JARGON BUSTER GUIDE

At Eddy Estates, we understand that buying and selling property can be a confusing and stressful process.  Property is the highest value asset most of us will ever own, so the pressure is on to ‘get it right’.  We hope our jargon buster guide will help you through the confusing language used in a property transaction.  We are always available to help you through the process.

A

Advance – The amount of your mortgage loan

APR (Annual Percentage Rate) – is the annual rate charged for borrowing. APR is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan.

Architects Certificate – A warranty ensuring property is built in accordance with the approved plans, complies with building regulations and is to a good standard.

Arrangement Fee – A fee you pay for the lender to set up your mortgage.

Assignment – A transfer of rights between two parties. For example, the seller (assignor) transfers the rights or benefits of their property to the buyer (assignee).

B

Balance Outstanding – The amount of loan that is still outstanding.

Bank of England Base Rate – Is the interest rate that the Bank of England charges Banks for secured lending. It is the basis Bank and Building Societies then set their interest rates on.

Bridging Loan/Finance – A short term loan to cover an interval between two transactions, typically the buying of one house and the selling of another. Beware can be an expensive option.

Buildings Insurance – A policy which covers the financial cost of repairing damage to the physical structure of a property. This includes the roof, floors, and walls, as well as any fitted or permanent fixtures (i.e. a fitted kitchen).

Building Regulations – Define how new buildings, conversions, renovations and extensions (domestic or commercial) are to be constructed.

Building Society – A financial institution that provides banking and other financial services to its members.

Buy to Let – A property bought with the intention of letting it out rather than living in it.

C

Cashback Mortgage – Pay a cash lump sum if your purchase is successful.

Chain – A chain is formed if you need to sell in order to buy.

Chain Free – The vendor is not buying another property.

Completion – It is the date on which title to the property is transferred by the seller to the buyer and the buyer takes possession of the property. 

Completion Statement – A document provided by your solicitor/conveyancer of all the financial transactions and costs.

Content Insurance – A policy which covers your household possessions against loss, damage or theft.

Contract – It is the legal document between the buyer and seller for the purchase/sale of a property and once the contract is exchanged it is legally binding on all parties.

Contract Race – Where a seller receives and accepts two or more offers on their property and will sell to the party who is ready to exchange contracts first. In transactions involving land, it means that the seller intends to deal with more than one potential buyer at the same time.

Conveyancer – A professional person who acts for the seller, buyer, and lender when purchasing or selling a property.

Conveyancing – The necessary process when buying or selling a property, conducted by either a Solicitor or Licensed Conveyancer.

Covenant – A provision contained within the Title Deed or Lease which affects or limits its use.  For example restrictions on erecting a fence or trading from a property.

D

Deeds – A legal document showing ownership of a property or land.

Defective Lease – The vendor may have to obtain a Deed of Variation and will need the freeholder’s permission to change the original terms of the lease.

Deposit – A sum of money that the buyer pays on the exchange of contract usually 10%.

Disbursements – Fees other than legal costs solicitors have to pay to other organisations such as searches.

Discount Mortgage – (Variable Rate) Lenders offer a discount on their mortgage rate, usually for an introductory term of two, three or five years.

Draft Contract – The initial version of your contract issued by your solicitor/conveyancer.  It may be amended during the process of the sale but becomes final on the exchange of contracts.

E

Easement – The right to cross someone else’s property or land.

Early Repayment Charge – If you repay your mortgage early there may be a charge.

Energy Performance Certificate (EPC) – A legal requirement for all properties being rented or sold.  It is an energy efficiency rating for your property and is valid for 10 years.

Enquiries – Questions raised by the buyer’s solicitor/conveyancer, usually about the survey, searches or property information pack.

Equity – It is the difference between your property value and the amount of outstanding mortgage/loan on it.

Exchange of Contracts – Buyer and seller sign identical contracts, the solicitors will exchange contracts usually with the buyer paying a 10% deposit, at this point the sale becomes legally binding.

F

Financial Conduct Authority (FCA) – Is a financial regulatory body to protect the customer.

Fixed Rate Mortgage – A mortgage where the rate is fixed for a number of years and then it generally reverts back to the variable rate.

Fixtures and Fittings – Items that may be included in a property sale and are disclosed in the Fixtures and Fittings List.

Flexible Mortgage (Offset Mortgage) – Allows you to pay more off your mortgage each month.  Then you can either pay it off earlier or apply to borrow back previous overpayments, take payment holidays or pay less each month.

