Confused by buying / conveyancing terminology?

Let’s explain…

 

A

 

Agreement in Principle – An Agreement in Principle is also known as a ‘Decision in Principle’ or a ‘Mortgage Promise’, a mortgage lender will give you this to confirm how much they might lend you, based on the details you give them. It’s not a binding offer but it could help show sellers and agents that you’re a serious buyer.

APR – Annual Percentage Rate is the interest payable on what you’ve borrowed along with other charges (e.g. arrangement fees) and then expressed as an annual rate of charge. The APR helps you compare the true cost of borrowing, for example for a mortgage. The APR takes into account all fees and charges applied to the mortgage as well as the monthly payments over the life of the loan.

Arrangement fee – This is a fee that might be charged by your mortgage lender for arranging your mortgage. It can sometimes be added to your mortgage amount but if you to do this you will have to pay interest on it.

Asking price – This is the price the seller wants to get for the sale of their property. It is negotiable.

 

B

 

Base rate – This is the interest rate which lenders set their rates for lending and savings products. It’s usually based on the base rate set by the Bank of England.

Broker – A Broker is an independent mortgage broker can offer you independent advice on taking out a mortgage and help you compare mortgage products from different lenders. You don’t have to use a broker.

Buildings insurance – For any mortgage you have to have buildings insurance. You may be offered building insurance from your mortgage provider but it can pay to shop around for the best policy for you. If your property is leasehold and you pay a management or maintenance fee, check if you’re already covered for building insurance.

Buy-to-let mortgage – If you’re planning to buy a property to rent out, you’ll need to get a buy-to-let mortgage. Or if you’re living in a property that you have a mortgage on and you’d like to move and rent it out, you may need to switch to a buy-to-let mortgage, you should speak to your provider to find out.

 

C

 

Capital – Capital is money that you’ve invested or borrowed (e.g. to buy a home). It doesn’t include the income or profit you get from an investment, or the interest you have to pay on a loan or mortgage.

Chancel Search – A chancel search is carried out to check whether the owners of the property are liable to contribute to the cost of repairing the chancel of a parish church.

Chain of transaction – This is used to describe all buyers and sellers who are all dependant on each other moving at the same time. If anyone in the chain pulls out the whole chain may fail and typically everyone will exchange contracts on the same day and will move on the same day.

Coal mining search – This search is carried out in all areas where coal may lie underneath the surface. It reveals information regarding underground and surface shafts and mines. It also confirms whether there has been a claim in respect of subsidence due to coal mining.

Completion -This is when the property becomes legally the buyers. All the forms have been signed, Stamp Duty has been paid and the money is transferred to the seller’s solicitor. The buyer will be able to pick up the keys and move in from this date.

Contract – this is the document, which legally binds you to sell a property. It will not be legally binding until “exchange of contracts” takes place although in signing the contract you will be giving your solicitor authority to “exchange” on your behalf.

Conveyancing – This is the legal work of transferring ownership from one property owner to another. This is carried out by either a solicitor or a qualified conveyancer.

Covenants – These are the things referred to in the title deeds to a property which you must and must not do, i.e. you must not use the property to carry out any trade or business.

Credit rating – Your credit rating is used to help lenders decide whether to lend you money, how much to lend you, how much to let you borrow, and sometimes, how much interest to charge.

 

D

 

Decision in Principle – Decision in Principle is also known as an ‘Agreement in Principle’ or a ‘Mortgage Promise’, a mortgage lender will give you this to confirm how much they might lend you, based on the details you give them and their initial checks. It’s not a binding or formal mortgage offer but it could help show sellers and agents that you’re a serious buyer.

Deposit – When you exchange contracts you must provide a deposit, usually 10% of the purchase price. If you fail to go on and complete you will lose your deposit.

Disbursements – These are monies which are paid to other people on your behalf by your conveyancing solicitor and include Office Copies, Land Registry Fees, Stamp Duty, H.M. searches, Bankruptcy search, Local search and Environmental search.

Deposit for mortgage – This is the amount of money you will need to pay upfront when buying a property and is normally a percentage of the total price.

 

E

 

Early redemption fee – The charge made by lenders if a mortgage is repaid early i.e. during a fixed rate discount period.

Equity (in property) – The difference between how much your property is worth, the balance of your outstanding mortgage and any other debts secured on the property.

Equity release – Equity release is a way of releasing extra money by borrowing against the equity in your home.  Speak to your mortgage lender for more details.

Energy Performance Certificate (EPC) – The Energy Performance Certificate tells you how energy efficient a building is and gives it a rating (A = very efficient and G = inefficient). It gives you an idea of how costly the building will be to heat and light. If you’re selling or renting out your property, you must get a Domestic Energy Assessor to create the EPC before you start marketing the property for sale or rent.

Exchanged/ exchange contracts – this is the swapping of signed contracts between the two parties. It involves a telephone call between solicitors. At this point both the seller and buyer are legally bound to the sale. A completion date will be set when contracts are exchanged and cannot be altered later (except where you are buying a new property where completion will be on notice).

 

F

 

Fixed-rate mortgage – When an interest rate is fixed for an agreed period of time, usually two or five years. Repayments will remain the same during this time, regardless of other interest rate rises or falls.

Fixtures, fittings and contents form -This is completed by the seller. It sets out a full and comprehensive list of all the different kinds of fixtures and fittings which the Seller will include (or not include) in the sale. Items may also be indicated which the Seller will be prepared to sell separately.

