Home buying language - A glossary of terms

Home selling is full of phrases and terminology that is unfamiliar to all but the seasoned house buyer.

That’s why we’ve provided you with a mortgage and moving glossary to guide you through some the language you are likely to encounter when moving home.

A

Additional Security Fee
An up-front, one-off fee paid to the lender to protect them against the borrower defaulting on the loan. Usually charged on mortgages over 75% of the house value. Also known as MIG, Indemnity Guarantee Premium and Mortgage Indemnity Premium

Agents
(See Estate Agents)

APR
Annual Percentage Rate - the true cost of a loan
 

B

Bridging Loan
A temporary loan to tide you over when having to buy your new home before selling your current property

Broker
An intermediary who will give advice and offer a range of mortgages

Buildings Insurance
Insurance to cover any structural damage to your property
 

C

Capital
The sum borrowed in a mortgage

Chain
This occurs when the seller needs the sale of their property to occur before they can complete the purchase of another property. The same situation may exist for others in the chain. As a result, the whole chain can collapse if one link breaks

Charge
The term used for the security that the lender relies on when granting a mortgage

Completion
The point when contracts have been exchanged and ownership legally passes to the buyer

Contents Insurance
Insurance to cover any loss or damage to your possessions

Contracts
The legal documents needed to transfer the ownership of property

Conveyancing
Legal work involved in buying and selling a property
 

D

Deposit
Part of the purchase price paid when contracts are exchanged, which is generally 10% of the purchase price 
Direct Lenders
A new form of mortgage lender who deals solely over the telephone or internet

Disbursements
Expenses paid by the solicitor on behalf of the purchaser

Discounted Rate
A reduced mortgage interest rate which is subtracted from the Standard Variable rate

E

Endowment Mortgage
Type of mortgage where monthly payments are made into an endowment – or life assurance  policy. The loan is paid off in one lump sum at the end of the loan period

Estate Agents
Estate Agents arrange the sale of property. They advise on price, negoiate between sellers and buyers and co-ordinate the marketing of the property. They usually offer other optional services such as arranging mortgages, surveys and conveyancing. You are under no obligation to use these services, either as a buyer or a seller.

Excess
The initial sum you have to pay on an insurance claim

Exchange of Contracts
The point at which buyer and seller are legally bound to the sale and purchase of the property

F

Failed Valuation Survey
When the lender turns down your mortgage application after reading the surveyor's valuation report

Freehold
Absolute ownership of property and land
 

L

Land Registry
Carried out by the solicitor to register the buyer as the new owner of the property. The Land Registry Authority retains the records of who owns land 

Lender's Arrangement Fees
Charge passed on to the buyer by the lender for arranging a loan

Lender's Legal Fees
The fees incurred by the lender when arranging a mortgage. These costs are passed on to the buyer

Lender's Valuation
A valuation of the proposed property carried out by the lender before agreeing to give out a mortgage. This is only a valuation survey. A separate full structural survey may be needed by the buyer

Life Assurance
An insurance policy which pays out a fixed lump sum on death of an individual. Life Assurance helps protect from financial difficulties

Loan-to-Value
A percentage expressing the size of mortgage in relation to the value of property. For example, property value=£100,000, mortgage size=£90,000. Therefore loan-to-value=90%

Local Authority Search
A search carried out by the solicitor to find out if there are any Local Authority Notices, with respect to the building itself (e.g. has it been condemned?), and the surrounding area (e.g. have plans gone through to build a motorway next to the house?). Also alterations to land use or public rights of way
 

M

MIG
Mortgage Indemnity Guarantee (see Additional Security Fee)

Mortgage
A long term loan to fund the buying of a property

Mortgagee
The lender of a mortgage

Mortgagor
The house buyer who takes out a mortgage

Mortgage Deed
The legal charge of the lender until the loan has been re-paid

Mortgage Indemnity Premium
See Additional Security Fee.

Mortgage Term
Period over which mortgage is to be repaid

N

Negative Equity
When the value of your property falls to less than your mortgage
 

P

Pension Mortgage
Monthly repayments made up of a) interest on loan and b) contribution to a personal pension scheme. The loan on the property is paid off in one lump sum at the end of the loan period

Premium
The monthly amount payable to an insurance policy

Principle
The sum of the loan on which interest is calculated
 

R

Redemption
When a mortgage if fully repaid

Repayment Mortgage
A basic mortgage capital and interest on the loan are paid off in monthly installments

Repossession
When the mortgage lender takes away your home because you have fallen too far behind on your mortgage repayments
 

S

Sole Agent
When a seller chooses only one estate agent to sell their property

Solicitor
Legal professional who acts on behalf of the buyer in the purchase of a property. The solicitor will check the legal position of the property, carry out a Local Authority Search, Land Registry and oversee the exchange of contracts between the two parties

Stamp Duty
A government tax. Currently the tax is 1% of the property's value between £125k up to £250k, and 3% on those valued over £250,000 and up to £500k. Those properties valued below £125k are exempt from stamp duty

Structural Survey
A report constructed by the surveyor detailing firstly whether the property is structurally sound and secondly, listing the major/minor defects, (including the necessary work that needs to be done)

Survey
As a new house or apartment will be, in most cases, the most expensive purchase of your life you need to know its condition. So upon applying for your mortgage, you may wish for a survey of your new property is undertaken.Similar to our MOT test, a survey will tell you the condition of the property and  give you the peace of mind of knowing exactly what you are buying. There are three types of surveys that you might want done on your new home – a full building survey, which is the most comprehensive; a RICS Homebuyer's Report and a Defect Report, which concentrates on a particular defect specified by the client, for example, a cracked wall

Surveyor
The person who carries out a structural survey of the property, examining the structure and general state of the property
 

T

Term
The period in which a mortgage is taken out

Title
The legal right to ownership of a property

Title Deeds
The document which shows the ownership of a property
 

V

Valuation Survey
A survey carried out by the lender to ensure that the property's value is not less than the proposed loan. Often the lender will arrange the survey and bill the buyer. This cannot be used as a structural survey