Jargon Buster

Administration/Application fee
This is a charge levied by the lender to cover the costs of processing a mortgage application. If an application is not completed, the fee may not be refunded.

Agreement in principal. This is confirmation from a mortgage lender that subject to their normal reference checks and a survey they will lend a pre-agreed amount to a buyer.

Annual Percentage Rate (APR)
The total cost of a loan, which includes the costs, interest charges, and arrangement fees.

Arrangement fees
Fees charged to arrange a loan on certain products. Usually applied to loans where a special interest rate applies e.g. fixed or capped rates.

Building survey (formerly full structural survey)
A full inspection of the property, conducted by a chartered surveyor, who will write a detailed report setting out the soundness of a property and any property defects. Suitable for any house, particularly older properties and those that have been poorly maintained as well as properties that have been extensively altered or extended, or any property due to be altered or extended.

Buy to Let Mortgage
A type of mortgage designed specifically for investors who are buying a property with the intention of then letting it out.

Capital Gains Tax
A tax on any profit realised on the disposal of an asset. Owner occupied properties are generally exempt from Capital Gains Tax.

Legal documents proving ownership, generally held by the mortgage lender.

This is a sum of money required from the buyer when he enters into an enforceable agreement. This is usually on the signing of the contract, and can be between 5 and 10 per cent of the purchase price if buying, or 4-6 weeks rent for tenants.

These are fees paid by the buyer’s solicitor on the buyer’s behalf, such as stamp duty, land registry fees, and search fees.

Discount mortgage
Mortgages charged at a rate discounted from the published bank standard variable rate for a set period of time. The rates are variable and are subject to go up or down in line with any changes to the Bank of England base rate.

Early Repayment Charge (ERC)
A charge levied by the lender as a penalty if a mortgage is paid off within a specified period.

Energy Performance Certificate (EPC)
An EPC measures the energy efficiency of a property using a scale of A-G. It is a legal requirement to have a valid EPC for their property.

The initial sum paid on an insurance claim.

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. The time at which a deposit (generally 10%) is paid.

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

Flexible mortgage
An arrangement whereby you can increase or decrease your mortgage.

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”.

Where the owner of the property also owns the land on which it is built.

Gas Safety Regulations 1998
Regulations that require that any gas appliances in a property have to be inspected by a gas engineer, who is certified by the Gas Safe Register, before tenants move into a property and annually thereafter.

In the event of two people wishing to purchase the same property, one buyer may offer more than the other to tempt the seller into proceeding with him. This is despite the fact that the seller may have already accepted the other buyer’s offer, subject to contract. There is no legal obligation to the first buyer, only a moral one.

This is similar to gazumping, except on this occasion it is the purchaser reducing his offer prior to exchange of contracts. It probably goes without saying that gazumping is prevalent in an active market, and gazundering in a slow market.

Ground Rent
When a freeholder lets land to a leaseholder and then subsequently builds on it, the rent paid is in respect of the land only and is therefore known as ground rent.

Home Buyers Survey and Valuation Report
This is a survey report which is not as detailed as a full structural survey and is carried out by a chartered surveyor.

Independent Financial Advisor.

Interest Only Mortgage
An interest only mortgage stays the same throughout the mortgage term. When choosing an interest only mortgage, the purchaser is responsible for ensuring that they have sufficient funds available to repay the mortgage at the end of the term.

Informal Tender (sealed bids)
Requires competing buyers to submit their best bids by a specific time and date. It is not a legally binding contract.

Land Registry Fee
Payable to the Land Registry to register ownership of a property.

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

The party, typically a bank, building society or Mortgage Company, offering the loan.

Listed Building
A building which is listed as being of special historical or architectural interest, which cannot then be demolished or altered without local government consent.

Loan to value (LTV)
The proportion of the value of the property on which the lender is prepared to loan. This can be up to 100%.

