Whether you’re a first-time buyer or have been on the property ladder for a long time and are considering downsizing, the industry comes with its own vocabulary and to help make the moving process smoother for you, our guide covers some of the most common terms used.
A letter of acceptance is confirmation to the lender that the person/s pursuing the loan/mortgage wishes to accept.
Frequently shortened to AIP, is a statement from a lender, typically a bank or specialist mortgage provider, that certifies an agreement to loan a certain sum, under specified conditions.
An agreement is a document which details the terms and conditions between the seller and buyer of a property. It binds both parties to the completion of the transaction and can also be referred to as a contract.
Many lenders charge borrowers for the administration of organising a mortgage or loan, this is referred to as the arrangement fee.
The assignment is the document which indicates the transfer of assets IE a property, from one owner to the next.
The base rate, also known as a bank rate, is an interest rate which is decided and set by the Bank of England. It is the amount that the Bank of England will charge commercial lenders for loans. The base rate can affect consumer spending. Typically, when the rate is reduced, interest payments reflect this, which can encourage spending, and visa-Versa.
A bridging loan can be applied when the sale of a property is dependent on the sale of another. It allows the buyer to purchase a property before the other has been sold. This type of loan is usually short term, with high interest rates.
A building survey involves a detailed inspection of a property. Usually conducted by Chartered Surveyors, the report will detail the condition of the property, as well as highlight any concerns, areas which are in need of repair and the estimated cost of this.
A chain is when there are several properties which are dependent on each other for the completion of a sale. Each transaction is interlinked, and the success is dependent on each of the properties within the chain.
No-chain properties are often considered more appealing, as the uncertainty of relying on a chain for the transaction to complete is removed. Houses with no-chain often sell and complete very quickly, as the dependence for progress is shared solely between two parties, rather than multiple.
Estate agents typically charge a commission on each of the properties sold; this is for general administration and the service of marketing. The commission is usually a percentage of the house price, and estate agents often charge a different amount.
The condition of sale details the legal expectations and rights of the buyer and seller throughout the transaction.
The Declaration of Trust, also known as Deed of Trust, is a legally binding document which outlines the financial agreements between owners of a property and those who have a financial interest.
When buying and selling a property, disbursements occur. Typical payments for disbursement are to a third party, such as Land Registry or Stamp Duty.
Also known as a deposit, a down payment is paid by the buyer to secure the acquisition of a property.
The discharge of a mortgage is when the agreement reaches an end. This may be due to the loan being paid back, refinanced or the borrower has filed for bankruptcy.
If a borrower ends the mortgage agreement ahead of the date initially specified, then there can be a charge for the early termination, this is referred to as an early redemption charge.
If the deeds to your property include an easement, this means that a part of your land can be legally accessed and used by the public or companies with a specific purpose, such as drainage or electricity, water or gas.
One of the final documents to complete the transaction. The solicitor prepares it, and both parties are required to agree and sign. Solicitors will often charge a fee for producing and actioning the legally binding document.
If a property has been purchased using a loan or mortgage, the equity is the difference between the balance paid and the market value. Owners often consider the equity as the proportion of the property that they truly own, as if it was to be sold and the mortgage terminated early, it is the amount they would receive, following the sale.
One of the last steps in purchasing a property; each party is required to sign the contracts; they are then exchanged and legally binding.
A valuation survey, also known as a mortgage valuation, is conducted to give both the borrower and lender a valuation of the property, as well as detail any apparent damage. This valuation is conducted to ensure the correct market value is borrowed, for a property that is considered in acceptable condition. Typically, when a valuation survey fails, it could be due to a false market price or an issue with the property.
When part of a property overhangs or is underneath another, this is considered a flying freehold. Examples of this include, rooms of a property which create a bridge above a public walkway, a cellar which is underneath a neighbouring property or a balcony over a garage.
After an owner of a property verbally accepts an offer, gazumping occurs when after this agreement has been made, they then take a higher offer from another party. This can be referred to as ‘raising the asking price’, and it often happens last-minute.
Gazundering is when the potential buyer/party that has made an offer on a property, lowers their offer at the last minute, typically this occurs before the contracts are exchanged. When there is a chain which is dependent on the sale, this can cause complications if the new offer is not accepted by the seller.
