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.
Charged to arrange a loan on certain products. Usually applied to loans where a special interest rate applies e.g. fixed or capped rates.
Basic Variable Mortgage Rate
Mortgage lender’s standard rate of interest which may be increased or decreased periodically by the lender depending on prevailing economic conditions.
A temporary loan providing financial cover which allows a purchaser to complete on the purchase of a new property before selling the previous property.
Building Survey (formerly 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. Also for properties which have been extensively altered or extended, or any property you may wish to alter or extend.
Buy To Let Mortgage
A type of mortgage specifically designed for people buying a property with the intention of letting it out.
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 new property.
The CML is the main trade body representing UK mortgage lenders. They promote good practice, collect and publish data on mortgage lending, comment on market issues, and liaise on behalf of our members with many organisations, government departments, and commentators who have an interest in the UK’s £1.3 trillion mortgage market.
The point at which all transactions concerning the property’s sale are concluded and legal transfer of ownership passes to the buyer.
Conditions of Sale
The details which determine the rights and duties of the buyer and seller. These may be national, statutory, or the Law Society’s conditions.
A legal agreement between the seller and buyer of a property which binds both parties to complete the transaction.
A qualified individual such as a solicitor or licensed conveyancer who deals with the legal aspects of buying or selling a property.
Legal title documents proving ownership. The deeds will be held by the mortgage lender.
Fees paid by the buyer’s solicitor on the buyer’s behalf such as stamp duty, land registry and search fees.
Paying off a mortgage.
Early Redemption Charge (ERC)
A charge made by the lender if the borrower terminates a mortgage in advance of the terms of the particular mortgage. Normally occurs when the borrower has benefited from reduced payments or cash-back in the early period of a mortgage.
Energy Performance Certificate. Since October 2008 it has been required to have an Energy Performance Certificate (commonly called an ‘EPC’) whenever your property is rented out. This is part of European legislation to tackle climate change and reduce carbon dioxide emissions. The report grades buildings from A (most energy efficient) to G (least energy efficient) and suggests possible improvements that can be made to improve your property’s energy rating.
The difference between the value of a property and the amount of mortgage owed.
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 the agreed price.
Failed Valuation Survey
When the lender turns down your mortgage application after the surveyor’s valuation report indicates the property is not worth the sum sought.
Fixed Rate Mortgage
A mortgage in which the interest rate is set for an agreed period of time.
Fixtures & Fittings
Items usually provided in a letting – curtains, carpets, blinds, light fittings, kitchen units, appliances, (in the case of some lettings there will beds, chairs, tables and other items of fixtures and fittings provided). It is advisable to always check as to what is to be left in the property and not to assume that items in the property when viewed will actually be provided.
An arrangement whereby you can increase or decrease your mortgage repayments.
A legal term traditionally used to describe land and everything built on it and owned in perpetuity. If there is any time element associated with the ownership, however long that might be, the ownership is not freehold.
This is 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 not yet exchanged contracts.
When a buyer offers the seller a lower offer just before contracts are about to be exchanged.
Rent payable by the leaseholder to the freeholder for the land on which the building sits. This provides an income to the Freeholder (so is not payment for any services provided) and the level of ground rent is set out in the Lease. Often, ground rent payable escalates over time, typically increasing every 25 years or so.
Home Condition Report
Similar to a Homebuyers Survey this can be included in a Home Information Pack.
Homebuyer’s Survey & Valuation (House/Flat Buyer’s Report)
This is a survey report, which is not as detailed as a structural survey, carried out by a chartered surveyor to assess the state of a property and its value.
There are 2 types of mortgage: interest-only or capital repayment. Interest-only mortgage stays the same throughout the mortgage term. Interest and a premium to an investment vehicle are paid monthly. At the end of the term the proceeds from the investment vehicle are intended to repay the mortgage. The amount will depend on the performance of the investment vehicle. If you choose an interest-only mortgage you will be responsible for ensuring that you have sufficient funds available to repay the balance of your mortgage at the end of the term.
Land Registry Fee
Paid to the Land Registry to register ownership of a property.
A leasehold to a property is the right to use a piece of land for a given period of time subject to certain conditions and (usually) subject to payment of a ground rent.
This is another form of legal tenure, and is different from freehold. It means that you buy a right to the property temporarily but do not own the land it stands on.
Lender’s Arrangement Fees
Charge passed on to the buyer by the lender for arranging a loan.
These are buildings listed on the Statutory List of Buildings of Special Architectural or Historic Interest. There are currently three categories of listed buildings in England and Wales ranging from Grade I with greatest significance through Grade II* to Grade II. Only 2%of the buildings in England and Wales are listed and the vast majority of these are old buildings – for example, most buildings built before 1840 are listed.
