A

Advance

Monies provided by a lender to a borrower and secured on the property as part of the mortgage debt.

Agreement

Document outlining the terms agreed between the buyer and the seller and binding both parties to complete the sale/purchase transaction. Also known as Contract.

Agreement in Principle (AIP)

Lender’s expression of intent to provide funding subject to certain conditions being met. Also known as Mortgage Agreement in Principle (MAP).

Arrangement Fee

Fee charged by some lenders to cover the administration of arranging a loan.

Asking Price

Price set by the seller of a property as what they hope to achieve.

Auction

Method of sale whereby a property is sold to the highest bidder.

B

Base Rate

Interest rate set by the Bank of England. Variable mortgage rates will often be adjusted depending on movements in the Base Rate.

Buildings Insurance

Insurance policy required by lenders and designed to cover any structural damage to a property.

Buy to Let Mortgage

Mortgage designed for buying property that is intended to be rented to tenants for investment purposes.

C

Capital

Amount borrowed on which interest is calculated.

Chain

Occurs where successive buyers and sellers are linked together and reliant upon one another to complete the transaction.

Charge

Security in the property relied upon by lenders when granting a mortgage.

Commission

Fee payable to an estate agent, usually a percentage of the property price, for providing certain services in relation to the transaction.

Completion

Point at which legal transfer of property ownership passes from one party to another.

Conditions of Sale

Terms defined in the contract and which determine the rights and duties of the buyer and seller.

Contract

Document outlining the terms agreed between the buyer and the seller and binding both parties to complete the sale/purchase transaction. Also known as Agreement.

Contract Race

Occurs when two or more parties attempt to purchase the same property and the Vendor will sell to the first party to exchange contracts.

Conveyancer

Suitably qualified person, such as a solicitor or licensed conveyancer, who handles the legal and administrative process of transferring ownership of a property from one person to another.

Covenant

Legal requirement incorporated in the Title requiring the owner to do, or not to do, something in relation to the property.

D

Deed

Legal documents proving ownership of a property. Also known as Title Deeds.

Deposit

Amount of money paid by the buyer to the seller on exchange of contracts in order to secure a property. Also known as Down Payment.

Disbursements

Third-party costs relating to transactions paid out by solicitor to cover items such as Stamp Duty, Land Registry, Local Authorities, etc.

Discharge

Termination of a mortgage obligation when no further payments are required.

Draft Contract

Early version of the contract, which is then edited by the acting solicitors.

E

Early Redemption Charge

Financial penalty charged by some lenders if the borrower terminates a mortgage early.

Easement

Right granted to someone other than the owner of a property such as a right of way over land or a right to maintain services under land.

Engrossment

Final copy of a document prepared by a solicitor for signing by the parties.

Equity

Owner’s financial interest in a property, calculated as the difference between the market value of a property and the balance outstanding on the mortgage.

Exchange of Contracts

Point at which signed contracts confirming the intention to transfer ownership between buyer and seller are physically exchanged and the parties become legally bound by the terms.

F

First Time Buyer

Buyers who have not previously purchased a property.

Fixed-Rate Mortgage

Mortgage with interest rates initially ‘fixed’ for a defined period.

Fixtures & Fittings

Those non-structural items in a property that should be listed to be included in a sale

Flying Freehold

Where part of a freehold property overhangs a different freehold property or land.

Freehold

Absolute ownership of both a property and the land on which it stands indefinitely.

G

Gazumping

Where the seller has agreed an offer in principle on a property but then subsequently accepts a higher offer from another party.

Gazundering

Where the buyer has made an offer that has been accepted but then subsequently reduces the offer immediately prior to exchange of contracts.

Ground Rent

Fee paid annually by the leaseholder to the freeholder in order to occupy the land on which a property stands.

Guarantor

Person responsible for repaying a debt if the borrower defaults as required by some lenders.

H

Homebuyer’s Report

Standard report conducted by a surveyor on behalf of a buyer to assess value and condition of a property, highlighting major defects.

House Price Index

Statistical method of representing changes in house prices over time.

I

Independent Financial Advisor (IFA)

Qualified person using specialised knowledge of the marketplace to select financial products to best suit the needs of their client.

Individual Savings Account (ISA) Mortgage

Mortgage designed for monthly repayments to be paid into an Individual Savings Account, which is used to pay off the loan at the end of the term.

Insurance

Protection against a specific loss over a period of time secured by payment of a regular premium.

Interest Charge

Fee charged by a lender on the borrower, calculated as a percentage of the amount borrowed.

Interest Only Mortgage

Mortgage where only the interest charges are repaid initially. Monthly installments are invested by the buyer and repaid in full at the end of the term.

J

Joint Agents

Two estate agents jointly instructed by a seller to market a property.

Joint Tenants

Equal holding of a property between two or more persons. If one party dies, their share passes to the survivor(s).

L

Land Registry

Government department responsible for recording ownership of land in England and Wales. Searches will be requested from the Land Registry by conveyancers as part of any property transaction.

Lease

Possession of a property owned by another party for a specified time period. Also known as Tenancy.

