Jargon Buster A - Z

A

Advance - an additional loan is referred to as a further advance.
APR (Annual Percentage Rate) - The total cost of a loan, including interest charges and product fees, shown as a percentage rate. The calculation assumes that you maintain the mortgage for the full term. APR is an industry standard calculation and enables direct comparison of mortgages from all lenders.
Architect’s Certificate - A certificate provided by an architect, which confirms their overseeing of the construction of a building. Building societies are unlikely to lend on a new-build house in the absence of either an architect’s certificate or an NHBC warranty or equivalent.
Arrangement fee - The cost that a lender applies to secure a product.
Assignment - The transfer of ownership of an insurance policy or a lease.

B

Balance Outstanding - The amount of loan owed at a particular time.
Bank of England Base Rate - The Bank of England set a rate each month known as the 'Base Rate'. Banks and Building Societies use the Base Rate to set the interest rates they pay on deposits, or charge on debts.
Break Clause - A term in a fixed term tenancy agreement which allows either or both parties the right to terminate the agreement prior to the end of the term. Such a clause should always apply to both Landlord and Tenant or it may be deemed an unfair term of contract.
Bridging Loan / Bridging Finance - A temporary loan advanced to help somebody buy a new property before they have sold their existing one. Beware - it can prove very expensive in an uncertain market.
Building Regulations - The health and safety requirements that any new construction must meet.
Building Society - A mutual institution owned by its investors and borrowers that provides a range of savings and mortgages.
Buildings Insurance - Buildings insurance covers loss or damage to the physical structure of your home, for example, the roof, walls and floors. The value of you buildings insurance will be be less than the value of your home as it is the cost to rebuild alone, not the cost of purchase.

C

Cashback Mortgage - You receive a lump sum or a percentage of your mortgage in cash when you complete your mortgage.
Charge - An interest in the ownership of a property; usually a mortgage or some other debt secured against the property.
Completion - End of the purchase process. The seller moves out, the buyer moves in and ownership is transferred once the money is paid to the seller.
Contents Insurance - Insurance against accidental damage or theft of all moveable contents, including furniture, appliances and soft furnishings.
Contract - A document that describes the agreement under which the property will change hands.
Contract Race - This occurs when two parties have made an offer on the same house, usually at the same price. The vendor will sell to whichever party exchanges contracts first. All parties must be made aware that more than one contract has been issued.
Conveyancer - A person other than a solicitor who may conduct the conveyancing.
Conveyancing - The process of transferring property from one party to another, usually managed by a solicitor or a licensed conveyancer.
Covenant - A condition, contained within the Title Deeds or lease, that the buyer must comply with, which is usually applied to all future owners of the property. A restrictive covenant is one that prohibits the owner from doing something.
Credit Scoring - Lenders often use a system called credit scoring to help them decide whether to lend to you. They ask a series of questions about you and your finances and score your answers. Depending on your score you will be accepted or declined.

D

Debt Consolidation - The process of combining outstanding debts e.g. loans, credit cards etc, into one loan.
Deeds - Legal documents that show who owns a property or piece of land.
Defective Lease - A badly drafted lease. If this is serious, the vendor may have to obtain a “deed of variation” getting the freeholder’s permission to change the original terms of the lease. This can be a lengthy process as it may affect other leaseholders.
Deposit - Sum of money which the buyer puts down to secure the mortgage loan after exchange of contracts, usually 5 to 10 per cent of the purchase price.
Dilapidations - Damage to a property, missing items in an inventory, re-decoration required etc, usually assessed on the check out at the end of the tenancy.
Direct Debit - A Direct Debit is an instruction from a customer to their bank or building society to make regular payments direct from their account.
Disbursements - All the various costs for carrying out the legal work in relation to buying or remortgaging your home.
Discharge - Paying off a mortgage.
Discount Mortgage - A discount offered by mortgage lenders to borrowers, reducing monthly mortgage repayments often for the first two or three years of the loan period.
Dutch Auction - The original meaning refers to an auction in reverse, where an offer price is announced and the auctioneer gradually reduces it until a bid is made. However this meaning has been lost, and a Dutch auction now refers to the informal bidding that takes place when two or more potential buyers are outbidding each other for a property.

