Jargon Buster

Adverse Credit – Term used to apply to a borrower or application that has past problems with bad credit, e.g. frequent late payment, breached arrangement, bankruptcy or County Court Judgement.

Annual percentage rate (APR) A loan’s annual percentage rate, or APR, is what credit costs you each year, expressed as a percentage of the loan amount.

Applied or Nominal Interest Rate – The rate used to calculate the interest due.

Arrangement fee – A term often associated when arranging a loan i.e. a mortgage

Assignment of lease – The transfer of a lease by a lessee to a third party, with all its rights and obligations.

Assured Shorthold Tenancy (AST) – Give description first, for instance  “An agreement between two parties to rent a property” The most likely type of tenancy offered for a residential letting.

Bank of England Base Rate – The Bank of England set a rate each month known as the ‘Base Rate’. Banks and Building Societies use the Base Rate to set the interest rates they pay on deposits, or debts on loans.

Break Clause – If included in the tenancy agreement such a clause may enable landlord or tenant to end the tenancy earlier than the term stated.

Bridging Loan – A loan made to cover the period between two transactions, such as the buying of another house before the sale of the first is completed. Typically more expensive than conventional financing to compensate for the additional risk of the loan.

Building Insurance – Covers loss or damage to the physical structure of your home, for example, the roof, walls and floors.

Building Regulations – Local authority regulations which deal with the physical condition of the property to ensure that it complies with local authority consent, in respect of design, construction and alterations to virtually every building.  They are developed by the Government and approved by Parliament.

Building Survey – A full inspection of the property, conducted by a chartered surveyor, who will prepare a report setting out the soundness of a property and any property defects.

Buy to Let Mortgage – A type of mortgage specifically designed for people buying a property with the intention of letting it out.

Capital Gains Tax- A tax on profits above a fixed level made from the sale of financial assets such as a house, flat or shares.

Chain – When multiple property sales / purchases are linked together. For example; a purchaser may tie in the sale of their own property, which can make the intended purchase reliant on the success of their sale.

Charge – An interest in the ownership of a property; usually a mortgage or some other debt secured against the property.

Completion date – The date when the transaction relating to the sale/purchase of a property is completed, in most cases being the date you become the owner and can move in.

Contract – A legal agreement between the seller and buyer, which binds both parties to complete the transaction.

Contract Race – When two parties have made an offer on the same house, contracts can be issued to multiple parties with the vendor selling to whichever party exchanges contracts first. All parties must be aware that more than one contract has been issued.

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

Covenant – A condition, contained within the Title Deeds or lease, that the buyer must comply with, which is usually applied to all future owners of the property. A restrictive covenant is one that prohibits the owner from doing something.

Credit Scoring – Lenders often use a system called credit scoring to help them decide whether to lend to you. They ask a series of questions about you and your finances and score your answers. Depending on your score you will be accepted or declined. The same system is often used to credit check a tenant in combination with taking up references.

Deeds – Also known as Title Deeds. They are the legal title documents that prove ownership of a property. These are now electronically registered at the land registry.

Deposit – The sum of money which the buyer puts down on exchange of contracts. A deposit can also refer to a sum of money the tenant pays to protect the landlord against damages, unpaid rent etc

Dilapidation – Damage to a property – re-decoration required etc, usually assessed on the check out at the end of the tenancy.

Disbursements – Disbursements can best be defined as costs incurred by a solicitor that come over and above their normal fees. Can include land registry charges, search fees and stamp duty land tax.

Draft Contracts – The preliminary, unconfirmed version of the contract that is drawn up when the sale is first agreed. It will set out the conditions of sale and will need to be confirmed by the vendor’s solicitor

Easement – A term given to a right which someone may enjoy over another property. For example; rights of way, drainage rights, or access to a neighbour’s land in order to carry out repairs to their own property.

EPC (Energy Performance Certificate) – An EPC measures the energy efficiency of a property using a scale of A-G. An EPC is a legal requirement and must be commissioned before a property can be marketed.

