Jargon Buster

The world of property is full of terminology that is often confusing.
Here is a list of terms you may come across. Click on a letter below to take you to that section.

A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z

 

A

Absolute Title Full rights and ownership of a property.
Accident Sickness and Unemployment Insurance Income protection incorporating cover for loss of earnings from accident, sickness or unemployment. Usually paid out in the form of monthly tax-free income to cover a portion of lost earnings and restricted to two years from the date of the first payment.
Agreement in Principle A document provided by the mortgage lender that informs a prospective seller that the buyer can obtain a mortgage to cover the purchase price.
Assured Shorthold Tenancy This form of tenancy is the most common with the length of tenancy and the rent agreed upon when the lease is drawn up. Unless there is a break clause, neither party can terminate a fixed term tenancy before the end of the term without agreement of the other party. Assured Shorthold Tenancies are covered by the Housing Act 1988 (Amended 1996).
Additional Security Fee An up-front, one off fee paid to the lender to protect them against the borrower defaulting on the loan. This is usually, charged on mortgages over 75% of the house value, and is also known as an MIG, Mortgage Indemnity Guarantee Premium or Mortgage Indemnity Premium.
Annual Percentage Rate (APR) the total cost of a loan - including all costs, interest charges and arrangement fees - shown as a percentage rate and easily comparable with mortgage interest rates.
Arrangement Fees The fees charged for arranging a loan on certain products. These are usually applied to loans where a special interest rate applies e.g. fixed or capped rates.
Assignment The transfer of ownership of an insurance policy or lease.
Auction The sale of a property to the highest bidder.

B

Boundaries Define the area of legal ownership relating to a property.
Basic variable mortgage rate The mortgage lender's standard rate of interest which may be increased or decreased periodically by the lender depending on prevailing economic conditions.
Bridging loan A temporary loan providing financial cover which allows a buyer to complete on the purchase of a new property before selling the previous property.
Building survey (formerly a full structural survey) A full inspection of the property, conducted by a Chartered Surveyor, who then writes a detailed report including any property defects. Suitable for any house, particularly older properties and those which have been poorly maintained as well as for properties which have been extensively altered or extended, and any property you may wish to alter or extend.
Buy to let mortgage A type of mortgage specifically designed for investors buying a property with the intention of letting it out.

C

Capped mortgage Provided by lenders with an upper limit on the interest rate which is normally agreed for a fixed period of time. Thus if the standard interest rate is lower than the upper limit the borrower will be charged interest on the lower rate, but if the standard variable rate is higher the borrower will be charged at the agreed rate.
Chain The situation that occurs when a buyer is reliant upon completion of the sale of his existing property, in order to complete on the purchase of his new property.
CML The Council of Mortgage Lenders, which devised the Mortgage Code to ensure lenders treat customers fairly.
Completion The point at which all transactions concerning the property's sale are concluded and legal transfer of ownership passes to the buyer.
Conditions of sale The details that determine the rights and duties of the buyer and seller. These may be national, statutory, or conditions imposed by the Law Society.
Contents insurance Insurance covering any loss of or damage to your possessions within the property.
Contract A legal agreement between the seller and buyer of a property which binds both parties to complete the transaction.
Contract race Occurs when two parties have made an offer on the same house. The vendor will sell to whoever exchanges contracts first, i.e.: it's a race!
Conveyancer A qualified individual such as a solicitor or licensed conveyancer who deals with the legal aspects of buying or selling a property.
Conveyancing Traditional term used for the legal work involved in the purchase and sale of a property.
Capital Appreciation/Depreciation The increase or decrease in the value of an individual's investment in a property.
Catchment Area An area surrounding a school in which you must live for your children to be eligible to attend the school.
Commission An estate agents fee usually based on a percentage of the sale price.
Covenants Rules and regulations governing the property and contained in its title deeds or lease.
Council Tax A tax levied by individual Councils that varies for each borough and is based on property value.
Credit Checks Checks carried out by a company on an individual's credit history and worthiness before the loan of funds.
Credit Crunch Following on from the recent well-documented turmoil in the international banking system the banks and building societies are not too keen to lend money, either to themselves or to new borrowers. This has the most impact on First Time Buyers, who are now finding it difficult to raise the necessary funds to purchase a property. Certainly the days of the 100% mortgage are well and truly gone and most lenders are looking for a 10% deposit from a borrower. It is sometimes possible for a first time buyer to purchase a home having saved just a 5% deposit IF the seller of the property is willing to offer an additional 5% “gifted” deposit.