E

Early Repayment Charge - A charge payable on some mortgages if they are repaid early (during an Early Repayment Charge period). The amount depends on the mortgage outstanding and the terms of the mortgage.
Easements - A term given to a right which someone may enjoy over another property. These can be rights of way, drainage rights, or more likely access to a neighbour’s land in order to carry out repairs to their own property.
Equity - The difference between the value of a property and the amount of mortgage and / or secured loans owed.
Exchange of contracts - The point at which both buying and selling parties sign their copies of the contract which are exchanged by their respective legal representatives and are legally binding. The buyer usually pays a deposit at this point and the date of completion is agreed.

F

Financial Services Authority (FSA) - The regulatory authority for the UK financial services industry. The FSA has taken over the regulation of mortgages and all lenders and mortgage intermediaries must be directly authorised and regulated by the FSA, or must be an appointed representative of an authorised firm.
Fixed rate mortgage - A mortgage where the interest rate payment is fixed for a specific time. It then normally reverts back to a variable rate.
Fixtures and Fittings - Non-structural items included in the purchase of a property ranging from curtains to white goods and disclosed in the fixtures and fittings list.
Flexible Mortgage - An arrangement enabling the mortgage borrower to overpay, and with the overpayments that have been built up, borrow money back, take payment holidays or pay less in some months.
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”.
Freehold - Legal title that gives you absolute ownership of the land your property is on.
Full Structural Survey - A full structural survey looks at all the main features of the property, including walls, roof, foundations, plumbing, joinery, electrical wiring, drains, and garden.
Further Advance - An additional loan to your existing mortgage taken after the main mortgage has completed which is also secured against the property.

G

Gas Safety Certificate - If you are a landlord letting a property equipped with gas appliances you need to understand and comply with the law relating to gas safety. If you let a property, you must make sure that pipe work, appliances and flues provided for tenants are maintained in a safe condition. You need to have a gas safety check every year. A Gas Safe registered engineer must carry out the safety check in your properties. You must give your tenants a copy of the gas safety record within 28 days of it being carried out or before they move in. You are also obliged to show your tenants how they can turn off the gas supply in the event of a gas leak. Annual checks: As a landlord, you are legally responsible for making sure that a Gas Safe registered engineer checks the gas appliances in your rental properties every 12 months and gives you copies of the gas safety records. Gas safety records: When your Gas Safe registered engineer has checked the gas appliances in your rental property they will give you a gas safety record. This record confirms the gas appliances have been checked and are safe. You must give your tenant a copy of these gas safety records within 28 days of the checks being done, or give a copy of the gas safety record to a new tenant before they move in. Remember, you must keep a record of each safety check for two years.
Gazumping - When a seller pulls out of a sale after accepting an offer above the asking price. Often mistakenly used by people who have made an offer below the asking price and where a higher offer is later accepted. If you don't offer the asking price, you may lose out.
Gazundering - A tactic whereby the buyer offers less than the agreed price just before exchange of contracts, usually at the last minute.
Ground Rent - The annual fee which a leaseholder pays to a freeholder.
Guarantor - A guarantor is someone who guarantees to pay your mortgage or rent if you can't or won't for any reason.

H

Higher Lending Charge - This charge is payable (usually added on to your loan) if you borrow more, for example, than 90% of the valuation or purchase price of your property.
HMO - House in Multiple Occupation - This term covers many categories of housing where a house is 'occupied by persons who do not form a single household'. If in doubt, you should check with your local authority as in such cases, the property will need to be licensed if it falls into this category.
Holding Deposit - A holding deposit is intended to reserve a property for let, and the landlord/agent does this by taking the property off the market, though new enquiries should still be recorded. If the letting goes through, the holding deposit should be credited to the main deposit or to rent. If the letting does not go ahead, through the fault of the prospective tenant, then it's usual for the deposit or part of the deposit to be retained in compensation for lost time - this belongs to the landlord. In this respect it's important not to take too much as a holding deposit - one week's rent is usually about right and should compensate fairly if retained. If the letting does not go ahead through the fault of the landlord / agent then the deposit should be refunded. In all cases there should be a written Holding Deposit Agreement / Receipt which makes it very clear what will happen to the deposit in these eventualities and when the deposit should be returned or retained. It is important to remember that paying a holding deposit is in no way legally binding on either party
Home Buyers Report - This is an intermediate-level survey which is usually offered by the mortgage lender and prepared by their own surveyor. The homebuyer's report comments on the structural condition of most parts of the property that are readily accessible, but it does not involve in-depth investigation or the testing of water, drainage or heating systems.
Home Contents Insurance - A policy insuring household contents against theft and damage.
Home Envirosearch - A report on detailed flood, subsidence and land contamination history for each UK neighbourhood.

