Are you confused by moving vocab? Estate agents, lenders, surveyors and conveyancers all have their unique home-buying jargon. Our First Time Buyer glossary will take you through each part of the buying process and help make dealing with property professionals more straightforward.
Estate Agents
Valuation
An assessment of the market value of a property. There are several different kinds, such as a mortgage valuation (a report requested by the mortgage lender to ascertain whether a property is suitable security for their mortgage loan). A valuation is different to a survey carried out by an independent surveyor. They offer information about the condition of a house or flat. Further information on surveys can be found below.
Appreciation
The increase in a property’s value. This may be due to a number of factors, from a booming property market to recent home improvements or developments in the local neighbourhood.
Depreciation
The decrease in the value of a property. This is usually attributed to either a downturn in the broader UK housing market or issues within the local area.
Open Market Value
A property’s likely value in an open and balanced market.
Below Market Value
BMV is where a property is valued below what it could potentially fetch on the open market
Energy Performance Certificate
An official document detailing the energy efficiency of a property required for every sale marketed by an estate agent.
Gazumping
Where a buyer has an offer on a property accepted, but the seller then chooses to sell to someone else, usually someone who has made a higher offer.
Gazundering
This happens when a buyer lowers their initial offer prior to exchange of contracts.
Lenders
Mortgage
A special type of loan, secured against the property deeds for a fixed term and subject to interest that enables buyers to pay for their new home over an agreed period (term).
Agreement in Principle
An Agreement in Principle (AIP), also known as a mortgage in principle or decision in principle, gives you an understanding of how much you may be able to borrow towards the purchase or re-mortgage of a property. It is a document that you can use with an estate agent or those selling a property to show that you are in a financial position to purchase it.
Arrangement fees
Fees that may apply to signing up for a particular mortgage deal. These are usually payable up front or in some cases can be added to the final loan amount. Be aware that adding them to the loan increases your mortgage debt and the amount of interest you’ll pay, so it’s always cheaper over the long term to pay these as up front.
Telegraphic transfer (TT) fee/ CHAPS Fee
A fee to cover the cost of electronically transferring the mortgage funds to the borrower.
Broker/Intermediary
An independent adviser who can help you with mortgages and other financial matters.
Guarantor
A person that agrees to meet mortgage repayments and conditions of the borrower if the borrower is unable to meet the repayment deadlines for any reason. A guarantor is usually a parent or guardian and can significantly increase the amount a First Time Buyer can borrow.
Base rate
The interest rate set by the Bank of England.
Fixed Rate mortgage
A mortgage where the interest rate stays the same for a specific period (e.g. two or five years) even if the base rate changes in the meantime.
Interest
The percentage of the mortgage that is charged to the borrower on top of the mortgage repayments. Interest rates charged by mortgage lenders are usually influenced by the Bank of England base rate.
Portability
Where an existing mortgage can be transferred between properties when you move house.
Building insurance
Designed to cover homeowners in the event of damage to the property following events such as a fire, flood or structural damage. This does not cover the contents of your house (See ‘Contents insurance’ further down).
Contents insurance
An insurance policy that protects possessions within the home – different to buildings insurance which is designed to protect buyers in the event of structural damage to their home.
Occupier’s Consent
A legal document signed by someone living in a property but not being the legal owner. Often required by a mortgage company,
Capital
In the context of a mortgage, capital is the mortgage debt that needs to be repaid by the end of the agreed term – not including interest payments. With a repayment mortgage the capital will reduce over the mortgage term; the capital on an interest-only mortgage does not reduce unless you make additional part repayments.
Repayments
Money repaid to the mortgage lender by the borrower along with any interest owing as part of the agreement.
Early Repayment Charge (ERC)
A charge incurred by the borrower to the lender should they decide to pay off their loan before the agreed term expires (may also be referred to as an Early Repayment Penalty in some instances)
Repossession
If a homeowner defaults on the repayments of their mortgage or any other loans secured against their property, their home could be taken back by the lender so they can recoup the money they have lent.
Surveyors
Surveys
Surveys are carried out by surveyors to inspect the property you intend to purchase and ensure there are no major issues with its structure such as damp, subsidence or woodworm etc. The three levels of report offered by RICS surveyors.
RICS
The Royal Institution of Chartered Surveyors is the accrediting body for professional home surveyors in the UK, responsible for setting and maintaining professional standards in the industry.
