Cutting through the jargon

We are often asked about the jargon surrounding buying and selling of a property and we have just found this useful guide to many of the terms you will come across on Lloyds Bank website and have added a few of our own to help you along.

 

Agreement in Principle

Also known as a ‘Mortgage Promise’, or ‘Decision in Principle’, an ‘Agreement in Principle’ specifies a figure that a lender is prepared to lend to named borrowers. The agreement is subject to factors such as the valuation of the property and the information supplied being accurate.

 

APRC

APRC is the Annual Percentage Rate Charge you will be charged to borrow money across a one year period. The rate takes into account not just the interest on the loan but also other charges you have to pay (for example, any arrangement fees).

 

Arrangement fee

A one-off fee to set up the mortgage with your lender, which you can add to the mortgage loan (in which case interest on it would be applied).

 

Base rate

The interest rate set by the Bank of England on which most mortgage lending rates are based.

 

Buy to let

Some buyers purchase property specifically to rent out to tenants. A buy to let mortgage is designed specifically for this purpose.

 

Capital gains tax

The tax paid on profits made from selling a property. Main residences are usually exempt unless they have been developed specifically for making a profit, for example a house converted into flats.

 

Chain

A term used to describe the list of people involved in the move. E.g the preson you are buying off of, who they are buying off of etc.

 

Completion

The day you have been waiting for, moving day. It’s all paid for and you get the keys.

 

Conveyancing

The term for legal work that a solicitor or licensed conveyancer does as part of the property purchase process.

 

Early repayment charge

A fee you might need to pay if you want to leave or repay your mortgage sooner than agreed. Your Mortgage Offer should specify any relevant terms and conditions.

 

Equity

The amount of the property’s value that is not covered by a mortgage loan. For example,a £250,000 house bought with a £200,000 mortgage loan has £50,000 equity.

 

Energy performance Certificate

All properties should be energy rated and an Energy Performance Certificate (EPC) issued showing its current rating and potential improvements. This can have an effect on your monthly bills so ask the agent when considering a home.

 

Exchange of contracts

The swapping of signed contracts between a buyer’s conveyancer and a seller’s conveyancer. Once you have exchanged these contracts you are both legally bound to the transaction.

 

Freehold

Ownership of the property and land on which it stands (the alternative is leasehold).

 

Help to Buy

A UK Government scheme that helps people to become home owners or move up the property ladder. The scheme’s products are available through appointed agents and mortgage lenders.

 

Inheritance tax

A tax paid if an estate (property, money and possessions) left in a will is worth more than £325,000. The rate is typically 40% on anything above this threshold (which may be reduced to 36% if 10% or more of the estate is left to charity).

 

Interest-only mortgage

A mortgage where you only pay off the interest on the amount you borrow. Savings or other assets are used to pay off the total amount borrowed at the end of the mortgage term, so it is important to plan ahead to manage this effectively.

Land registry

 

The organisation that registers the ownership of land and property in England and Wales.

 

Leasehold

Differs from a freehold in that you own the property for a fixed period of time. Leases can last for decades or centuries. The rules around leasehold properties are complex, and can vary in different parts of the UK.

 

Loan to value (LTV)

This relates to the size of your mortgage in relation to how much your property is worth. For example an £80,000 mortgage on a house valued at £100,000 would mean a LTV of 80%.

 

Mortgage deed

The mortgage contract, including the terms and conditions of the loan agreement.

 

Mortgage offer

Issued by a lender as confirmation of your mortgage deal once your application has been processed and necessary checks have been made. This document also sets out the terms of the loan.

 

Mortgage types

There are several types of mortgage available, the main three are:

• Fixed The interest rate stays the same for a specified period of time.

• Tracker The interest rate follows the movements of another rate (most commonly the base rate set by the Bank of England).

• Variable The interest rate has a variable rate set by the lender. Lenders may have more than one rate available.  

Negative equity

Where your property is worth less than the remaining value of your mortgage.

 

Offer

The amount of money you offer the owner for their consideration.

 

Remortgaging

Changing your mortgage without moving house. This could be to move to a lender that offers you a more preferable rate of interest, or to release more money to renovate your property.

 

Shared ownership

A scheme (usually offered by registered social landlords or local authorities) where you buy a share of a property, and pay a reduced rent for the rest.

 

Stamp duty Land Tax (SDLT)

A tax applied if you buy a property or land over a certain price in England, Wales and Northern Ireland. The current threshold is £125,000 for residential properties and £150,000 for non-residential land/properties. Extra Stamp Duty is now levied for second properties.   SDLT no longer applies in Scotland, where Land and Buildings Transaction Tax applies.

 

Survey

Surveys are undertaken to give you and your lender confidence about the value and condition of a property you’re taking out a mortgage on. There are different types with increasing degrees of scrutiny, from a basic valuation to a full structural survey.

 

Any that we have missed? Get in touch with me at stephen@stephenlaneestates.co.uk and I will update the list or call on 01268 514777 and I will be more than happy to help.