Local Authority Search
A search made at the local council office by a buyer’s solicitor to check whether or not the property is affected by such matters as any outstanding enforcement or future development issues which might affect the property, or the immediate surrounding areas.

Maintenance Charge (or 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.

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.

NHBC (National House-Building Council)
A non-profit making, independent body approved by the Department of the Environment, which lays down standards for house builders who are registered with them. The council issues 10 year certificates, which allow for the remedying of any serious defects developing during that time, on new-build properties. It is unlikely that a mortgage lender will grant a mortgage on a new property which does not have either an NHBC guarantee or an architect’s certificate.

Negative Equity
Occurs when the value of a property falls to less than the outstanding mortgage, so that despite having sold the property the owner will have a continuing debt.

Office copy entry
An official document from the land registry confirming up-to-date ownership of the property.

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

Outline Planning Permission
This is planning consent which is subject to certain reserved matters, such as design, appearance and siting of proposed buildings.

A specified charge that is levied by the lender under certain circumstances, usually for full or part repayment within a specific period linked to a discount, tracker, fixed or other product type.

Power Of Attorney
A document granting power to some person to act in the name of another. Normally left with a solicitor to enable a purchase to proceed in the absence of either the vendor or purchaser.

The amount of debt outstanding (excluding interest).

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

Restricted Covenant
An obligation restricting the use of land which is binding on subsequent owners, for example not allowed to keep animals on the premises, or a house builder may put a covenant on a property forbidding extension without his approval.

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

The Royal Institution of Chartered Surveyors.

A request or enquiry for information concerning the property held by a local authority or by the Land Registry.

Share of freehold
Where the freehold on which the property stands is owned by a limited company and the shareholders of that limited company are the owners of the property.

Sitting Tenant
A person occupying a property who is legally protected against being removed.

Sole occupancy
A property that is occupied (lived in) only by the mortgage applicant(s) and their direct family.

Stamp Duty
If you buy a property in the UK over a certain price, you have to pay Stamp Duty Land Tax (SDLT). This is charged on all purchases of houses, flats and other land and buildings.

Stamp Duty Land Tax Calculator

Band Normal Rate Additional Property
* An additionl property purchased for less than £40k will attract 0% tax. For purchases from £40k to £125k the rate will be 3% on full purchase price.
less than £125k 0% 3%*
£125k to £250k 2% 5%
£250k to £925k 5% 8%
£925k to £1.5m 10% 13%
rest over £1.5m 12% 15%

Structural surveyStandard variable rate
Mortgage lender's standard rate of interest, which may be increased or decreased periodically by the lender depending on prevailing economic conditions.

This is based on a detailed inspection of the property and reports on the general structural condition.

Subject to Contract
When an offer is made to purchase a property subject to contract, it means that all dealings are subject to the actual exchange of the contract itself. Nothing is binding on either seller or buyer until the contracts are exchanged.

A professional person qualified to estimate the value of land and property.

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).

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.

A collective term which relates to the nature of the owners title to a property i.e. is it freehold or leasehold.

The Property Ombudsman (TPO)
The Property Ombudsman (TPO) is a free, fair and independent arbitration service that ensures that landlords, tenants, sellers and buyers will receive the highest level of customer service.

Title insurance
An insurance policy which a buyer can take out to allow a sale to complete where there is a potential problem with the documentation in proving legal ownership of some part of the land he is buying.

Transfer Of Deeds
A Land Registry document that transfers the ownership of a property on completion in registered land transactions.

Under Offer
Status of a property indicating that an offer has been made and accepted for a property, subject to contract.

When existing foundations to a building are inadequate, additional strengthening will be added below the existing foundations.

Variable Base Rate
A basic rate of interest charged on a mortgage. This may change in relation to market conditions – in other words, monthly payments could either go up or down.

Refers to the seller or person who sells property or land.

Void period
Period of time where the property is empty/unoccupied by the tenant.

Income from a property calculated as a percentage of its value.