Lease Agreement

Legal document detailing terms whereby the owner of a property grants rights to another party to occupy it for a specified period of time. Also known as Tenancy Agreement.

Leasehold

Ownership and right to occupy a property by way of a lease agreement for a given period of time subject to an annual payment of rent to the owner of the freehold.

Lender

Institution that lends funds in order to assist the borrower with a property purchase.

Lessee

Someone who holds the lease on a property. Also known as Tenant.

Lessor

Someone who grants a Lease on a property. Also known as Landlord.

Lien

Legal right or claim against a property as security for a debt.

Listed Building

Building that has been registered as being of special interest and has preservation orders on it.

Loan to Value (LTV)

Percentage indicating the ratio of a mortgage loan on a property to its market value.

M

Maintenance Charge

Charge to a tenant or leaseholder made by a landlord to cover costs of maintaining a property. Also known as Service Charge.

Maisonette

Property that comprises a portion of a larger building, usually arranged over more than one floor with its own private entrance.

Mortgage

Long-term loan used to fund the purchase of a property where the property is held as security.

Mortgage Deed

Document containing the terms and conditions of a loan secured on a property.

Mortgagee

The lender of a mortgage.

Mortgage Indemnity Guarantee (MIG)

Fee charged by some lenders to protect them against the borrower defaulting. Also known as Mortgage Indemnity Premium (MIP) and Additional Security Fee.

Mortgage Indemnity Premium (MIP)

Fee charged by some lenders to protect them against the borrower defaulting. Also known as Mortgage Indemnity Guarantee (MIG) and Additional Security Fee.

Mortgage Rate

Standard variable interest rate quoted by all mortgage lenders. This varies in accordance with the Bank of England base rate.

Mortgage Term

Period of time over which a mortgage will be repaid.

Mortgage Valuation

Report commissioned by the lender to assess property value and determine maximum amount to be loaned on the security of a property.

Mortgagor

The borrower of a mortgage.

Multiple Agency

Where two or more estate agents are instructed by a seller to market a property. Only the agent who introduces a successful purchaser is paid.

N

Negative Equity

Occurs when the market value of a property falls to a value less than the mortgage loan balance.

NHBC (National House Building Council) Scheme

A guarantee offered on some newly built homes for structural defects occurring within a specified time after construction.

O

Offer

Indication from a potential buyer of a willingness to purchase a property at an indicated price. An offer is not legally binding in England and Wales and can be withdrawn or changed at any time prior to exchange of contracts.

Ombudsman

Independent body responsible for the investigation of complaints on behalf of consumers. Also known as The Property Ombudsman.

Open Market Value

Price that a property would likely achieve if it were available for sale.

P

Peppercorn Rent

Nominal ground rent usually paid annually and of trivial amount.

Preliminary Enquiries

Initial set of questions regarding a property that the seller must answer prior to exchange of contracts.

Public Liability Insurance

Insurance to cover the injury or death or damage to property of anyone on or around your property.

Purchaser

Person who is buying a property. Also known as the Buyer.

R

Redemption

Completion of the full and final repayment of a mortgage.

Redemption Figure

Amount required to fully repay a mortgage including interest and any penalties.

Repayment Mortgage

Mortgage with monthly repayments consisting of capital combined with interest.

Repossession

Occurs when mortgage payments are in arrears and a lender chooses to take possession of the property that secures the loan.

Retention

Amount held back by a lender until certain specified works have been completed.

S

Sale Contract

Legal agreement between a seller and an estate agent.

Searches

Enquiries made to the local authority and Land Registry for determining whether any matters adversely affect the property or the surrounding area.

Security

Property used to secure the mortgage loan.

Service Charge

Charge to a tenant or leaseholder made by a landlord to cover costs of maintaining a property. Also known as Maintenance Charge.

Sole Agency

Where only one estate agent is instructed exclusively by a seller to market a property.

Sole Selling Rights

Where one estate agent has exclusive rights to market a property and is entitled to a fee irrespective of how the property is sold.

Standard Variable Rate (SVR) Mortgage

Mortgage with interest rates that fluctuate at the discretion of the lender based on market conditions.

Subject to Contract

Term used to indicate a provisional agreement prior to exchange of contracts that is not yet legally binding

T

Tenancy

Possession of a property owned by another party for a specified time period.

Tenancy Agreement

Legal document detailing terms whereby the owner of a property grants rights to another party to occupy it for a specified period of time. Also known as Lease Agreement.

Tenants in Common

An optional method of shared home ownership (not necessarily in equal shares). If an owner dies, the owner’s interest in the property is passed to the owner’s heirs, rather than to the other owners of the property.

Tenure

Conditions on which a property is held, i.e. whether it is freehold or leasehold.

Title

Legal right to ownership of a property.

U

Under Offer

Status of a property from the point at which a seller has accepted an offer until exchange of contracts.

V

Vacant Possession

Provision of a property that has been vacated by any previous occupants.

Variable Base Rate

Basic rate of interest charged on a mortgage that may change due to market conditions.

Vendor

Person who is selling a property. Also known as the Seller.

Y

Yield

Income generated from a property expressed as a percentage of the property value.