I

IDD / Initial Disclosure Document - This is a document designed to assist you in comparing the services provided and the fees and charges made by lenders and intermediaries.
IFA - Independent Financial Advisor. James Muncaster of Capricorn Financial Consultancy 020 8341 1005 or 07782 208 585
Informal Tender - Requires competing buyers to submit their best bids by a specific time and date. It is not a legally binding contract.
Interest Only Mortgage - This is where you only repay the interest on your mortgage debt each month. Alongside this you will need to put money into a separate investment vehicle which is designed to grow sufficiently to pay off your loan when your mortgage comes to an end. You are responsible for the repayment of the capital when the mortgage reaches the end of its term. You may want to seek professional advice on the investment vehicle.

J

Joint Mortgage - A mortgage where there is more than one named individual responsible for the contract.
Joint Sole Agency - This is when you employ two agents to sell your property and where both receive a commission irrespective of which one introduces a buyer. The agents agree to split the fee upon the sale of the property or decide that the winner takes all. The ratio is pre-agreed with you and written into the agreement.
Joint Tenants - A form of ownership frequently used by couples which ensures that when one dies, the property passes automatically to the other. The alternative is Tenancy in Common.

K

Key Facts Illustration (KFI) - This document contains key mortgage information which is designed to help you compare the costs and features of different mortgages from one or more lenders. It is designed to make it easy to compare mortgages at a glance.

L

Land Certificate - A Land Registry certificate proving ownership of a property.
Land Registry - A government organisation that holds records of all registered properties in England and Wales.
Land Registry Fee - A fee paid to the Land Registry to register your details if you have bought a property or changed mortgage lenders.
Leasehold - To be given ownership of a property but not the land it is built on. This normally requires payment of ground rent to the landlord.
Life Assurance - Insurance which pays out on the death of the policy holder. Policies can run alongside your mortgage and will pay off all or part of the outstanding debt in the event of your death.
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 amount of mortgage expressed as a percentage of the property value. For example, if your mortgage amount was £80,000 and your property is valued at £100,000 your loan to value, or LTV, is 80%.
Local Authority Search - A search of the local area to highlight anything that may impact on the property or surrounding area, e.g. planned road building, planning permissions etc

M

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.
Maisonette - Technically a maisonette is an apartment which is on two levels, with its own separate access. Although generally properties on two levels, with or without separate access, are sometimes referred to as maisonettes.
Monthly Interest - A method of calculating mortgage interest on a monthly basis.
Mortgage Deed - A legal document relating to the mortgage lender's interest in the property.
Mortgage Indemnity Guarantee - See Higher Lending Charge
Mortgage Offer - Sum of money that the lender offers to lend you to pay for a property.
Mortgage Payment Protection Insurance (MPPI) - This is insurance designed to pay your monthly mortgage payment for a limited period, usually a year, if you are unable to work through illness, accident or redundancy. Mortgage Term - The length of time over which the mortgage is to be repaid. Often this is 25 years - but it can be shorter, or in some cases for longer periods of time.
Mortgage Valuation - The mortgage valuation is for the benefit of the mortgage lender. It is designed to give enough information for the lender to decide whether the property is safe to lend on, and up to what amount. Though you may pay for the report, you might not get a copy or even see what the surveyor has written.
Multiple Agency - This is when you employ the services of more than one agent. The agent that sells the property takes the whole fee. The downside is that fees will be higher and sometimes it can make your property look as if its difficult to sell when prospective buyers receive details from several sources. Additionally, buyers tend to be less confident as they are often concerned another buyer may appear.

