Glossary

An up-front, one off fee paid to the lender to protect them against the borrower defaulting on the loan. This is usually, charged on mortgages over 75% of the house value, and is also known as a MIG, Mortgage Indemnity Guarantee Premium or Mortgage Indemnity Premium.

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Q. Annual Percentage Rate

(APR) the total cost of a loan - including all costs, interest charges and arrangement fees - shown as a percentage rate and easily comparable with mortgage interest rates.

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Q. Arrangement Fees

The fees charged for arranging a mortgage loan. These are usually applied to loans where a special interest rate applies e.g. fixed or capped rates.

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Q. Auction

The sale of a property to the highest bidder.

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B

Q. Boundaries

Define the area of legal ownership relating to a property.

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Q. Basic variable mortgage rate

The mortgage lender's standard rate of interest which may be increased or decreased periodically by the lender depending on prevailing economic conditions.

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Q. Bridging loan

A temporary loan providing financial cover which allows a buyer to complete on the purchase of a property before selling the previous property.

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Q. Building survey (formerly a full structural survey)

A full inspection of the property, conducted by a Chartered Surveyor, who then writes a detailed report including any property defects. Suitable for any house, particularly older properties and those which have been poorly maintained as well as for properties which have been extensively altered or extended, and any property you may wish to alter or extend.

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Q. Buy to let mortgage

A type of mortgage specifically designed for investors buying a property with the intention of letting it out.

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C

Q. Capped mortgage

Provided by lenders with an upper limit on the interest rate which is normally agreed for a fixed period of time. Thus if the standard interest rate is lower than the upper limit the borrower will be charged interest on the lower rate, but if the standard variable rate is higher the borrower will be charged at the agreed rate.

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Q. Chain

The situation that occurs when a buyer is reliant upon completion of the sale of his existing property, in order to complete on the purchase of his next property.

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Q. Completion

The point at which all transactions concerning the property's sale are concluded and legal transfer of ownership passes to the buyer.

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Q. Conditions of sale

The details that determine the rights and duties of the buyer and seller. These may be national, statutory, or conditions imposed by the Law Society.

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Q. Contents insurance

Insurance covering any loss of or damage to your possessions within the property.

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Q. Contract

A legal agreement between the seller and buyer of a property which binds both parties to complete the transaction.

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Q. Contract race

Occurs when two parties have made an offer on the same house. and the seller has said that he will sell to whoever exchanges contracts first, i.e.: it's a race! Both buyers would be aware that this was the case.

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Q. Conveyancer

A qualified individual such as a solicitor or licensed conveyancer who deals with the legal aspects of buying or selling a property.

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Q. Conveyancing

Traditional term used for the legal work involved in the purchase and sale of a property.

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Q. Capital Appreciation/Depreciation

The increase or decrease in the value of an individual's investment in a property.

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Q. Catchment Area

An area surrounding a school in which you must live for your children to be eligible to attend the school.

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Q. Commission

An estate agents fee which is either a fixed sum or based on a percentage of the sale price. VAT may be payable on the commission fee.

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Q. Covenants

Rules and regulations governing the property and contained in its title deeds or lease.

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Q. Council Tax

A tax levied by individual Councils that varies for each borough and is based on property value.

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Q. Credit Checks

Checks carried out by a company on an individual's credit history and worthiness before the loan of funds.

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D

Q. Decision in Principle

See ‘Approval in Principle’

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Q. Deeds

Legal title documents proving ownership. The deeds will be held by the mortgage lender until the loan is paid off.

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Q. Deposit

A sum of money (usually 10% of the property value) paid by the buyer on exchange of contracts.

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Q. Detached

Term used to describe a building that stands alone and is structurally separate from all others.

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Q. Disbursements

Fees paid by the buyer's solicitor on the buyer's behalf such as stamp duty, land registry and search fees.

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Q. Discharge (also called Redemption)

Paying off a mortgage.