Full building survey – This is carried out by a surveyor and is good for older, larger or non-traditional properties. It provides a thorough inspection and detailed breakdown of the property condition including any structural defects, necessary repairs and maintenance advice.

 

G

 

Gazumping – This is when a property seller, who has accepted your offer, then accepts a higher offer from someone else.

Gazundering – This is when the buyer, who has had their offer accepted, demands a reduction in price, usually just before contracts are exchanged. The seller is then forced to choose between the lower price and risking the sale collapsing if they reject it.

 

H

 

Help to Buy – A Government initiative that aims to help first-time buyers get on the property ladder. It was designed to help those who can afford mortgage repayments but might be struggling to save up a 20% deposit.

There are two different parts to the initiative: an Equity Loan mortgage and a Mortgage Guarantee.

Homebuyer’s report – this is a detailed report by a surveyor, with advice on defects affecting the property value, and details of any likely future maintenance or repair costs. This type of survey is less extensive than a full building survey but more extensive than a lenders’ valuation.

 

I

 

Indemnity policy – This is an insurance policy taken out if there is a defect in the title of the property, which you are selling. It is normal for the seller to pay for such a policy. It is a one-off payment and depends on the value of the property and the defect, which affects the property. Defects include missing title deeds, missing rights of way, etc.

Interest rates – The rate at which you pay back interest, which is shown as a percentage of the amount you borrow.

 

J

 

Joint ownership – When two or more people purchase a property it is important to know how the property will be held between them. They can hold it in one of two ways:

Joint tenants – This means if either person dies then the property passes to the survivor.

Tenants in Common – This means that the parties have a divided share, e.g. 50/50 and when one party dies their share passes according to a Will.

 

L

 

Land and Buildings Transaction Tax – When you’re buying a property or land in Scotland, you have to pay Land and Buildings Transaction Tax.

This is a tax to be paid, if you buy a property or land worth over £145,000. Again, the amount you need to pay depends on the purchase price of the house, it is higher for more expensive properties, and rises to 12% for homes that cost over £750,000.

Land Registry Fees – These are the fees payable when your conveyancing solicitor registers your property into your name at the Land Registry. The amount depends upon the value of your property.

Loan to Value (LTV) – The size of your loan compared to the value of your property. For example, if your home is valued at £100,000 and you have a mortgage of £80,000, your LTV is 80%.

Local search – This search is carried out with the Local Authority where the house is situated. It shows entries with the property only and should you have any queries with neighboring land you will need to approach the Local Authority direct.

 

M

 

Mortgage Offer of Advance – This comes after you have completed your application and your survey has been carried out. This is the formal offer of a loan of monies from a Bank or Building Society. It will set out terms, i.e. how much, for how long and at what interest rate. You will get a copy of this at the same time as your conveyancing solicitor.

 

O

 

Occupiers Consent form – If a person is moving into a property who is not a party to the mortgage and is over 17 years of age then they must sign a consent form. This means that if a lender needs to re-possess the property the “occupiers” will vacate and any interest they may have acquired comes after the bank’s interest in the property. Any occupier will be told to take independent legal advice as they may be giving up legal rights.

Office copies – This is an up to date copy of your title deeds, which your conveyancing solicitor will obtain from the Land Registry.

Offset mortgage – A type of mortgage where your savings and current account balances are linked to your mortgage. You could save money because you won’t pay interest on the amount of mortgage debt equivalent to your savings. So if you have a mortgage of £100,000, savings of £10,000 and a typical current account balance of £2,000, you pay mortgage interest on £88,000.

 

P

 

Payment holiday – a period of one or more months when you don’t make repayments on your mortgage, although interest continues to accrue during that time.

Property information form, additional property information form & buyers form – These are basic information forms which are completed by the Seller which sets out wat he or she knows about the property.

 

R

 

Retention – This is where the lender holds back some of the mortgage money until repairs have been done.

 

S

 

Stamp Duty Land Tax (SDLT) – A tax you have to pay if you buy a property or land worth over £125,000. The amount you need to pay depends on the purchase price of the house. It’s higher for more expensive properties. Stamp Duty is paid at a percentage of your purchase price.

Also, from 1st April 2016, buyers purchasing a second, third or more property will face an additional 3% stamp duty on top of the existing bands.

Standard variable rate (SVR) – An interest rate that you will pay at the end of any fixed tracker/period. The SVR of each lender is set by that lender and they can vary it at any time. This rate will normally change when the Bank of England’s base lending rate changes.

Standard valuation – this is the minimum check that has to be carried out on a property for a mortgage. It’s not the same as a survey. The property will be inspected and any obvious major defects that could affect the value are noted. It will then be compared to similar properties, taking age, condition and location into account. This information is used to write a valuation report, called a Standard valuation.

 

T

 

Title Deeds – The Land Registry now holds all information regarding the legal ownership of properties electronically. On completion of your purchase or remortgage you will receive a Title Information Document, which shows the current position at the Land Registry.

Tracker mortgage – This a mortgage where the interest rate moves directly in line with another rate for a certain period of time, usually two, three or five years. So if the interest rate rises or falls, your monthly mortgage payment will go up or down too. At the end of the tracker period, your interest rate will usually go back to the Standard Variable Rate.

Transfer – TR1 – This is the document which is used to change the ownership of the property at the Land Registry from the Seller to the Buyer.

 

U

 

Undertaking – This is a promise to do something, i.e. if your property needs some work doing your mortgage company may require you to sign an “undertaking” which is a promise to do the works within a certain period of time.

 

V

 

Valuation – This is the lenders’ surveyors’ inspection of the property to assess whether it is suitable for a mortgage.