D

Deeds Legal title documents proving ownership. The deeds will be held by the mortgage lender.
Deposit A sum of money (usually 10% of the property value) paid by the buyer on exchange of contracts.
Detached Term used to describe a property that stands alone and is separated from all others.
Dilapidations Any disrepair or damage to a rented property.
Disbursements Fees paid by the buyer's solicitor on the buyer's behalf such as stamp duty, land registry and search fees.
Discharge Paying off a mortgage.
Draft contract Preliminary, unconfirmed version of the contract drawn up for both parties to consider amendments.
Deeds Release Fee Often charged by the holder of the deeds

E

Easement or 'Right of Way' A legal term for the right to use a part of someone else's land e.g. a shared driveway.
Equity Release Enables the owner of a property to generate either a lump sum or a regular income in return for allowing a lender to take ownership of a portion of the property.
Early redemption charge (ERC) A charge made by the lender if the borrower terminates a mortgage in advance of the terms of that particular mortgage. This usually occurs when the borrower has benefited from reduced payments or cash back in the early period of a mortgage.
Endowment mortgage Interest-only repayments combined with monthly premiums into an endowment policy designed to pay off the loan at the end of the term.
Energy Performance Certificate The Energy Performance Certificate (EPC) gives home owners, tenants and buyers information on the energy efficiency of their property. It gives the building a standard energy and carbon emission efficiency grade from 'A' to 'G' (where 'A' is best) and advice on cost effective improvements to improve the current rating
Equity The difference between the value of a property and the amount of mortgage owed.
Excess The initial agreed sum paid by the policyholder on an insurance claim.
Exchange of contracts The point at which signed contracts are physically exchanged, legally committing the buyer and seller to the purchase and sale of a property at an agreed price.

F

Financial Advisor Qualified person who recommends products and services that help individuals plan their income and expenditure. There are two types: Independent or Tied. Independent advisor works on behalf of the client and can give best advice because they can choose from any product or service whereas Tied advisors work on behalf of a company and can only recommend their products.
Fixtures fittings & contents form A document that details items that the seller has agreed as included in the sale price.
Failed valuation survey Occurs when the lender turns down a mortgage application after the surveyor's valuation report indicates the property is not worth the sum sought.
Fixed rate mortgage A mortgage in which the interest rate is set for an agreed period of time.
Fixtures & fittings All non-structural items included in the purchase of a property.
Flexible mortgage An arrangement whereby mortgage repayments can be increased or decreased.
Freehold Technical term describing the ownership of the property, meaning that it belongs to the owner without the limitation of time.

G

Gazumping Occurs when a seller accepts a higher offer from a third party on a property that they have agreed to sell to someone else, but have not yet exchanged contracts on.
Gazundering When a buyer makes the seller a lower offer just before contracts are due to be exchanged.
Greenbelt Land protected under planning legislation that cannot be built on.
Gross Income An individual's total income before tax.
Ground rent The annual charge levied by the freeholder to the leaseholder.
Guarantor The lender may require a borrower to appoint a guarantor, who promises to pay the borrower's debt if the borrower defaults.

H

Homebuyer's survey and valuation This is a survey report, which is not as detailed as a structural survey, and is carried out by a Chartered Surveyor to assess the state of a property and its value.
Home Information Pack (also known as the HIP) is compulsory for all homes on the market in England and Wales. It is a set of documents that provides the buyer with key information on the property and must be provided by the seller or the seller's estate agent. It is a legal requirement to have a HIP and you can't market your property without one.
What is in a HIP?
Home Information Pack Index
Energy Performance Certificate (EPC)
Sustainability information (required for newly built homes only)
Sale statement
Evidence of title
Standard searches (local authority and drainage and water)
A copy of the lease for leasehold properties
Commonhold documents where appropriate