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Q. Domestic Energy Assessor

Domestic Energy Assessor - a trained and qualified person who is accredited to a Government approved scheme to provide Energy Performance Certificates for private houses. Only Assessors can prepare the Energy Performance Certificates which have to be included in a Home Information Pack.

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Q. Draft contract

Preliminary, unconfirmed version of the contract drawn up for both parties to consider amendments.

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Q. Deeds Release Fee

Fee paid to the bank or building society holding the deeds to release them to your care.

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E

Q. Easement or 'Right of Way'

A legal term for the right to use a part of someone else's land - e.g. a shared driveway.

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Q. Energy Performance Certificate

one of the documents required to be in a Home Information Pack, it is prepared by a Domestic Energy Assessor and shows the energy efficiency rating of the property, together with an illustration of how this could be improved by taking specified actions to reduce energy wastage.

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Q. Equity Release

Enables the owner of a property to generate either a lump sum or a regular income in return for allowing a lender to take ownership of a portion of the property.

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Q. Early redemption charge (ERC)

A charge made by the lender if the borrower terminates a mortgage in advance of the terms of that particular mortgage. This usually occurs when the borrower has benefited from reduced payments or cash back in the early period of a mortgage.

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Q. Equity

The difference between the value of a property and the amount of mortgage owed.

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Q. Excess

The initial agreed sum paid by the policyholder on an insurance claim.

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Q. Exchange of contracts

The point at which signed contracts are physically exchanged, legally committing the buyer and seller to the purchase and sale of a property at an agreed price.

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F

Q. Fixtures fittings & contents form

A document that details items that the seller has agreed as included in the sale price.

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Q. Fixed rate mortgage

A mortgage in which the interest rate is set for an agreed period of time.

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Q. Fixtures & fittings

All non-structural items included in the purchase of a property.

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Q. Flexible mortgage

An arrangement whereby mortgage repayments can be increased or decreased.

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Q. Freehold

Technical term describing the ownership of the property, meaning that it belongs to the owner without the limitation of time.

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G

Q. Gazumping

Occurs when a seller accepts a higher offer from a third party on a property that they have agreed to sell to someone else, but have yet to exchange contracts on.

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Q. Gazundering

When a buyer makes the seller a lower offer just before contracts are due to be exchanged.

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Q. Greenbelt

Land protected under planning legislation that cannot be built on.

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Q. Gross Income

An individual's total income before tax.

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Q. Ground rent

The annual charge levied by the freeholder to the leaseholder.

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Q. Guarantor

The lender may require a borrower to appoint a guarantor, who promises to pay the borrower's debt if the borrower defaults.

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H

Q. Home Inspector

an individual qualified to prepare a Home Condition Report for inclusion in a Home Information Pack. Only fully accredited Inspectors can do this work - a Chartered Surveyor cannot do the work unless they are also qualified as a Home Inspector

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Q. Home Information Pack (HIP)

a collection of documents about a property being offered for sale, intended to help a prospective buyer know more about the property before making an offer. Contents include an Energy Performance Certificate, Local and Drainage Searches, Proof of Ownership and, for a Leasehold property, details of the lease etc.

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Q. Homebuyer's survey and valuation

This is a survey report, which is not as detailed as a structural survey, and is carried out by a Chartered Surveyor to assess the state of a property and its value.

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I

Q. IFA

Independent Financial Advisor.

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Q. Interest charges (mortgage)

The charges made on a loan by banks, calculated as a percentage of the amount borrowed.

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Q. Interest-only mortgage

With an interest-only mortgage, the debt stays the same throughout the mortgage term. Interest is paid monthly ant at the end of the term, the borrower must produce the money to repay the mortgage.If you choose an interest-only mortgage you are responsible for ensuring that you have sufficient funds available to repay your mortgage at the end of the term.

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Q. Inflation

The continued aggregate increase in prices.

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L

Q. Land registry fees

Are paid to the Land Registry to register ownership of a property.

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Q. Lease

A legal document by which the freehold or leasehold owner of a property lets the premises (or a part of it) to another party for a specific length of time, after which point ownership may revert to the freeholder or superior leaseholder.

