Buying Or Selling a Property Explained

Selling or buying any type of property is almost always a stressful process. Many people you have dealth with maynot have had time or intention to explain the proces in detail. They may have put long complicated documents in front of you so you can digest all of that and then make a decision. However many terms used within these documents are legal lingo and not every one understands every term used within.

To help you with this we have tried to explain what most of these terms mean. This may even help explain the overall proces whether you are buying or selling the property.

Annual Percentage Rate  (APR)
When applying for a mortgage or taking on a loan, many lenders may offer higher rates of interest while others a lower rate but higher start up (or arrangement) fees. How do you compare which offer is better than the other? APR is used to indicate the overall cost of borrowing over a certain period of time. It looks at the interest rate of your loan, repayment arrangements and any other associated fees to give you an indication of the overall cost of the loan. You should use APR to compare different loan offers; generally, the lower the APR, the better the deal for you.

Arrears
Arrears mean that you have fallen behind with payments on your loan. In case of mortgage arrears, the mortgage lender may take action to repossess the property.

Building survey
This is also called a full structural survey. It is a indepth  inspection of a property carried out by a chartered surveyor. They will write a report detailing any problems or defects in the property you are looking to buy. Building surveys are often carried out when people are buying houses or property of an old age with potential problems which could be structural and in need of repair. This could prove to be costly as certain properties may have been neglected and poorly maintained.

Chartered surveyor
A surveyor is someone who is employed to carry out a building survey to check for any problems with the property you are looking to buy. The chartered bit simply means he/she is suitably qualified and a member of the Royal Institution of Chartered Surveyors (RICS).

Conveyancing
This is any legal work involved in buying and selling a property, including advising buyers and sellers of their rights, researching legal ownership of properties, drafting contracts and leases, and liaising with mortgage lenders and estate agents. A conveyancer is a solicitor, or other legally qualified individual, who deals with this work.

Endowment mortgage
This is one of three main types of interest only mortgage. As well as making regular payments to cover the interest on your mortgage, you pay into an endowment policy to save up money to pay off the actual loan. An endowment policy is a life assurance savings scheme designed to pay out a lump sum at the end of a given period. Endowment mortgages have been a source of controversy in recent years, because many people have found that they have not accumulated enough money to pay off their mortgages. This is called an endowment shortfall.

Fixed rate mortgage
With a fixed rate mortgage you pay a fixed rate of interest on your mortgage for a set period, so you know exactly what you'll be paying each month. When that period ends, you will often end up paying a variable rate of interest controlled by your mortgage lender.

Freehold
Unlike leasehold, if you buy a freehold property you own it outright and have responsibility for all maintenance and repairs.

Gazumping
Though it may sound like someone eating their dinner too quickly, gazumping actually refers to a situation in which a seller accepts a higher offer from a third party on a property they have agreed to sell to someone else, before contracts have been exchanged. Gazundering is when a buyer offers a seller a lower offer just before contracts are due to be exchanged.

Interest only mortgage
Along with repayment, this is one of the two main classifications of mortgage. With an interest only mortgage, monthly payments to your mortgage provider only cover the interest on your mortgage. You also have to make regular payments into a long-term savings plan, so that you can pay off your mortgage at the end of the agreed period (the term). The three main types of interest only mortgages are ISA, endowment and pension scheme.

ISA mortgage
This is one of three main types of interest only mortgages. As well as making regular payments to cover the interest on your mortgage, you pay into an Individual Savings Account (ISA) to save up money to pay off the actual loan. ISAs are tax-free savings and investment accounts which have replaced PEPs and TESSAs. They are used to save cash or invest in stocks and shares.

Leasehold
Buying a leasehold property, instead of a freehold property, means you have ownership for a certain length of time. The lease will stipulate this period, and say who is responsible for maintaining and repairing various parts of the property. You will normally pay a small amount of ground rent to the owner of the land (the freeholder). It is generally considered unwise to buy a property with a lease that has less than 50 years remaining.

Loan to Value (LTV)
Expressed as a percentage, this is the ratio of the value of your mortgage to the value of your house. For example, if a property is worth £400,000 and you take out a mortgage of £200,000 then the LTV is 50%. Some mortgages are only available if you are borrowing under a certain proportion of the total value of the property, so buyers contributing a sizable deposit themselves can get better deals.

Mortgage
This is simply a loan taken out to buy a property. Your mortgage provider or mortgage lender might be a bank, building society, or specialist mortgage lending company. If you change your mortgage lender or your method of repayment without moving house, you are remortgaging.

Negative equity
This is a situation which arises if the value of your house falls to less than the value of the mortgage you have taken out to buy it. This is bad news. It means that you would be unable to repay your mortgage by selling the property and are therefore unable to move.

Pension scheme mortgage
This is one of three main types of interest only mortgages. As well as making regular payments to cover the interest on your mortgage, you use part of your pension to pay off the actual loan. This type of mortgage is generally suited to self-employed people and higher rate taxpayers.

Pied à terre
Directly translated from the French, this means "foot on the ground". In property jargon, it refers to a property kept for temporary, secondary or occasional occupation.

Public liability insurance
This type of insurance covers you should anyone suffer injury or death in or around your home, for example a trespasser or someone hit by a falling object (better get those loose tiles fixed!). It is sometimes, but not always, included in Building or Contents insurance.

Repayment mortgage
Along with interest only, this is one of the two main classifications of mortgage. With a repayment mortgage, you make monthly payments to your mortgage provider for an agreed period (the term) until you have paid back both the loan and the interest on it.

Secured
A mortgage is a loan secured on your home. This means that, if you don’t repay it, your mortgage lender may retrieve their money by selling your home.

Sitting tenant
This is someone who has a legal right to occupy a property, even if that property changes ownership. They are entitled to apply to the local authority to set a fair rent. Properties with sitting tenants are generally worth less than they would be if sold on the open market without being occupied.

Stamp duty
Nothing to do with posting letters or stamping your feet (though it may make you want to do so!), stamp duty is the government tax you pay when purchasing property or shares. In the case of property, it is stamp duty land tax (as opposed to stamp duty reserve tax on shares). As of March 2006, if you are buying a property for less than £125,000 then you don’t have to pay any stamp duty land tax. You are also exempt from the tax if the property you are buying is in an area designated by the government as "disadvantaged" and the purchase price is under £150,000. Normally, when buying a property worth over £125,000, you will have to pay between one and four percent of the purchase price (on a sliding scale).

Standard variable rate mortgage
Here you will be paying back money at a rate decided by your mortgage lender, without any discounts or deals. It’s variable, meaning the interest may go up or down.

Subject to contract
Watch out for this one. It means that an agreement is not yet legally binding.

Tenancy agreement
This is a legal document setting out the conditions of a rental agreement, including the rights of both the tenant(s) and the landlord.

Title deeds
These are legal documents relating to the ownership of a property. They set out anything affecting this ownership, such as boundaries and rights of way. A title search can be undertaken by a conveyancer or solicitor to check there are no unusual circumstances relating to the ownership of the property you are looking to buy.

Tracker mortgage
This is a mortgage with an interest rate linked to the Bank of England rate, or another base rate. The interest rate will go up and down depending on this rate, irrespective of the mortgage lender.

Under offer
If a property is under offer, the seller has accepted an offer from a buyer but not yet exchanged contracts.

Vendor
You will come across this term in legal documents; it is just another word for the seller of a property.

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