What does it all mean?

Agreement in principle

An initial document from your lender that gives you an idea of the amount they are likely to lend you. Often needed when dealing with estate agents so they know you can afford the property. Also known as a ‘lending decision’ or ‘decision in principle’, it will check your credit history and confirm if you are likely to secure the mortgage you require.

Arrangement fee

(Sometimes called a Completion Fee or Booking Fee) An administration charge your lender will charge you for arranging your mortgage. It can be paid on completion or included in your mortgage loan.

Base/Bank Rate

It is the interest rate at which the Bank of England will lend money to other banks and determines mortgage rates.

Capital and interest mortgage

Also known as a repayment mortgage where you pay off both the ‘capital’ (amount borrowed) as well as interest accrued each month, in a series of monthly payments over an agreed term. The mortgage will be repaid providing all payments are made in full and on time.

Legal completion

The final stage of the sale when the ownership changes hands from the seller to the buyer.

Buildings and contents insurance

Buildings insurance protects your home against damage or loss. Contents cover protects against damage to or theft of the contents of your house including furniture and furnishings, TV and audio, all electric goods and appliances, clothing and jewellery. You should always check your policies terms and conditions.

Contract

A legally binding document/agreement between two parties.

Conveyancing

The process of transferring ownership from one person to another.

Conveyancer (or Solicitor)

The professional required to carry out the legal work involved in the process of buying and selling property.

Council tax banding

A system based on the value of your home on a specific date for the administration of council tax bills. Your home’s banding will affect how much you pay.

Credit score

A credit score is a number that depicts a consumer’s creditworthiness (how large is the perceived risk for you managing to keep up with repayments). It is used to used to assess credit and loan applications. The higher the score, the better a borrower looks to potential lenders. A credit score is based on credit history: number of open accounts, total levels of debt and repayment history, and other factors.

Deposit

The money you put in down towards buying a house, usually at least 5% of the property cost, depending on how much money you have saved and the mortgage lender’s requirements.

Early repayment charge (ERC)

An amount of money (a charge) you may have to pay a lender if you either move your mortgage to another lender during the special deal period, or want to reduce the amount you’ve borrowed within the agreed period ie paying off a lump sum. Many lenders allow you to port your deal to a new property subject to their criteria at the time and you should discuss this with your mortgage adviser.

Energy Performance Certificate (EPC)

This certificate shows how much energy a building uses, and how energy efficient it is, looking at things such as insulation and electricity use. The certificate gives the building a rating from A to G, where A is the most and G is the least energy efficient.

Equity

The difference between the value of the property, and what you owe as a mortgage.

Exchange of contracts

The exchanging of contracts between the seller and the buyer usually carried out by their solicitors and, once exchanged, this is a legally binding agreement.

Exit fees (also known as redemption charges)

Charged by some lenders when you pay off your mortgage early and are still within the redemption period.

Formal Notice

Once your new home has been finished and approved by the LABC/NHBC warranty provider, we will send your solicitor a formal notice and agree a completion date.

Freehold

Where the sale includes the property and the land on which the property is built, and you have complete ownership of both for an unlimited time.

Guarantor

A person who guarantees you will cover the mortgage repayments. If you don’t they are liable and have to pay them, often parents or relatives are guarantors for first time home buyers to help them afford a property.

Help to Buy

A government backed scheme which gives first time buyers the opportunity to access a 20% equity loan to help buy their new home, which is repaid once the property is sold.

Homebuyers’ report

A report on the condition of the property showing the value of the property, any major faults and estimated costs to fix.

Independent Financial Advisor

Known as IFAs, they are professionals who offer independent financial advice on all financial matters and can recommend suitable financial products (such as a mortgage) from the whole market.

Loan to Value (LTV)

The amount of money you have borrowed/want to borrow expressed as a percentage of your property value. For example, if you borrow £90,000 on a property worth £100,000, your loan to value will be 90%.

LABC

Local Authority Building Control represents all local authority building control teams in England and Wales. LABC teams are independent, impartial and not for profit. They are committed to safeguarding the safety and protection of our communities by constantly reviewing surveyor competence and working with all those in construction to ensure buildings are safe, healthy, inclusive and efficient, and meet the standards set by the Building Regulations.

LABC Guarantee

The Local Authority Building Control is the standard setting body and leading warranty provider for new homes in the UK. They provide new home buyers with a 10-year warranty and insurance policy, paid for by the builder, which protects your new home from structural damage that may occur during the first ten years after your home is completed. Mortgage lenders are more likely to release funds if homes have a warranty in place.

Mortgage

A loan taken out to buy a property. The loan is ‘secured’ against the value of your home until it’s paid off.

Mortgage Broker

These are professionals who offer advice on all your mortgage needs and can recommend suitable financial products (such as a mortgage) to meet your needs. Some advisers will charge a fee for their services.

Mortgage Payment Protection Insurance (MPPI)

This insurance can cover your mortgage payments if you can’t work because you’ve become unemployed or because of an accident or illness.

Mortgage Valuation

The inspection undertaken by your lender in order to agree a mortgage.

NHBC Guarantee

The National House-Building Council is the standard setting body and leading warranty provider for new homes in the UK. They provide new home buyers with a 10-year warranty and insurance policy, paid for by the builder.

Notice of default

Legal notice given by the mortgage lender detailing a payment default (missed payments) by the borrower. This notice will also contain details of the steps the borrower must take to pay this off and by what date, otherwise the property may be taken over by the lender.

Part Exchange

With Part Exchange, you buy our home and we buy yours. You’ll be given an offer based on independent valuations and benefits from a guaranteed buyer and none of the hassle of a chain, or the stress of a sale falling through.

Payment holiday

Available with some mortgages, this is an agreed period of time when you don’t have to make any mortgage repayments, for instance because of a previous overpayment or difficult financial or economic circumstances. However this does not allow you to get out of re-paying the full amount at the end of the loan period

Portable

A feature of a mortgage which means it can be transferred from one property to another subject to the lenders criteria at the time of moving.

Predicted Energy Assessment (PEA)

This is the energy certificate used by property developers of new build homes before they are complete.

Product fee

A fee charged on some mortgages to secure a particular mortgage deal. Also known as a reservation fee

Release of funds

When a lender moves the funds required when purchasing a house. There is usually a charge for the electronic transfer of this money.

Searches

An investigation or ‘search’ of the local area to see if there are proposed plans or problems in the area that you should be aware of.

Sold Subject to Contract

This means the owner of the property has accepted an offer made by the buyer but the legal paperwork has not yet been completed.

Stamp duty/Stamp Duty Land Tax (SDLT)

This is a government tax you pay when you purchase a property or land over a certain value. You will pay this on legal completion. The amount varies dependent on a number of factors including purchase price, whether the property is for your own use and whether it is your only property as well as government legislation at the time of completion.

Survey

An inspection of the property by a qualified surveyor carried out before buying a property (for example a Home Buyers’ Report or Structural Survey also known as ‘building survey’).

Surveyor

The professional who carries out the valuation of a property and examines the condition of that property. Surveyors can differ in the services they offer from mortgage to structural surveyors.

Title deeds

The documents held at the Land Registry that prove legal ownership of a property and all other dealings with that land.

Vendor

Another word for the person selling the property.