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
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 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.
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
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
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.
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
Unlike leasehold, if you buy a
freehold property you own it outright and have responsibility
for all maintenance and repairs.
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
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
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.
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
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
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
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
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.
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
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.
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
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.
This is a legal
document setting out the conditions of a rental agreement,
including the rights of both the tenant(s) and the
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.
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.
If a property is under
offer, the seller has accepted an offer from a buyer but not
yet exchanged contracts.
You will come across this term in
legal documents; it is just another word for the seller of a
back to the Useful Articles section