Loan To Value (LTV)
The size of the mortgage as a percentage of the property’s value.
Local Authority Search
Procedure whereby a buyer’s solicitor makes an enquiry to the local council regarding any outstanding enforcement or future development issues which might affect the property or immediate area.
The costs that are incurred by a freeholder for repairing and maintaining internal and external communal parts of a building which is passed to the leaseholder.
A property arranged over more than one floor (ie: a portion of the house).
A legal document relating to the mortgage lenders interest in the property and containing the terms of the mortgage.
Mortgage Indemnity Guarantee (MIG)
An insurance policy that mortgage lenders may require buyers to pay for if their loan is above a specified proportion of the purchase price.
Mortgage Indemnity Premium (MIP)
An insurance policy that protects the lender against default of mortgage repayments. Although the policy benefits the lender, it is the borrower who usually pays the premium.
Mortgage Payment Protection (MPP)
This is an insurance designed to pay your monthly mortgage for a limited period, usually a year, if you are unable to work through illness, disability or redundancy.
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.
The period of time over which (repayment mortgage) or at the end of which (endowment mortgage) the loan is to be repaid.
Movers Protection Insurance
If anything goes wrong during the sale, and you cannot proceed, this insurance will reimburse you with the costs associated with the sale.
When the value of the property falls to less than the outstanding mortgage.
NHBC Scheme (National House-Building Council)
A type of building guarantee available on some newly built homes under which defects occurring within a specified time after construction are remedied.
Independent professional bodies who investigate complaints on behalf of customers against, for example, estate agents, solicitors and insurance companies.
Open Market Value
The price a property would achieve when there is a willing buyer and willing seller.
An option on flexible mortgages that allows you to stop making mortgage payments for up to 6 months.
Costs that may be incurred if the borrower repays the loan too early or switches between lenders.
Peppercorn Ground Rent
A nominal periodic rent usually paid annually.
The initial enquiries about a property put forward to a seller which the seller must answer before the exchange of contracts.
Lump sum paid up front as rental for a property
The sum of the loan on which interest is calculated.
Public Liability Insurance
Insurance which covers injury or death to anyone on or around your property.
Refinancing a property by either switching a mortgage from one lender to another or by taking out a second mortgage to draw down any equity gained by a rise in value.
When a mortgage is fully repaid.
A mortgage repaid by way of monthly repayments of capital combined with interest.
When the mortgage lender takes possession of your property due to non-payment of the mortgage.
Holding back part of a mortgage loan until repairs or specified works to the property are satisfactorily completed.
A request or enquiry for information concerning the property held by a local authority or by the land registry.
A property which is joined to one other house.
Service charges are levied by the management company to recover the costs they incur in providing services to a building. The way in which the service charge is organised is set out in the tenant’s lease or tenancy agreement. The charge normally covers the cost of such matters as general maintenance and repairs, insurance of the building and, where the services are provided, central heating, lifts, porters, lighting and cleaning of common areas etc. Service Charge is collected in advance of expenditure so that the landlord is not out-of-pocket in providing the services.
A tax paid by purchasers of properties with a value in excess of £125,000, of between 1% and 4% depending on value. The tenant is responsible for paying any Stamp Duty (SDLT Stamp Duty Land Tax) The starting point is currently is £120,000 in one agreement, therefore unless for example the rental (without any gardening / cleaning or other additions included) is under £10,000 a month there will not be any Stamp Duty Land Tax to pay.
See Building Survey.
A flat consisting of one main room or open-plan living area incorporating cooking and sleeping facilities and a separate bath/shower room.
Subject To Contract
Words to indicate that an agreement is not yet legally binding.
Professionally qualified expert who carries out the survey.
Tenants In Common
A form of ownership by two or more people in which if one of them dies, their share of the property forms part of their estate and does not automatically pass to the other(s).
The nature of ownership of a piece of land, which determines whether an occupant is an owner or a tenant. Freehold and leasehold are examples of tenure that land can be held under.
A property which forms part of a connected row of houses.
Documents showing the legal ownership of a property.
The land registry document that transfers legal ownership from seller to buyer.
The status of a property for sale, when a seller has accepted an offer from a purchaser but prior to exchange of contracts.
A basic survey of a property to estimate its value for mortgage purposes. Mortgage lenders will insist on this before lending.
Variable Base Rate
The basic rate of interest charged on a mortgage. This may change in reaction to market conditions, so your monthly payments can go up or down.
The legal name for a person selling a property.