Environmental Search – A type of check which the conveyancer can carry out to see if there are any landfill or waste disposal sites in the area, if the property has been built on an old industrial site and whether there are any risks from contaminated land, toxic emissions, flooding, subsidence etc.

Equity – The difference between the amount you owe on your mortgage and the current value of your property. For example if your house was valued at £300,000 and you have a £200,000 mortgage, your equity would be £100,000.

Exchange of Contracts – When signed contracts are physically exchanged the seller and buyer are legally bound to the sale and purchase of a property at the agreed price.

Execute the Tenancy – The procedure to legally complete the tenancy agreement by dating the fully signed original document. The date is legally considered to be the date on which the agreement was made.

Fixed Rate Mortgage – A mortgage in which the interest rate is set for a specified period of time.

Fixtures and Fittings – Items that are to be included in the sale of the house and will be detailed in the contracts.

Flying Freehold – This can occur when first floor accommodation forming part of one freehold is located over ground floor accommodation forming part of another freehold. The first floor freeholder does not own the land beneath the property, and is then said to own a “flying freehold”.

Freehold – The term used to indicate ownership of a property and more importantly land on which it stands. This means that once you have purchased the property you are the absolute owner of the property and the land it’s on.

Gazumping – When a seller accepts a higher offer from another party having already agreed to sell to someone else prior to exchange of contracts.

Gazundering – When a buyer reduces the offer made (and which was accepted) prior to exchange of contracts.

Ground Rent – Rent paid to the owner of freehold land by a person who has a Lease, usually paid annually.

Guarantor – The lender may sometimes require a borrower to appoint a guarantor who promises to pay the borrower’s debt if the borrower defaults. A guarantor can also be required if a landlord requires extra security on the tenants ability to pay the rent. For example student lettings often involve a guarantor.

Holding Deposit – The sum of money paid by a tenant to secure their interest in a property and demonstrate commitment. Often non-refundable if the tenant has a change of mind etc

Home Buyers Report – Not as detailed as a structural survey, the homebuyer’s report will assess the state of a property and its value.

Independent Financial Advisor (IFA) – Can give you help and advice on a range of financial products and services.

Interest Only Mortgage – A type of mortgage in which the borrower only repays the interest on the loan for the duration of its term, repaying the full loan amount at the end of the mortgage period.

Inventory – A report describing the condition of furnishing, fixtures and contents of a property in order that any dilapidation during can be identified at the end of the tenancy.

Joint Tenants – A form of ownership frequently used by couples which ensures that if one dies, the property passes automatically to the other.

Jointly and Severally – A legal expression where two or more persons are held responsible. For example each tenant can be held responsible for rent arrears regardless of how much one individual may have paid.

Key Facts Illustration (KFI) – A document containing key mortgage information which is designed to help you compare the costs and features of different mortgages from one or more lenders.

Land Registry – The official body responsible for recording the ownership of land.

Lease – A contract in which the legal owner (freeholder) of a property agrees to another person using that property, or part of it, in return for a regular specified payment (rent) over a set term. On expiry of the lease ownership may revert to the freeholder or superior leaseholder.

Leasehold – A type of ownership in which a person owns a property, but not the land on which it is built. The owner of the Freehold will grant a lease on the property for a specified length of time.

Listed Building – A building or other structure of special architectural or historic interest. Listing protects the whole building, both inside and out and cannot be altered or demolished without local government consent.

Loan to Value (LTV) – The amount of mortgage expressed as a percentage of the property value. For example, if your mortgage amount was £200,000 and your property is valued at £250,000 your loan to value, or LTV, is 80%.

Local Authority Search – A questionnaire sent to a local Authority by the conveyance to verify whether a property is affected by planning proposals, tree preservation orders, new roads etc.

Maintenance Charge (also Service Charge) – The cost of repairing and maintaining external and / or internal communal parts of a building, which are then charged to the tenant or leaseholder.

Maisonette – A self-contained apartment, usually on two floors, with its own entrance from the outside.

Mortgage Deed – The legal document gives the lender certain rights over the property.

Mortgage Offer – A formal offer of mortgage issued by a building society, bank or other lender once the usual formalities such as references and valuation have been carried out.

