From agreement in principle and loan-to-value to freehold and leasehold, we’ve compiled a list of terms you’re likely to come across when buying a property and what they actually mean.
Buying a property can be a complicated process, and even more confusing when
you’re confronted with various terms you’ve not come across before. To help
you make sense of it all, we’ve listed some key definitions you’ll need to know.
This list should give you a good head start when it comes to understanding the jargon around mortgages. To help you take the stress out of buying a property, speak to a financial adviser about how they can help you find the most suitable mortgage and guide you through the process.
| Agreement in principle | A document from a mortgage lender with an estimate of how much money you may beable to borrow. You can use this to prove to a seller that you can afford to buy their property. |
| Annual percentage rate (APR) | The overall cost of a mortgage, including the interest and fees.It assumes you have the mortgage for the whole term. |
| Arrangement fee | A set-up fee for your mortgage. |
| Base rate | The interest rate the Bank of England charges other banks and lenders when they borrow money. |
| Buildings insurance | Covers you for damage to the structure of your home – you’ll need to have a policy in place when you take out a mortgage. |
| Capital | The amount of money you borrow to buy a property. |
| Conveyancing | The legal process you go through when you buy or sell a property done by a licensed conveyancer or solicitor. |
| Deposit | The amount you need to put down in cash towards the cost of a property. |
| Equity | The amount of the property that you own outright – yourdeposit as well as the capital you’ve paid off on your mortgage. |
| Fixed-rate mortgage | The interest rate on the mortgage stays the same for the initial period of the deal.Your rate won’t change with the Bank of England base rate during this time. |
| Flexible mortgage | Allows you to underpay, overpay or take a payment holiday from your mortgage – they are usually more expensive than conventional mortgages. |
| Freehold | You own the building and the land it stands on. |
| Gazumping | When an offer has been accepted on a property but a different buyer makes a higher offer, which the seller accepts. |
| Guarantor | A third party who agrees to meet the monthly mortgage repayments if you can’t. |
| Help-to-Buy | The government has introduced various Help to Buy schemes to make buying a home easier, including equity loans, mortgage guarantees, ISAs and specific schemes for Scotland and Wales. |
| Interest-only mortgage | You only pay the interest on your mortgage each month without repaying the capital. |
| Joint mortgage | A mortgage taken out by two or more people. |
| Land Registry | The official body responsible for maintaining details of property ownership. |
| Leasehold | You own the building but not the land it stands on, and only for a set period. |
| Loan-to-value | The size of your mortgage as a percentage of the property value. |
| Porting | Allows you to transfer your borrowing from one property to another if you move, without paying arrangement fees. |
| Repayment mortgage | You pay off interest and part of your capital each month. |
| Stamp duty | You’ll need to pay stamp duty land tax when you buy a property over a certain price. |
| Standard variable rate (SVR) | The default interest rate your lender will charge after your initial mortgage period ends. |
| Tracker mortgage | The interest rate on your mortgage tracks the Bank of England base rate at a set margin above or below it. |
| Valuation survey | Lenders will carry one of these out to check whether the property is worth around theamount you’re paying for it. |
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