Flying Freehold – One freehold which overhangs or underlies another freehold.

Freehold – The legal ownership of the property and land on which it stands.

Full Structural Survey – For older properties, this survey is a lot more comprehensive and gives you a highly detailed review of its condition.

Further Advance – Is taking on more borrowing from your current mortgage lender.

G

Gazumping – Is when a seller pulls out of a sale after accepting an offer on a property from one potential buyer but then accepts a higher offer from someone else.

Gazundering – When the buyer reduces his agreed price usually just prior to exchange.

Ground Rent – An annual fee paid by the leaseholder to the freeholder.

Guarantor – Is a third party who agrees to pay your mortgage/rent if you don’t for any reason.

H

Higher Lending Charge – A charge made by your mortgage lender if the loan-to-value ratio is higher than they are prepared to accept at standard rates. Usually in excess of 90% of the property value.

Home Buyers Report – A more detailed visual inspection of the property than a valuation, commenting on its condition, highlighting areas of concern.

I

IFA (Independent Financial Adviser) – A person who gives financial advice and will help you shop around for the best deal.

IDD (Initial Disclosure Document) – A document designed to assist you in comparing the services provided and the fees and charges made by lenders and intermediaries.

Identity Checks – The Money Laundering Regulations requires us to ensure sellers and buyers are who they say they are and obtain two forms of ID: Photo ID as proof of identity and a proof of address.

Informal Tender – A property remains open to offers for a specific time, during this time sealed bids are collected, after the deadline has closed all the tenders are opened and the vendor can choose which offer is most suited to them. It is not a legally binding contract and the vendor is at liberty to accept a higher offer at any time.

J

Joint Mortgage – When you buy a property with another person (your partner, family member or friend).

Joint Sole Agency – When two agents agree to sell your property, they both receive a commission irrespective of who introduces a buyer, the selling agent getting the higher ratio.

K

Key Facts Illustration (KFI) – Contains key mortgage information which is designed to help you compare the costs and features of different mortgages from one or more lenders. It is designed to make it easy to compare mortgages at a glance.

L

Land Certificate – A certificate issued by the Land Registry prior to 2002 to the owner of registered land as evidence of ownership. Where the property was subject to a mortgage or charge the Land Registry issued a charge certificate instead.

Land Registry – A government organisation that holds records of all registered properties in England and Wales.

Land Registry Fee – A Land Registry fee to register your details if you have bought a property or changed mortgage lenders.

Leasehold – You are the legal owner of the property but the land on which it stands is owned by the freeholder.  This normally requires payment of ground rent to the freeholder. Length of lease varies and diminishes with time but can be renewed or extended.

Life Assurance – Insurance which pays out a lump sum to your dependents should you pass away during the term of the policy. Policies can run alongside your mortgage and will pay off all or part of the outstanding debt in the event of your death.

Listed Building – A building which is listed as being of special architectural and historic interest, local government consent is required prior to any demolition or alteration.

Local Authority Search – A search of the local area to highlight anything that may impact on the property or surrounding area, e.g. planned road building, planning permissions, etc.

Loan to Value (LTV) – A financial term used by lenders.  The ratio of loan to the property value as a percentage. For example, if your mortgage amount was £80,000 and your property is valued at £100,000 your loan to value is 80%.

M

Maisonette – An apartment which is on two levels, with its own separate access.

Monthly Interest – Mortgage interest calculated on a monthly basis.

Mortgage Deed – A legal document that must be signed by the borrower, it must be in place and will be dated on the day of completion. By signing the deed, the borrower is agreeing to the terms of the mortgage offer and agrees for the lender to have a secured charge over the property.

Mortgage Indemnity Guarantee – An insurance policy that protects lenders if the mortgage repayments cease for some reason, usually if the loan-to-value ratio is higher than they are prepared to accept at standard rates. Usually in excess of 90% of the property value.

Mortgage Offer – A document confirming that the lender is happy to lend you the money to purchase the property.

Mortgage Payment Protection Insurance (MPPI) – This is insurance designed to pay your monthly mortgage payment for a limited period, usually a year, if you are unable to work through illness, accident or redundancy.

Mortgage Term – The length of time over which the mortgage is to be repaid.

Multiple Agency – When you employ more than one agent to sell your property. The selling agent takes the whole fee. Fees will be higher.

N

Negative Equity – When the value of the mortgage which is outstanding on the property, is more than the market value of the property.