N

Negative Equity - When the value of the mortgage which is outstanding on the property, is more than the market value of the property.
NHBC - National House Building Council. A warranty scheme for new properties providing cover against major structural defects for 10 years.
Non Resident Landlords - If you live overseas and are not a UK tax payer you can apply to receive rent without tax being deducted. For more information and details on how to apply for the Non Resident Landlords (NRL) Scheme www.hmrc.gov.uk/international/nr-landlords.htm

O

Office Copy Entries - - If the property has a registered title, the vendor’s solicitor will need to apply for office copy entries from the Land Registry before a draft contract can be prepared.
Ombudsman - - An independent professional body which is set up by law to help settle individual disputes between consumers and firms, for example, estate agents, solicitors and insurance companies.
Outline Planning Permission - - This is planning consent which is subject to certain reserved matters, such as design, appearance and siting of proposed buildings.

P

Peppercorn Rent - A nominal rent where the landlord does not receive an annual payment in cash. When the owner of land or property wishes to grant a lease, he must charge a rent as an acknowledgement of the existence of the lease. Where the owner does not want to charge any rent but simply wishes to establish the lease exists, he can ask for a peppercorn rent each year as a token payment.
Planning Permission - The permission granted by the local planning authority (usually the local council) for any new building or engineering operations or change of use of a building if it meets the public's interest.
Premium - The amount you pay regularly, monthly or annually, to an insurer for an insurance policy.
Private Sale - Sale of a property without the use of an estate agent.
Product Fee - There may be a fee involved when you apply for a mortgage. This is to reserve the mortgage and to cover administration costs. Also known as an arrangement fee.

R

Remortgage - The process of moving your mortgage without moving home. You take a new mortgage with a different lender to pay off your old mortgage.
Repayment Mortgage - Also known as a Capital and Interest mortgage. Your monthly payments pay off the interest and some of the capital borrowed. By the end of the term of your mortgage you will have paid off all your mortgage debt.
Repayment Type - How you pay back your mortgage. See Repayment Mortgage or Interest Only Mortgage.
Retention - Holding back part of a mortgage loan until any repairs to the property are satisfactorily completed.

