exchange of contracts (or conclusion of missives in Scotland).

Disposition or Feu Disposition (Scotland only)

A legal document which transfers ownership of a property to the buyer.

Endowment mortgage

This is one of three main types of interest only mortgage. As well as making regular payments to cover the interest on your mortgage, you pay into an endowment policy to save up money to pay off the actual loan. An endowment policy is a life assurance savings scheme designed to pay out a lump sum at the end of a given period.

Energy Performance Certificate

In future, the sellers of properties requiring a Home Information Pack in England & Wales will be required to provide a copy of a valid Energy Performance Certificate (EPC). It gives details about the energy efficiency of the property.

Exchange of Contracts (in Scotland, Missives Conclusion)

The contracts are in fact two identical documents, one signed by the seller and the other by the purchaser. When these are exchanged, both sides are legally bound to complete the transaction.

Fixed rate mortgage

With a fixed rate mortgage you pay a fixed rate of interest on your mortgage for a set period, so you know exactly what you'll be paying each month. When that period ends, you will often end up paying a variable rate of interest controlled by your mortgage lender.

Freehold

Unlike leasehold, if you buy a freehold property you own it outright and have responsibility for all maintenance and repairs.

Home Information Pack

In future the sellers of properties in England and Wales will need to create a Home Information Pack (HIP) before the property can be marketed. HIPs will contain information about energy performance, legal documentation and other details. This new legal requirement is being phased in over a period of time.

Insurance

You will need:

Contents insurance: To work out how much cover you need for a household contents insurance policy, you need to add up the value of all the possessions in your home. It is recommended that any items of particular value - jewellery for example – are specified and covered by an “all risks” policy, which applies even when the items are not in the home.

Buildings insurance: Cover for the bricks and mortar of your home. It is advisable to review insurance cover regularly. A figure will be advised on the building survey report.

Interest only mortgage

Along with repayment, this is one of the two main classifications of mortgage. With an interest only mortgage, monthly payments to your mortgage provider only cover the interest on your mortgage. You also have to make regular payments into a long-term savings plan, so that you can pay off your mortgage at the end of the agreed period (the term). The three main types of interest only mortgages are ISA, endowment and pension scheme.

ISA mortgage

This is one of three main types of interest only mortgages. As well as making regular payments to cover the interest on your mortgage, you pay into an Individual Savings Account (ISA) to save up money to pay off the actual loan. ISAs are tax-free savings and investment accounts which have replaced PEPs and TESSAs. They are used to save cash or invest in stocks and shares.

Land certificate

A certificate issued by the Land Registry as proof of ownership.

Land Registry Fees

These are paid through your solicitor to register your ownership of the property with the Land Registry. The scale of fees is fixed by the Government.

Leasehold

Land held under a lease for a number of years, on which ground rent is paid.

Loan to Value (LTV)

Expressed as a percentage, this is the ratio of the value of your mortgage to the value of your house. For example, if a property is worth £400,000 and you take out a mortgage of £200,000 then the LTV is 50%. Some mortgages are only available if you are borrowing under a certain proportion of the total value of the property, so buyers contributing a sizable deposit themselves can get better deals.

Local Authority Search

Carried out by your solicitor, this establishes if your new home is likely to be affected by any planning decisions.

Management Company (In Scotland: Factoring Company)

Apartment buildings usually have a management company responsible for maintaining the main structure, common parts ( eg stairs and hallways ) and landscaped areas. On some developments a management company may also maintain roads, street lighting and open spaces. The management company recovers its costs from each owner through a service charge.

Missives(Scotland only)

The name given to a contract. Missives are letters exchanged by the purchaser (making an offer for the property) and the seller (accepting the offer).

Mortgage

This is simply a loan taken out to buy a property. Your mortgage provider or mortgage lender might be a bank, building society, or specialist mortgage lending company. If you change your mortgage lender or your method of repayment without moving house, you are remortgaging.