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Q. Leasehold

Denotes that the property is occupied by way of a long ground lease from the Freeholder, who may charge an annual ground rent.

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Q. Lender's arrangement fees

Charges passed on to the buyer by the lender for arranging a loan.

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Q. Lender's legal fees

The fees incurred by the lender when arranging a mortgage. These costs are passed on to the buyer.

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Q. Listed building

A building listed as being of special architectural or historic interest, which cannot be demolished or altered without local government consent.

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Q. Loan to value (LTV)

The size of a mortgage quantified as a percentage of the property's value.

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Q. Local authority search

A procedure whereby a buyer's solicitor makes an enquiry to the local council regarding any outstanding enforcement or future development issues which might affect a property or immediate area surrounding a property. These are usually valid for three months.

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Q. Land Registry

A Government department that registers all the details of any land transactions and issues of ownership in England and Wales.

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Q. Legal Charge

A document securing the debt on a property.

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Q. Life Assurance

A type of insurance that provides a fixed amount of money to the policyholder in the event of death.

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M

Q. Maintenance Charge (or Service Charge)

The cost of repairing and maintaining external or internal communal parts of a building charged to the tenant or leaseholder. This is most likely to occur in the case of flats and buildings with shared (common) areas like halls and stairways, roofs and car parking.

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Q. Market value

The price a property should achieve when there is a willing buyer and willing seller.

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Q. Mortgage Application Fee

A charge incurred purely for applying for a mortgage normally paid to the lender up-front at the time of application.

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Q. Mortgagor

The person who has borrowed money on a mortgage and is responsible for repaying it to the lender.

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Q. Maisonette

A property arranged over more than one floor (i.e. a portion of the house), accessed via a private entrance.

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Q. Mortgage

A sum of money advanced by a lender (such as a bank or building society) on the security of a property and repayable over a long period.

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Q. Mortgage deed

A legal document relating to the mortgage lender's interest in the property and containing the terms of the mortgage.

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Q. Mortgage indemnity guarantee (MIG)

An insurance policy that mortgage lenders may require buyers to pay for if their loan is above a specified amount of the purchase price. This protects the lender against failure of the borrower to repay the mortgage.

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Q. Mortgage indemnity premium (MIP)

The premium payable for the MIG (see above). Although the policy benefits the lender, it is the borrower who usually pays the premium.

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Q. Mortgage payment protection (MPP)

An insurance designed to pay your monthly mortgage for a limited period if you are unable to work through illness, disability or redundancy.

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Q. Mortgage rate

The standard variable interest rate quoted by all mortgage lenders which normally varies with the Bank of England base rate. All discounted rates are based on this mortgage rate.

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Q. Mortgage term

The period of time during which or at the end of which the loan is to be repaid.

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Q. Mortgagee

The lender of a mortgage (a bank or building society).

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N

Q. Negative equity

Occurs when the value of a property falls to less than the outstanding mortgage.

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Q. NHBC (National House-Building Council) scheme

A type of building warranty available on some newly-built homes under which defects occurring within a specified time, post construction, are remedied.

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Q. National Association of Estate Agents (NAEA)

Regulatory body for estate agents, which ensures they adhere to codes of practice.

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O

Q. Offer

A sum of money that the buyer offers to pay for a property.

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Q. Offer of a loan

A formal document approving the mortgage that a buyer has requested and detailing the terms and conditions that will apply.

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Q. Ombudsman for Estate Agents

Independent body which investigate complaints on behalf of customers against member estate agents and awards financial compensation if appropriate. Membership of the scheme is voluntary.

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P

Q. Payment break

An option on flexible mortgages that allows the borrower to stop making mortgage payments for up to six months.

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Q. Penalties

Costs that may be incurred if the borrower repays the loan too early or switches between lenders.

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Q. Preliminary enquiries

The initial enquiries about a property put forward to a seller’s solicitor, which the solicitor must answer before the exchange of contracts.

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Q. Premium

The monthly amount payable for an insurance policy.

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Q. Principal

The sum of the loan on which interest is calculated.