I

IFA Independent Financial Advisor. Individual savings account (ISA) mortgage An interest-only mortgage linked to an Individual Savings Account fund, which is designed to pay off the loan at the end of the period.
Interest charges (mortgage) The charges made on a loan by banks, calculated as a percentage of the amount borrowed.
Interest-only mortgage An interest-only mortgage stays the same throughout the mortgage term. Interest and a premium to an investment vehicle are paid monthly. At the end of the term, the proceeds from the investment vehicle are intended to repay the mortgage. The amount will depend on the performance of the investment vehicle. If you choose an interest-only mortgage you are responsible for ensuring that you have sufficient funds available to repay your mortgage at the end of the term.
Inflation The continued aggregate increase in prices.
Inventory A list which describes the condition of furnishings and contents of a leased property at the start and end of a tenancy in order that any dilapidation during the tenancy can be identified.

L

Land registry fee Are paid to the Land Registry to register ownership of a property.
Lease A legal document by which the freehold or leasehold owner of a property lets the premises (or a part of it) to another party for a specific length of time, after which point ownership may revert to the freeholder or superior leaseholder.
Leasehold Denotes that ownership of a property is by way of a lease.
Lender's arrangement fees Charges 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.
Listed building A building listed as being of special architectural or historic interest, which cannot be demolished or altered without local government consent.
Loan to value (LTV) The size of a mortgage quantified as a percentage of the property's value.
Local authority search A procedure whereby a buyer's solicitor makes an enquiry to the local council regarding any outstanding enforcement or future development issues which might affect a property or immediate area surrounding a property. These are usually valid for three months.
Land Registry A Government department that registers all the details of any land transactions and issues of ownership in England and Wales.
Legal Charge A document securing the debt on a property.
Life Assurance A type of insurance that provides a fixed amount of money to the policyholder in the event of death.

M

Maintenance Charge (or Service Charge) The cost of repairing and maintaining external or internal communal parts of a building charged to the tenant or leaseholder.
Mortgage Application Fee A charge incurred purely for applying for a mortgage normally paid to the lender up-front at the time of application.
Maisonette A property arranged over more than one floor (i.e. a portion of the house), accessed via a private entrance.
Mortgage A sum of money advanced by a lender (such as a bank or building society) on the security of a property and repayable over a long period.
Mortgage deed A legal document relating to the mortgage lender's interest in the property and containing the terms of the mortgage.
Mortgage indemnity guarantee (MIG) An insurance policy that mortgage lenders may require buyers to pay for if their loan is above a specified amount of the purchase price.
Mortgage indemnity premium (MIP) An insurance policy that protects the lender against default of mortgage repayments. Although the policy benefits the lender, it is the borrower who usually pays the premium.
Mortgage payment protection (MPP) An insurance designed to pay your monthly mortgage for a limited period (usually a year) if you are unable to work through illness, disability or redundancy.
Mortgage rate The standard variable interest rate quoted by all mortgage lenders which normally varies with the Bank of England base rate. All discounted rates are based on this mortgage rate.
Mortgage term The period of time over which (repayment mortgage) or at the end of which (endowment mortgage) the loan is to be repaid.
Mortgagee The lender of a mortgage (a bank or building society).

N

Negative Equity If you purchased a property a short time ago and now find its value is less than the amount you borrowed, you are in negative equity. This of course does not matter at all unless you are needing to sell. In the short term, property values can and do fall, but in the long term the trend is usually upward.
NHBC (National House-Building Council) scheme A type of building guarantee available on some newly-built homes under which defects occurring within a specified time, post construction, are remedied.
National Association of Estate Agents (NAEA) Regulatory body for estate agents, which ensures they adhere to codes of practice.

O

Offer A sum of money that the buyer offers to pay for a property.
Offer of a loan A formal document approving the mortgage that a buyer has requested and detailing the terms and conditions that will apply.
Ombudsman for Estate Agents Independent professional body who investigate complaints on behalf of customers against, for example, estate agents and provides financial compensation if appropriate. Membership of the scheme is voluntary and as of June 2004 there were 4494 Estate Agents in the scheme.
Open market value The price a property should achieve when there is a willing buyer and willing seller.