Mortgagee – A building society or bank that lends money against the security of the property purchased, i.e. the lender.

Negative Equity – You will be in negative equity if the value of the outstanding mortgage is more than the market value of the property.

Office Copy Entries – A term used by Land Registry for copies of registers and plans. They are officially marked ‘office copy’ and are legally recognised.

Ombudsman – The TPO (The Property Ombudsman) is an Independent professional body providing a scheme to facilitate a resolution on behalf of customers against estate agents and letting agents.

Peppercorn Rent – A nominal rent that is charged on leasehold properties, often due annually. It should be noted in the conditions of sale but is not always collected.

Power of Attorney – A power of attorney (POA) or letter of attorney is a written authorisation to represent or act on another’s behalf in private affairs, business, or some other legal matter such as the sale of a property.

Redemption Fee – You redeem a mortgage by paying it off. If you switch lenders and redeem the mortgage you may be required to pay a fee, especially if repaying the mortgage early.

Re-mortgage – The process of moving your mortgage without moving home. You take a new mortgage with a different lender to pay off your old mortgage.

Repayment Mortgage – A type of mortgage in which monthly charges are used to repay the interest and reduce the outstanding capital.

Retention – Whereby the lender holds back (retains) part of a mortgage until certain conditions are met.

Section 21 – A Section 21 Housing Act 1988 notice is the first step to obtaining the property back when there is “no fault” alleged i.e. the landlord wants to regain possession of a property at the end of an Assured Shorthold Tenancy (AST) or wishes to exercise a “Break Clause”. The landlord is able to issue the tenant with a Section 21 notice without giving any reason for ending the tenancy agreement.

Share of Freehold – This essentially means that you will have a lease over your flat as well as a share in the freehold of the whole building. This may be a share in a company that owns the freehold. Alternatively the freehold may be held by up to four individuals. It is important to understand the responsibilities involved in having a share in the freehold which may include liability with others to repair and maintain the exterior of the building and the common parts.

Sole Agent – When a seller opts to use the services of a single agent to sell or rent their property. This often results in the agent offering a lower rate of commission.

Sole Selling Rights – The appointment of a selling agent who will be entitled to their fee, even if you end up selling your property privately or through another agent. This usually applies to development / land, new homes, auction and properties being sold by tender.

Stamp Duty – A government tax payable by every buyer of a property over £125,000. Duty is charged at 1% for homes priced between £125,000 and £250,000. The rate is 3% for homes over £250,000 but not more than £500,000. Property over £500,000 attracts “stamp duty” of 4%, with further rises once the price surpasses £1,000,000. There are certain nil-rated bands applying to disadvantaged areas.

Structural Survey – This is based on a detailed inspection of the property and reports on the general structural condition. A structural engineer can carry out the survey and is often employed when visual defects are found such as cracks or movement.

Subject to Contract – A legal term to clarify that an agreement is not yet legally binding and depends upon the terms yet to be agreed within the contract.

Subsidence – This results from external factors which cause the disruption, displacement, contraction or distortion of the ground under or around a building. Some of the more common causes include trees and collapsed drains.

Tender – This is an arrangement whereby prospective purchasers are invited to submit sealed bids by a previously stated date and time. The moment the offer is accepted by the seller, the arrangement becomes a legally binding contract.

Title Deed – Documents showing the legal ownership of a property.

Transfer Document – The formal document that officially confirms the transfer of the property from one party to another (from seller to the buyer).

Under Offer – The status of a property being for sale when a seller has accepted an offer from a buyer, prior to exchange of contracts.

Underpinning – The process of strengthening and stabilising the foundation of an existing building or other structure.

Valuation Survey – A basic property survey to estimate its value. Mortgage lenders will insist on this before lending and whilst the buyer pays for a mortgage valuation its purpose is to enable the lender to decide whether to lend on the property or not.

Variable Base Rate – The basic rate of interest charged on a loan which may change as a result of market conditions, therefore be advised your monthly payments can go up or down.

Vendor – The seller of a property or piece of land.

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