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Home Buying Terminology

As exciting as buying a home is, especially your first one, sometimes the property jargon can leave your head spinning. But that’s where our expertise comes in. We’ve put together a handy guide of common terms you’ll likely hear, or will hear, during the process, from browsing the market to your completion date.

 

A

Annual percentage rate (APR)

 

The total cost of your mortgage loan borrowed for a year (including all costs, arrangement fees and charges), shown as a percentage rate for simple comparison.

Assessment

 

Also known as mortgage valuation, assessments are conducted on the property by the lender to establish whether it’s worth the asking price. Another assessment is a homebuyer survey/report which can be paid for independently. Whichever level of survey you get, it’ll help inform you on the property’s condition and other important factors that may affect your offer.

 

B

Base rate

 

A base rate reflects the Bank of England’s current mortgage rate. This figure can be a key factor in the term length (usually 2, 3 or 5 years) and whether to choose fixed or variable.

Broker

 

A broker, or mortgage advisor, is a qualified advisor who acts as the intermediary between borrowers and lenders, finding homebuyers the best mortgage deal possible for their financial position.

Building insurance

 

Building insurance is a necessary type of insurance that your mortgage provider will require for you to have in place for the length of your mortgage. Though usually applied for at the time of your mortgage, it should be in place by the time you exchange. This covers the cost of repairing/rebuilding following structural damage, such as to the roof, walls, and floors.

 

C

Chain

 

A chain is the group of buyers and sellers who transactionally depend on each other to move. For example, a first-time buyer has no chain as they have no property to sell, but the people above them (the sellers) may also be in the process of buying a new property, and so on – each buyer/seller is a link in this chain. Chains eventually ‘close’, usually by someone moving abroad, into rental, or by agreeing to ‘break’ the chain. And in some cases, properties are sold with no chain, meaning the seller doesn’t need to buy another property before selling.

Completion

 

Completion is the final part of the process where the property ownership is legally transferred to the buyer. The completion date is the date money is transferred to the seller’s solicitor, and you can officially get the keys and move into your new home.

Contents insurance

 

Where building insurance covers the structure, contents insurance covers the ‘stuff’. This isn’t a requirement to have in place, but it’s definitely worth doing to protect your possessions from fire, accidental damage or theft.

Conveyancing

 

Conveyancing is the legal process of transferring property ownership from seller to buyer. This is handled by conveyancers/conveyancing solicitors who handle the contracts, carry out searches, give advice and eventually transfer the money to pay for your property.

 

D

Deeds

 

This is a legal document that assigns ownership of a building to the buyer.

 

Deposit Unlock

The Deposit Unlock scheme helps first-time buyers and home movers to buy a new build home from a participating builder with just a 5% deposit.

 

E

Energy Performance Certification (EPC)

 

The EPC tells you how energy efficient a property is, helping you figure out the rough cost of bills. One of many fantastic new build positives is that they have a better EPC rating, making them cheaper to run overall.

Equity

 

Your home equity is the amount of your home that you actually own. To find this out, simply take away the remaining mortgage payments from the value of your property.

Exchange

 

At this point, both the seller and buyer have signed their contracts agreeing to the sale of the property and it becomes legally binding. Your solicitor will also pay your deposit to the seller.

 

F

Fixed rate mortgage

 

A fixed rate mortgage means that your mortgage repayments have a fixed interest rate over a period of time agreed at the time of getting a mortgage or remortgaging. Most commonly, this will be a period of between two and five years, but it can be longer.

Freehold

 

When you buy a freehold property, it means you own the property and the land it’s built on.

 

I

Interest

 

This is the charge you repay for borrowing money from a lender.

Interest only mortgage

 

This is a type of mortgage where the property owner will only pay the interest on the loan each month. The capital amount is then due at the end of the loan term.

 

J

Joint property ownership

 

Two or more people are the legal owners of the property. Whether you’re registered as ‘joint tenants’ or ‘tenants in common’ affects how much of a property each person owns and what happens to it should a relationship break down or if one owner passes away.

 

L

Leasehold

 

Leasehold means that you are purchasing the property and land for a set lease agreement with the freeholder – for example with apartments. When the lease ends, the property returns to the freeholder unless it’s extended.

Loan to Value (LTV)

 

LTV is the ratio of the home’s value versus the loan you’ll need to get, and is important when applying for an agreement in principle or mortgage. The higher your deposit, the lower your LTV is likely to be.

 

M

Mortgage Charge

 

The total cost of fees charged when you apply for a mortgage, such as admin and valuation.

Mortgage

 

The type of loan used to help you buy a property or plot of land.

Mortgage offer

 

A formal document confirming the lender’s offer, including all details and terms and conditions.

Mortgage term

 

The length of time of which you’ll pay back your mortgage and interest. The longer the term, the lower your monthly payments are likely to be, but the more interest you’ll end up paying.

 

O

Off-plan

 

When you buy off-plan, it means you buy a property before it’s built. This comes with a range of benefits, including getting first pick of your favourite plot, making choices to some of the finishes, and more.

P

 

Part-exchange (PX)

 

If you plan to buy a new home, selling your existing property to a home builder gives you a guaranteed buyer, taking some of the stress out of the sale – just like part-exchanging your car for a new model. Learn more about our part-exchange incentive.

 

R

Remortgage

 

Remortgaging happens when your current mortgage deal expires and you move to a new lender while staying in the same property.

Repayment

 

This simply covers the act of paying back money you’ve borrowed from a lender according to the agreed terms.

Reservation

 

Reserving a new-build home means that the property is yours, but it’s not legally binding until exchange.

 

S

Solicitor

 

A qualified legal practitioner who deals with specialist legal action. They will handle all legal aspects of the home buying/selling process.

SSTC

 

Sold subject to contract – this means the seller has accepted an offer on the property, but it is not yet legally binding.

Stamp Duty

 

Stamp Duty is the tax paid to the government on properties over a certain value. There are exceptions to this, including those buying properties worth £250,000 or less and first-time buyers (who do not have to pay this on properties costing up to £425,000).

 

V

Valuation

 

An assessment carried out in the lender’s interest on the home you’re looking to purchase, confirming the property’s value based on a number of factors. As this is for lending purposes only, you may want to get an independent survey for a detailed report.

Variable mortgage

 

Unlike fixed rate, variable mortgages can change with interest rates, meaning your monthly payments can go up or down over time. These fall into three categories: standard variable rates (SVR), tracker rates and discounted rates.

 

W

Warranty

 

Warranty is an insurance policy taken out by developers to give new-build homeowners peace of mind that any viable issues will be fixed. These can typically last for 10 years.

 

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