This blog contains some of the housing market glossary terms you may encounter when selling, buying, or otherwise dealing with property…
APR – Stands for ‘annual percentage rate’, and is the rate of interest paid on a loan.
Arrangement fee – Some lenders may charge this for providing a loan. It can often be added on to the mortgage.
Base rate – This is the interest rate set by the Bank of England that all banks and building societies calibrate their interest rates to. Most banks will set their rates a few percentage points above the base rate.
CCJ – county court judgement – this is given when a home owner defaults on a loan and it may affect your ability to get a mortgage in the future.
Chain – This refers to the sequence of buyers and sellers that can build up when someone is moving house. Most people who sell their homes are also buying at the same time. There can be a ‘chain’ of several buyers and sellers, each dependent on each other for the sale and purchase of their new homes. If one buyer or seller drops out the whole chain may collapse, leading to a domino effect where the paperwork for several properties is delayed or cancelled altogether.
Chain free – This is when a person buying a house is not involved in a chain from selling their house. An example of someone who is chain free is a first time buyer. Chain free buyers are sought after due to their low risk.
Collateral – Your house is used as ‘collateral’ against your mortgage: it will be sold with the proceeds going to the lender if you don’t keep up repayments on the loan you have taken out with them.
Completion – The completion date agreed with the seller on exchange of contracts is the date upon which the seller must give vacant possession and you can take up occupation, But first you must pay the balance of the purchase price. Failure to complete on the agreed date will result in the party at fault being in breach of Contract.
Conveyancing – These are all the legal duties that need to be carried out in order for the house purchase to go through, such as: drawing up the contract that will be exchanged with the seller; making sure there are no planning permission or local development issues regarding the property and register the owner details of the property with the Land Registry.
Decision in principle – This is given by your mortgage provider on receipt of an initial application for a loan, provided you meet their criteria (they will usually do a credit check). The decision in principle means that the lender will provisionally agree to lend you the amount of money you requested, and at the rate you asked for.
Default – This is when you fail to keep up regular repayments on a loan secured on your house. If this happens the lender may repossess your home to recoup his outlay.
Deposit – In mortgage terms this is the amount a borrower pays in cash toward the purchase of a property. Most mortgages today require some deposit; many of the better rates are reserved for people that have got a 30% deposit, or more. This is due to the fact that a higher deposit reduces the risk for the lender.
Discounted rate – This type of mortgage gives a rate lower (or discounted) than the lender’s standard variable rate.
Early repayment charge – A fee charged by a lender to a borrower for paying off their mortgage before its scheduled completion date. This is to compensate for the loss of income that would have been generated had the mortgage run its full course.
EPC – Energy performance certificate – EPC’s show the energy efficiency of a property.
Equity – This the amount of a house that that mortgage borrowers actually own – it’s the difference between the value of the house and how much they still owe on the mortgage.
Exchange of contracts – This is a milestone on the road to buying or selling a house. Exchange of contracts is the point at which you commit to buying or selling the property, but do not take final ownership of it (this is called completion).
Fixed rate mortgage – This is a mortgage where the interest rate is fixed at a certain level for a fixed period – say, two years.
Fixtures and fittings – These are items that come with the house e.g. light fittings, carpets, cooker. The cost of these is usually included in the price of the house.
Freehold – Complete ownership of a piece of land and the property that is on it.
Gazumping – This is when a vendor accepts an offer from a buyer, but then accepts a higher offer from another buyer at the last minute.
Gazundering – This is where the buyer threatens to pull out of a house purchase at the last minute if the price is not reduced. Gazundering is considered the opposite of gazumping.
Guarantor – A person who promises to pay a person’s debt if they cannot keep up repayments on it. Often parents act as guarantors for their childrens’ property if they cannot afford a big deposit.
IFA – Stands for independent financial adviser – someone who is qualified to give impartial financial advice to the general public.
Instruction – This is where you give your estate agent permission or ‘instruction’ to sell your home.
Interest only mortgage – This is a loan where the monthly repayments made to the bank only pay off the interest each month, as opposed to a repayment mortgage where some of the loan and interest is paid off each month. Interest only mortgages are often arranged on the premise that house price will go up and up, and the increase in equity will make it worthwhile.
Land Registry – A government office that stores records of land ownership.
Lease – An agreement between a landlord (freeholder) and a tenant (leaseholder). It lays out the responsibilities of each party to each other.
Lender – A person or organisation that lends money to the public; often lenders are banks.
Mortgage broker – This is the person that can search among a selection of mortgages to find you the best mortgage deal.
Negative equity – When the value of your house falls below that of your mortgage.
Redemption – This is the point at which you pay off your mortgage.
Repayment mortgage – This is a loan where the monthly payments made to the bank are paying back some of the loan, as well as the monthly interest. Compare with an interest only mortgage.
Searches – These are enquires made by the house buyer’s solicitor to the local council to investigate whether there are any planning permissions outstanding on or near the property, e.g. whether there are any planned roads to be built on or near the property. The results of these searches may affect the buyers’ decision to purchase the property.
Stamp duty – This is a tax that property purchasers have to pay when buying property above a certain threshold.
Standard variable rate – The basic rate than at lender charges interest on its loans.
Survey – This is a report produced by a building surveyor on a property for the purposes of valuation and assessing the structure of the property.
Title deeds – These indicate ownership of the property and land. For the duration of a mortgage the deeds stay with the lender. This confirms (if there was any doubt) just who owns the property until the mortgage is paid off!
Under offer – When a property has had an offer accepted but contracts have not been exchanged.
Valuation – An assessment of a property’s value as judged by an estate agent or a surveyor.
Vendor – The person or persons selling the property.