There can be a lot to wrap your head around when buying or selling a property, and the legal speak can sometimes add to the stress and confusion!
Here is a list of the most commonly used jargon we come across on a day to day basis:
AGREEMENT IN PRINCIPLE
Also known as a decision in principle, mortgage in principle, approval in principle or mortgage promise. This is an estimate of how much money you can borrow from a mortgage lender. What you can borrow is based on your income and credit history; it can be used as evidence that you have the funds in place for when you have an offer for a property accepted.
ANNUAL PERCENTAGE RATE OF CHARGE (APRC)
The total rate of interest you’ll pay for a mortgage’s entire duration. APRC considers all the different rates your mortgage will be subject to and serves as an easy way to compare mortgage deals—lower rates usually mean a better deal.
Also known as 'base rate', it is the interest rate set by the Bank of England which influences other banks. It is generally used as a benchmark for the interest rates banks charge when lending money.
A temporary short-term loan which enables a buyer to purchase a property before selling their existing property.
A report into the physical state of a property sometimes referred to as a full structural survey.
Formed when several property sales and purchases are inter-dependent. A chain can become complicated but a good estate agent will be able to help keep it moving.
A system of ownership usually in place in buildings or estates of multiple occupancies (such as a block of flats). Unlike with leasehold, you own the freehold to your particular property (as do the other owners) and all property owners collectively help manage the upkeep of the building/estate.
When the transaction is complete and ownership of the property passes from seller to buyer. Normally, the seller's solicitor will ask the estate agent to release the keys to the buyer at this time.
A lawyer who specialises in the transferring of homeownership. They are required if you are using a mortgage and will cover every legal aspect of the home purchasing process.
A covenant is a provision or promise that has been written into a deed which may affect or limit the use of the property or land. There are two different types of covenant: positive and restrictive. A positive covenant is an obligation which requires some form of action (such as maintaining a fence or wall), whereas a restrictive covenant limits or prevents the use of land in a specified way.
Documents that show who owns the title of a property or land, along with any responsibilities on the property, e.g. what you can/cannot alter, rights of way, etc. Deeds are usually held by the mortgage lender until you pay off your mortgage, then they can be held by you or your solicitor.
An amount of money used to secure a property purchase, usually ten per cent (or lower) of the full price. Paying a deposit displays your initial commitment to purchase with the remaining amount to be paid later or provided in the form of a mortgage.
EARLY REPAYMENT CHARGE (ERC)
A charge incurred when you overpay on a mortgage or transfer to a different mortgage product during a specified amount of time (known as the early repayment charge period). The charge covers potential lost interest to your lender. Most mortgages will allow you to overpay up to a certain amount annually without incurring a charge.
The right of one landowner to make use of another nearby piece of land for the benefit of their land, e.g. a private right of way.
ENERGY PERFORMANCE CERTIFICATE (EPC)
Shows the efficiency of a property and gives an indication of how much the energy bills will be. It is displayed as two graphs: the energy efficiency and the environmental impact of the property. Both are graded from A (the best) to G (the worst).
Equity, or capital, represents the amount of money a homeowner has put into a property. This value is built up over time as the owner pays off the mortgage and the market value of the property appreciates.
EXCHANGE OF CONTRACTS
The point at which both parties are committed to the property transaction; both the buyer and seller can walk away at any point before the contracts have been 'exchanged'.
When a buyer chooses a mortgage rather than taking advice from a mortgage broker/advisor.
FIRST TIME BUYER
An individual who has never bought or owned a property before. Renting a property does not count as buying or owning.
A term used to describe a mortgage that has an interest rate which stays the same for a predetermined ‘fixed’ period—the interest rate will not change during this time.
A system of ownership which means you own the building and the land it sits on.
When a higher offer is made by another party and accepted, even after the offer with the first buyer had been accepted.
When a buyer lowers their offer (usually at the final hour) so the seller is forced to accept their lower price or reject it and risk having to find another buyer.
A percentage charge added to the amount you pay back on a loan. For example, a mortgage with a four per cent interest rate would mean you have to pay back the full amount of the loan—plus four per cent of its value.
LAND AND BUILDING TRANSACTION TAX (LBTT) (SCOTLAND)
The tax you pay when purchasing land or property in Scotland. The current threshold is £145,000 for residential properties and £150,000 for non-residential land and properties. However, the rate payable is subject to the total purchase cost.
A Government database containing the registrations of who owns what property and land in England and Wales.
LAND TRANSACTION TAX (LTT) (WALES)
LTT replaced Stamp Duty in Wales from April 2018. Buyers looking to purchase in Wales will be charged LTT on any residential purchase above £180,000 and above £150,000 for non-residential purchases. However, the price you pay varies depending on the overall cost of the property.
A system of ownership where you own the property but not the land it sits on. For example, you may own a flat but not the building it sits within. There will be a time period placed on your lease which will need to be renewed with the landowner, always check how many years remain on the lease. Whilst common with flats, some houses are sold as leasehold too which has been subject to much scrutiny.
The ratio of how much your loan (or mortgage) will cover the price of your property, written as a percentage. For example, a mortgage that offers 60 per cent LTV will cover 60 per cent of the property’s price.
A specialist loan used to pay for a property which you pay back over time with interest to the lender. The property itself is considered collateral, this means if you don’t keep up with your repayments, it can be repossessed and sold to reclaim the money owed.
A property that hasn’t been lived in and has been recently built. Bear in mind that different banks and mortgage lenders have their own definitions. They can vary from whether the property has been lived in but not bought, whether it has been converted or refurbished or whether it was finished within a certain amount of years.
RIGHT OF WAY
Right of way is a legal right for another to pass along a specific route on a piece of land or property belonging to another.
Where the developer of new build properties touches up paintwork, adjusts appliances and fixes any other faults within the property. A snagging survey is usually completed prior to the buyer moving in to spot minor cosmetic issues and check the quality of workmanship.
A lawyer who deals professionally with legal matters. Like a conveyancer, they will handle the transferring of homeownership but their knowledge goes above and beyond just that of property.
STAMP DUTY (SDLT)
A lump-sum tax that anyone buying a property or land over a certain price in England and Northern Ireland must pay. The current threshold for residential properties is £125,000 and £150,000 for non-residential land and properties. However, the rate you pay will vary depending on the overall purchase price.
STANDARD SECURITY (SCOTLAND)
This is the form that confirms to your mortgage lender that they can repossess your home if you don’t keep up with your payments.
STANDARD VARIABLE RATE (SVR)
The rate your lender charges after your introductory mortgage deal finishes (usually after two to five years). This rate is set by your lender, not by the Bank of England.
A qualified expert who specialises in examining and highlighting any potential issues or benefits within a property. Such issues may affect a properties price or need fixing in future.
The legal right of owning a property or land.
If a property is under offer, it means that the seller has accepted an offer from the buyer but the contracts have not yet been exchanged.
Another term for the home owner.
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