P

Payment break An option on flexible mortgages that allows the borrower to stop making mortgage payments for up to six months.
Penalties Costs that may be incurred if the borrower repays the loan too early or switches between lenders.
Peppercorn ground rent A nominal periodic rent usually paid annually.
Pied-a-terre A property kept for temporary, secondary or occasional occupation.
Preliminary enquiries The initial enquiries about a property put forward to a seller, which the seller must answer before the exchange of contracts.
Premium The monthly amount payable for an insurance policy.
Premium lease The lump sum paid up front as rental payment for a property.
Principal The sum of the loan on which interest is calculated.
Public liability insurance Insurance which covers injury to or death of anyone on or around a property.
Purchaser The person who is buying a property.
Part Exchange Builders offer to buy an existing home and put its value towards the cost of the new home. Full market value is rarely paid as the builder carries the costs and risk of selling the property.
Payment Protection Insurance An insurance policy that pays for a loan if the individual becomes unable to work for an extended period of time as a result of redundancy, accident, sickness or disability.

R

RICS Royal Institution of Chartered Surveyors. The professional association that represents surveys. RICS offers clear impartial expert advice on property issues.
Redemption Occurs when a mortgage is fully repaid.
Re-mortgage Refinancing a property by either switching a mortgage from one lender to another or by taking out a second mortgage to draw upon any equity gained by a rise in value.
Repayment mortgage Monthly payments which cover both interest and capital (as opposed to an interest-only mortgage) so that the amount outstanding gradually decreases until the mortgage is fully repaid.
Repossession Occurs when the mortgage lender takes possession of a property due to non payment of the mortgage.
Retention The holding back of part of a mortgage loan until repairs or specified works to the property are satisfactorily completed.

S

Search A request or enquiry relating to information (concerning a property) held by a local authority or by the land registry.
Semi-detached A property which is joined to one other house.
Service charge See Maintenance charge.
Sole agent A single estate agent entrusted with a sale or let.
Solicitor A legal expert handling all documentation for the sale or purchase of a property.
Stamp Duty The tax paid by buyers of property, the amount payable is calculated as follows:

Residential property - purchase price
Rate of Stamp Duty Land Tax
up to £175,000 (until 2 September 2009 inclusive)
0%
£175,001 - £250,000
1%
£250,001 - £500,000
3%
£500,001 or more
4%


It should be stressed that the stamp duty is on the WHOLE amount and not just the balance above £175,000
Structural survey See Building Survey.
Studio flat A flat consisting of one main room or open-plan living area incorporating cooking and sleeping facilities and a separate bathroom/shower room.
Subject to contract Words used to indicate that an agreement is not yet legally binding.
Surveyor A professionally qualified expert who carries out the survey.
Sellers Pack A Government proposal aimed at speeding up the house buying process and thereby reducing the length of time in which gazumping and gazundering is possible. The document will become a legal requirement for anyone putting a property on the market. It will include a basic report on the condition of the property and the results of local authority searches - both of which are currently the buyer's responsibility.

T

Tenancy Temporary possession of a property by a tenant.
Tenancy agreement A legal agreement designed to protect the rights of the tenant and landlord setting out all the terms and conditions of the rental arrangements.
Tenant The person who has temporary possession of a property.
Tenants in common A form of ownership by two or more parties whereby if one of them dies, their share of the property forms part of their estate and does not automatically pass to the other party.
Tenure The conditions on which a property is held (i.e. length of lease).
Terraced house A property which forms part of a connected row of houses.
Title deeds Documents showing the legal ownership of a property and any conditions affecting it.
Transfer deeds The land registry document that transfers legal ownership from seller to buyer.
Term The time frame in which the lender agrees to provide a loan.
Title The right to ownership of a property.

U

Under offer The status of a property, when a seller has accepted an offer from a purchaser prior to exchange of contracts.

V

Valuation A basic inspection (not a survey) of a property to estimate its value for mortgage purposes. Mortgage lenders will insist on this before lending.
Variable base rate The basic rate of interest charged on a mortgage. This may change in relation to market conditions, meaning monthly payments can go up or down.
Vendor The legal term used to describe the person selling a property.
Vacant Possession The previous occupants must vacate the property before the new occupants move in. This includes any tenants.

Y

Yield The income from a property calculated as a percentage of its value.