Mortgage Indemnity Insurance / Guarantee

Your mortgage lender will usually require additional security if the loan is in excess of 70% or 80% of the purchase price. This involves a once-only payment which can normally be added to your mortgage. The amount of the payment varies with the amount borrowed and the term of the loan.

Mortgage Protection Policy

An insurance policy often arranged in conjunction with a repayment mortgage, which is taken out to ensure that the loan will be paid off should the borrower die before the end of the mortgage term. Insurance may also be available to protect your repayments in the event of redundancy.

Mortgage Valuation Survey

Prior to making a mortgage offer your lender will have the property valued for “mortgage purposes”. You will pay a fee (variable on the purchase price of the property).

National House Building Council

A non-profit making body whose role is to both protect the home buyer and help the industry to construct good quality new homes. When the developer is registered with NHBC, inspectors carry out spot checks and regular examinations on all properties at varying stages of construction. The NHBC also provides a 10 year Buildmark warranty.
www.nhbc.co.uk

Negative equity

This is a situation which arises if the value of your house falls to less than the value of the mortgage you have taken out to buy it. This is bad news. It means that you would be unable to repay your mortgage by selling the property and are therefore unable to move.

Pension scheme mortgage

This is one of three main types of interest only mortgages. As well as making regular payments to cover the interest on your mortgage, you use part of your pension to pay off the actual loan. This type of mortgage is generally suited to self-employed people and higher rate taxpayers.

Pied à terre

Directly translated from the French, this means "foot on the ground". In property jargon, it refers to a property kept for temporary, secondary or occasional occupation.

Public liability insurance

This type of insurance covers you should anyone suffer injury or death in or around your home, for example a trespasser or someone hit by a falling object (better get those loose tiles fixed!). It is sometimes, but not always, included in Building or Contents insurance.

Repayment mortgage

Along with interest only, this is one of the two main classifications of mortgage. With a repayment mortgage, you make monthly payments to your mortgage provider for an agreed period (the term) until you have paid back both the loan and the interest on it.

Searches

A term used to denote the physical and written procedure for determining any adverse effects in/on a particular property, whether already in effect or planned to take place.

Secured

A mortgage is a loan secured on your home. This means that, if you don't repay it, your mortgage lender may retrieve their money by selling your home.

Settlement(Scotland only)

The end of the house buying process, when the deeds of the new house and other documents are handed over, in return for the agreed price.

Sold subject to contract

Sold 'Subject to Contract' (STC) means that the seller and buyer are proceeding with the sale but the paperwork is not yet complete.

Stamp duty

Stamp duty is the government tax you pay when purchasing property or shares. In the case of property, it is stamp duty land tax. Currently, if you are buying a property for less than £125,000 then you don't have to pay any stamp duty land tax. You are also exempt from the tax if the property you are buying is in an area designated by the government as "disadvantaged" and the purchase price is under £150,000. Normally, when buying a property worth over £125,000, you will have to pay between one and four percent of the purchase price (on a sliding scale).

Standard variable rate mortgage

Here you will be paying back money at a rate decided by your mortgage lender, without any discounts or deals. It's variable, meaning the interest may go up or down.

Tenancy agreement

This is a legal document setting out the conditions of a rental agreement, including the rights of both the tenant(s) and the landlord.

Title

The rights and liabilities that attach to the property.

Title Deeds

Legal documents describing the rights and liabilities that attach to the property and prove ownership of property.

Title report on

Solicitors' certificate confirming that the title to the property is acceptable. A Lender must have one before an advance cheque for the mortgage monies can be issued.

Tracker mortgage

Nothing to do with chocolate bars or satellite devices, this is a mortgage with an interest rate linked to the Bank of England rate, or another base rate. The interest rate will go up and down depending on this rate, irrespective of the mortgage lender.

Under offer

If a property is under offer, the seller has accepted an offer from a buyer but not yet exchanged contracts.

Vendor

You will come across this term in legal documents; it's just another word for the seller of a property.

Will

As a homeowner, it is advisable to make a will – or alter an existing one. Your solicitor can advise you.