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Q. Public liability insurance

Insurance which covers injury to or death of anyone on or around a property.

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Q. Purchaser

The person who is buying a property.

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Q. Part Exchange

Builders offer to buy an existing home and put its value towards the cost of the new home. Full market value is rarely paid as the builder carries the costs and risk of selling the property and a reasonable differential is required between the values of the two properties.

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Q. Payment Protection Insurance

An insurance policy that pays for a loan if the individual becomes unable to work for an extended period of time as a result of redundancy, accident, sickness or disability.

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R

Q. RICS

Royal Institution of Chartered Surveyors. The professional association to which all Chartered Surveyors belong. RICS surveyors can offer clear impartial expert advice on property issues.

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Q. Redemption

Occurs when a mortgage is fully repaid.

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Q. Re-mortgage

Refinancing a property by either switching a mortgage from one lender to another or by taking out a second mortgage to draw upon any equity gained by a rise in value.

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Q. Repayment mortgage

Monthly payments which cover both interest and capital (as opposed to an interest-only mortgage) so that the amount outstanding gradually decreases until the mortgage is fully repaid.

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Q. Repossession

Occurs when the mortgage lender takes possession of a property due to non-payment of the mortgage.

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Q. Retention

The holding back of part of a mortgage loan until repairs or specified works to the property are satisfactorily completed.

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S

Q. Search

A request or enquiry relating to information (concerning a property) held by a local authority or by the land registry.

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Q. Semi-detached

A property which is joined to one other house.

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Q. Service charge

See Maintenance charge.

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Q. Sold, Subject to Contract.

The status of a property, when a seller has accepted an offer from a purchaser prior to exchange of contracts and has agreed to take the property off the market.

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Q. Sole agent

A single estate agent entrusted with a sale or let. Instructing another agent when you already have a sole agent could lead you to have to pay two commission fees.

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Q. Solicitor

A qualified legal expert. Solicitors often handle all documentation for the sale or purchase of a property, but Licensed Conveyancers can also do this.

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Q. Stamp duty

The tax paid by buyers of property above certain price levels.

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Q. Structural survey

See Building Survey.

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Q. Studio flat

A flat consisting of one main room or open-plan living area incorporating cooking and sleeping facilities and a separate bathroom/shower room.

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Q. Subject to contract

Words used to indicate that an agreement is not yet legally binding.

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Q. Surveyor

A professionally qualified expert who carries out the survey.

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T

Q. Tenancy

Temporary possession of a property by a tenant.

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Q. Tenancy agreement

A legal agreement designed to protect the rights of the tenant and landlord setting out all the terms and conditions of the rental arrangements.

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Q. Tenant

The person who has temporary possession of a property.

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Q. Tenants in common

A form of ownership by two or more parties whereby if one of them dies, their share of the property forms part of their estate and does not automatically pass to the other party.

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Q. Tenure

The legal form of ownership of a property (usually either Freehold or Leasehold, but there are other less common forms).

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Q. Terraced house

A property which forms part of a connected row of buildings.

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Q. Title deeds

Documents showing the legal ownership of a property and any conditions affecting it.

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Q. Transfer deeds

The land registry document that transfers legal ownership from seller to buyer.

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Q. Term

The time frame over which the lender agrees to provide a loan.

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Q. Title

The right to ownership of a property.

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U

Q. Under offer

The status of a property, when a seller has accepted an offer from a purchaser prior to exchange of contracts. Also called ‘Sold, Subject to Contract’.

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V

Q. Vacant Possession

Indicates that when the property is handed over to the new owner, it will be vacant of any occupants, including tenants, so that the new owner can move in.

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Q. Valuation

A basic inspection (not a survey) of a property to estimate its value for mortgage or other purposes. Some mortgage lenders insist on a valuation before lending.

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Q. Variable base rate

The basic rate of interest charged on a mortgage. This may change in relation to market conditions, meaning monthly payments can go up or down.

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Q. Vendor

The legal term used to describe the person selling a property. Also called the Seller

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