Condition Report (Level 1 Survey)
The most basic type of home survey offered by RICS-accredited chartered surveyors. This type is recommended for newer and conventionally built properties that appear to be in good condition.
HomeBuyer Report (Level 2 Survey)
The most popular type of RICS home survey, more detailed than a Condition Report (Level 1) but not as detailed as a Building Survey (Level 3). In a HomeBuyer Report, the surveyor rates the condition of all permanent structures included in the property and highlights important problems or defects that could affect the property’s value.
Building Survey (Level 3 Survey)
The most comprehensive level of home survey offered by RICS-accredited chartered surveyors. It is especially suited to older buildings or properties that are more run-down. You can read more about Building Surveys in our guide.
Conveyancers
Conveyancing
The legal process of transferring a property from one owner to another.
Solicitor
The solicitor you use to buy a property is a conveyancing solicitor. All solicitors must be regulated by the Solicitors Regulation Authority (SRA), which regulates and has an independent ombudsman scheme to handle any disputes.
Licensed conveyancer
A licensed conveyancer is someone who is qualified to process the legal aspect of property transactions. Conveyancers do not necessarily have to be qualified as a solicitor to handle your conveyancing; however, the Council for Licensed Conveyancing (CLC) must regulate them. The CLC is a regulatory body that oversees the licensed conveyancing industry.
Vendor
The owner of the property available for purchase.
Chain
A scenario involving several buyers and sellers whose purchases are inter-related and dependent on one another in a chain-like fashion. First Time Buyers are therefore usually the first link in a chain, enabling the owners of the house they wish to purchase to move up to a different property, and so on.
Deeds
The document detailing the ownership of a property. Legal representatives of both parties will arrange the transfer of these when contracts have been exchanged
Freehold
Freehold describes a type of interest in land. The freeholder of a property owns it outright, including the land it is built on. If you purchase a freehold property, you are solely responsible for maintaining your property and land. You will own the freehold house ‘title absolute’.
Leasehold
Leasehold is a form of home ownership. A lease is an agreement between you and the owner. That person or company is the freeholder or landlord. The lease sets out what you can and cannot do as a leaseholder. If you own a leasehold property, you do not own the land it stands on.
Joint tenants
If one of the joint owners dies, his/her share of the property (which will be an equal division between all the property owners) automatically goes to the surviving owner(s), even if they have made a will which states that the property will pass to someone else. However, it is important to note that the joint tenancy may be converted to a tenancy in common at any time by any one or both parties, in which case the probability would be that you would then own the property in 50% shares.
Tenants in Common
If you purchase as Tenants in Common you will both still be legal owners of the property but in separate shares. The shares you own in the property can relate to the proportions you put into the purchase or not as you decide. The shares can be equal (i.e.50/50) or indeed unequal (i.e. 60/40, 90/10 etc.). If one of the joint owners dies, his/her share will not go automatically to the surviving owner(s). Instead, it will go to whomever they have nominated in their will. If they have not made a will, then the rules of intestacy will determine who inherits the property, which could have an unforeseen impact on the deceased person’s partner, family, and/or dependents. The joint owners should agree the extent of each person’s share of the property, which can be divided in either equal or unequal shares. It is recommended that a separate Declaration of Trust is drafted to reflect individual wishes.
Disbursements
Fees paid by a conveyancer on your behalf in order to carry out necessary checks such as local authority searches. These disbursements will then be invoiced to you at the end of the moving process.
Deposit
A percentage (no more than 10%) of the agreed purchase price that must be paid to the seller’s property lawyer upon exchange of contracts.
Stamp Duty
Stamp Duty Land Tax (SDLT) is a transaction tax paid on the purchase price of your new property and its land. The money goes to HM Revenue & Customs and your conveyancer will submit the payment and the associated tax return on your behalf. Stamp Duty must be paid at the time of purchase. The amount of Stamp Duty payable depends on the purchase price.
Exchange of Contracts
The time when a sale becomes legally binding and neither party can pull out without financial penalties.
Completion
The date your property purchase is finalised following the exchange of contracts. This is typically the day that you will move into the property once all legal matters are settled and the monies are transferred.
Financial Ombudsman Service
The UK’s financial ombudsman; this is an impartial body that adjudicates on complaints and disputes between customers and financial services providers, including mortgage lenders.
For more information on the above and/or to request a quote for our conveyancing services, please contact us on info@awdlaw.co.uk or 01329 232314.
The information contained in this article is correct at the time of publishing (11/07/2024).
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