NHBC (National House Building Council). A warranty scheme for new builds providing cover against major structural defects for 10 years.

O

Office Copy Entries – Certified copies of the land or charge certificate, obtained from the Land Registry, confirming ownership of a property.

Ombudsman – An independent professional body which is set up by law to help settle individual disputes between consumers and firms.

Outline Planning Permission – An application to establish whether the scale and nature of a proposed development would be acceptable to the local planning authority before a fully detailed proposal is put forward.

P

Peppercorn Rent – A token or nominal ground rent.  It is needed in order to enforce the terms of a lease.

Planning Permission – Formal permission from a local authority for the erection or alteration of buildings or similar development.

Premium – The amount you pay regularly, monthly or annually, to an insurer for an insurance policy.

Private Sale – Sale of a property without the use of an estate agent.

Product Fee – A fee that may be charged when you apply for a mortgage, also known as an arrangement fee.

R

Redemption Figure – The final figure to settle your mortgage at a fixed point in time. This will be the balance of your mortgage plus any early repayment fees or penalties which may apply.

Remortgage – The process of moving your mortgage without moving home. You take a new mortgage with a different lender to pay off your old mortgage.

Repayment Mortgage – Your monthly payments pay off the interest and some of the capital borrowed. By the end of the term of your mortgage, you will have paid off all your mortgage debt.

Retention – Holding back part of a mortgage loan until any repairs to the property are satisfactorily completed.

S

Service Charge – Charges payable by the leaseholder to the freeholder for the cost of repairing and maintaining external and/or internal communal parts of a building.

Share of Freehold – Means that when you buy a flat, the lease on the property comes with a share of ownership of the building (Freehold), which gives you more control over the management of the building. It is important to remember that when purchasing a property with a share of freehold, the property is still a leasehold property.

Sinking Fund – When you buy a leasehold property, part of the service charge may be paid into a sinking fund. This builds up over the years to cover future projects that may be needed to repair or improve the building. The freeholder or the property management company will be responsible for the service charge management and will notify leaseholders if part of the service charge will be paid into a sinking fund.

Sold Subject to Contract (STC) – When an offer has been accepted by the vendor and that a sale is proceeding with solicitors. It means the same as ‘Under offer’ or ‘Sale agreed’

Sole Agency – Where you give an agent exclusivity to sell your property for an agreed period of time.  Sole Agency fees are lower than where more than one agent is instructed.

Sole Selling Rights – This means that the appointed selling agent will be due to the agreed fee, even if you end up selling your property privately or through another agent.

Stamp Duty Land Tax – A tax you must pay on a property when you purchase it. The duty must be paid at the point of completion.

Subject to Contract – Indicates that an agreement is not yet legally binding.

Settlement – Buildings are heavy things and, as their weight is taken up by the ground, a little movement caused by this adjustment sometimes occurs as the ground consolidates under the new load – this is settlement.

Subsidence – This is caused when a building’s foundations sink because the soil is unstable. Contributory factors are clay soil, vegetation that draws water from the soil, and leaking drains.

Survey – A thorough report on the property you are planning to buy. This can be a full structural survey, a homebuyers report or a basic mortgage valuation.

T

Tenancy in Common – Is when two or more people have ownership interests in a property, if one dies, their share of the property forms part of their estate and does not automatically pass to the other(s).

Tenure –  Refers to the various ways that you can own property, for example, freehold or leasehold.

Title – The record of ownership of a property, the evidence of which is found in the title deeds.

Tracker Mortgages – Tracker mortgage normally follows movements in the base rate set by the Bank of England. This means that if the base rate falls, the amount you pay falls. Likewise, if the base rate goes up, so will your payments.

Transfer Deeds – The Land Registry document that transfers legal ownership from seller to buyer.

Transfer of Equity – when a property owner adds or removes one or more people from the title.

U

Under Offer – When an offer has been accepted on a property and that a sale is proceeding with solicitors.

Underpinning – In construction or renovation, underpinning is the process of strengthening the foundation of an existing building or other structure.

V

Valuation – A valuation of the property for mortgage purposes to ensure that the property is worth the amount requested for a mortgage

Valuation Fee – The charge for the valuation of the property.

Variable Interest Rate – The rate of interest fluctuates over time usually in line with the base rate.

Vendor – The seller of a property or piece of land.

W

Y

Yield – The yield of the property tells you the annual return on your investment. The gross yield is calculated by looking at the rental income you receive as a percentage of how much the property cost.