S

Section 21 Notice - The notice which must be served to end a tenancy. This can be served at any time after the deposit has been properly registered with an approved scheme but not less than 2 months before possession is required. A Section 21(1)(b) notice must be served to end a fixed term tenancy. A Section 21 (4)(a) must be used to end a periodic tenancy. In this case of a periodic tenancy, it must be served after term ends and expires following 2 mths after term ends. Example: let for 6 mths starting on 1 Jan. Term ends 30 June. Notice served 15 July. Notice expires after 30 September. Share of Freehold - Share of freehold means that when you buy a flat the lease on the property comes with a share of ownership of the building. Leaseholders in a block with several properties often choose to buy the freehold between them and so share of freehold gives them more control over the management of the property. It is important to remember that when purchasing a property with a share of freehold, the property is still a leasehold property. Sinking Fund - When you buy a leasehold property, part of the service charge may be paid into a sinking fund. The sinking fund builds up over the years to cover future projects that may be needed to repair or improve the building. The freeholder or the property management company will be responsible for the service charge management and will notify leaseholders if part of the service charge will be paid into a sinking fund. Sole Agency - Where you employ the services of one agent to sell your property for an agreed period of time. should you sell your property through another agent before your agreement with the sole agent has ended, then you may have to pay the original agent their fee as well. Likewise, the agent must respect the terms of the agreement and ensure that the service promised and agreed is delivered. If other agents approach you during the term of a sole agency agreement, they must warn you of a possible liability to pay commission to more than one agent. Sole Agency fees are lower than where more than one agent is instructed. Sole Selling Rights - This means that the appointed selling agent will be due the agreed fee, even if you end up selling your property privately or through another agent. This usually applies to development / land, new homes, auction and properties being sold by tender. Solicitor - Legal expert handling all documentation for the sale and purchase of a property. Stamp Duty Land Tax - A tax you must pay on a property when you buy it. The duty must be paid at the point of completion. £0 - £125,000 0% £125,001 - £250,000 1% £250,001 - £500,000 3% £500,001 - £1 million 4% Over £1 million - £2 million 5% Over £2 million 7% Over £2 million bought by corporate bodies 15% Statutory Periodic Tenancy - If at the end of a fixed term tenancy, neither parties do anything and no further agreement is made, the tenancy will automatically run from one rent period to the next on the same terms as the preceding fixed term assured shorthold tenancy. It will continue to run on this basis until replaced by a new agreement or by one party giving the other notice. Once notice is served, it will only be effective from the start of the next period of renewal and will end on the last day of that period. The tenant will have to provide not less than 1 months notice and the landlord not less than 2 months. Subject to Contract - Words to indicate that an agreement is not yet legally binding. Settlement - caused by the weight of a new building/structure or part of it. Buildings are heavy things and, as their weight is taken up by the ground, a little movement caused by this adjustment sometimes occurs as the ground consolidates under the new load - this is settlement. It usually occurs early in the life of a building and rarely recurs, although, there are exceptions, for example, in soft clay soils. Settlement rarely causes problems, although differential settlement (differing degrees of settlement between connected parts of the same structure) can cause damage. Not to be confused with subsidence. Subsidence - This results from external factors which cause the disruption, displacement, contraction or distortion of the ground under or around a building. Some of the more common causes include- TREES - trees extract moisture from the ground which then contracts, particularly in shrinkable clay soils, causing buildings above to move (subside). DRAINS - leaking drains can wash away or erode the adjacent ground which then partially collapses reducing the lateral (sideways) strength of the ground. The support provided by this ground will then be reduced causing any building above to move (subside). There could be movement in the ground beneath your home if you find: New or expanding cracks in plasterwork;New or expanding cracks in outside brickwork or rendering; Sticking doors or windows; Rippling wallpaper with no other apparent cause e.g. damp.
Survey - A thorough report on the property you are planning to buy. This can be a full structural survey, a homebuyers report or a basic mortgage valuation. Surveyor - Person who conducts the survey.

T

Tenancy in Common - A form of ownership by two or more people in which, if one dies, their share of the property forms part of their estate and does not automatically pass to the other(s).
Tenants - People living in a property on a non-ownership basis.
Tender - 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.
Tenure - A collective term which relates to the nature of the owners title to a property i.e. is it freehold or leasehold.
Title - The record of ownership of a property, the evidence of which is found in the title deeds.
Total Amount Payable - The total cost of repaying a mortgage.
Tracker Mortgages - Tracker mortgage normally follow movements in the base rate set by the Bank of England. The interest rate is then set at a constant level above or below the base rate, rising and falling in line with any changes during the tracking period. This means that if the base rate falls, the amount you pay falls. Likewise, if the base rate goes up, so will your payments. Tracker mortgages tend to be for a set period of time, say five years, after which you usually transfer to a new tracker rate, or to a different type of rate altogether.
Transfer Deeds - The Land Registry document that transfers legal ownership from seller to buyer.
Transfer of Equity - Adding or removing a party to / from a mortgage.

U

Under Offer - A term applied to a property for which the seller has provisionally accepted the buyer's offer.
Underpinning - In construction, underpinning is the process of strengthening and stabilizing the foundation of an existing building or other structure. Underpinning may be necessary for a variety of reasons: The original foundation is simply not strong or stable enough; The usage of the structure has changed ; The properties of the soil supporting the foundation may have changed (possibly through subsidence) or were mischaracterized during design; The construction of nearby structures necessitates the excavation of soil supporting existing foundations; It is more economical, due to land price or otherwise, to work on the present structure's foundation than to build a new one.

V

Valuation - A valuation of the property for mortgage purposes to ensure that the property is worth the amount requested for a mortgage
Valuation Fee - The charge for the valuation of the property.
Variable Interest Rate - Rate of interest payment that fluctuates over time with general interest rates.
Vendor - The seller of a property or piece of land.

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