A homebuyers report includes a survey and valuation of a property. Included in this are any areas of concern, the estimated rebuild cost and the market value of the property are detailed.
The house price index indicates the rate in which property prices in the UK increase and decrease.
An instruction refers to a property being put on the market by an agent. For example, the estate agent may say, ‘we have several new property instructions this month’.
If a buyer opts for an interest only mortgage, the monthly payments will consist of only paying the interest incurred, not the capital borrowed. This means that at the end of the agreement, the borrower will still owe the amount borrowed from the lender. This makes the monthly payments much cheaper, but the borrower will still owe the lender the price of the property.
Two estate agents can market a property, and when this occurs, it is referred to as joint agents. A multiple agency is when two or more agents are marketing a property.
The Land Registry is a department within the Government; responsible for detailing and recording the ownership of land. During property conveyances, information regarding the property and surrounding land will be extracted.
For this service, and to register a new ownership of a property, a fee can be incurred.
Before a lender has full understanding or the time to make the appropriate financial background checks on a potential borrower, they may produce a Mortgage Agreement in Principle. This proposal does not guarantee that an application will be accepted or confirm how much will be lent, instead, it should be used as an indication.
If the value of a property, which is mortgaged or a loan has been taken out to purchase falls below that of the loan/mortgage value, this is called negative equity.
Before contracts are exchanged, the buyer and solicitor of a property, will often have preliminary enquiries. These are questions about the property or land and are required to be answered in full before the transaction of sale goes ahead.
The principle of a mortgage is the amount still owed by the borrower; it is the remaining balance of the agreement. It is ‘the amount borrowed minus the amounts repaid, and which have been applied to the reduction of principle’.
Redemption relates to clearing a debt, and when associated with a mortgage, is reference to the final payment.
If essential work or maintenance is required on a property, the lender can withhold some of the funds until the work has been carried out.
A sole agency is where only one estate agent has been instructed to bring a property to market.
If you purchase either land or property in England or Northern Ireland that is over a certain threshold, Stamp Duty Land Tax must be paid. In 2019, for a residential property, the threshold is £125,00, and for non-residential land and properties, it is £150,000. If you’re a first-time buyer, the rates are usually less to none.
As the name suggests, a structural survey details the condition of the structure of a property. Typically, the inspection includes the attic and basement, walls, floors and ceilings.
When a property is listed as ‘sold’, this is often ‘subject to contract’. As before all of the legally binding paperwork has been completed and the money has been exchanged, the transaction is not yet complete, and the house can still be considered as for sale. During this part of the buy and sell transaction, it is considered subject to contract.
A surveyor is a specialist in inspecting the condition of properties. The level of detail they go into will depend on the type of survey they are conducting. They also prepare detailed reports on the properties and often estimate the cost of any repairs.
Freehold, leasehold and customary are the primary types of tenure. The tenure is the status in which a property is owned.
Tenants in common have shared ownership of a property; these shares can be of a different percentage. A tenant in common can pass on their share in a will when they die; it does not have to go to the other tenant in common. A tenant in common differs from a joint tenant, as joint tenants have equal rights to the property.
When a potential buyer likes a property, they will put forward an offer of the price they want to pay. This offer is then presented to the existing homeowner to consider; it is this stage that is referred to as ‘under offer’.
Vacant possession means that the previous owners of a property have moved out and their possessions removed on the day of completion. The only items left behind, should be those previously agreed (these are usually curtains, kitchen units and white goods).
A property valuation provides an accurate estimate of what the home is worth and could be marketed for. The property valuation is used in both the sale of a property, and mortgage applications or renewals.
Are there any phrases or words which we’re missing from our property glossary that you would like to know the meaning of? Get in touch, and we’d be happy to advise!
The team at Godfrey Short and Squire have you, the customer, at the centre of our daily practises. We pride ourselves on our local knowledge and hold true to the traditional values which have served us well since establishing in 2008. We market homes for sale in Okehampton, as well as lettings and valuations. Why not call us today on 01837 54504 and find out how we can help you during your journey on the property market.