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Additional
security fee
An up-front, one off fee paid to the lender to protect them against the
borrower defaulting on the loan. Usually, charged on mortgages over 75%
of the house value. Also known as Mortgage Indemnity Guarantee (MIG)
premium and 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
Charged to arrange a loan on certain products. 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.
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Basic
variable mortgage rate
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 purchaser to
complete on the purchase of a new property before selling the previous
property.
Building survey
(formerly 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. Also for properties which have been
extensively altered or extended, or any property you may wish to alter
or extend.
Buy to let
mortgage
A type of mortgage specifically designed for people buying a property
with the intention of letting it out.
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Capital
The amount of the loan on which interest is calculated.
Capped mortgage
Normally agreed for a fixed period of time, many lenders provide
mortgages with an upper limit on the interest rate. Thus if the standard
interest rate is lower than the upper limit you will be charged the
lower rate, but if the standard variable rate is higher you 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 as 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 which determine the rights and duties of the buyer and
seller. These may be national, statutory, or the Law Society’s
conditions.
Contents
insurance
Insurance to cover any loss 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
When two parties have made an offer on the same house. The vendor will
sell to the first party to exchange contracts, ie: 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 for the legal work involved in the purchase and sale of
a property.
Covenants
Rules and regulations governing the property, contained in its title
deeds or lease.
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Deeds
Legal title documents proving ownership. The deeds will be held by the
mortgage lender.
Deposit
a sum of money (usually 1 months rent) paid upfront to the landlord or managing agent. This money is then held and returned to the tenant/s if the property has been left in the condition it was found. Otherwise a sum of money is deducted for items to pay for repairs etc.
Deposit
sum of money (usually 10%) paid by the buyer on exchange of contracts.
Detached
Term used to describe a property that stands alone and is separated from
all others
Development
A newly built residence or an older property which has been refurbished
and modernised.
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.
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Early
redemption charge (ERC)
A charge made by the lender if the borrower terminates a mortgage in
advance of the terms of the particular mortgage. Normally 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.
Equity
The difference between the value of a property and the amount of
mortgage owed.
Excess
The initial sum you have to pay 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 the agreed price.
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Failed
valuation survey
When the lender turns down your 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 you can increase or decrease your mortgage
repayments.
Freehold
Technical word for the ownership of the property, meaning that it
belongs to the owner without limitation of time.
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Gazumping
This is 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.
Gazundering
When a buyer offers the seller a lower offer just before contracts are
about to be exchanged.
Ground rent
The annual charge levied by the freeholder to the leaseholder.
Guarantor
The lender may sometimes require a borrower to appoint a guarantor. This
is someone who promises to pay the borrowers debt if the borrower
defaults.
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Homebuyer's
survey and valuation (house/flat buyer's report)
This is a survey report, which is not as detailed as a structural
survey, carried out by a chartered surveyor to assess the state of a
property and its value.
Home Information Pack
A set of documents that need to be produced before the property comes onto the market including (As from 1st June 2007): Energy efficiency rating, searches etc.
Home Condition Report
Similar to a homebuyers survey this can be included in a Home Information Pack.
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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 that banks make on a loan, calculated as a percentage of the
amount borrowed.
Interest-only
mortgage
There are 2 types of mortgage, interest-only or capital repayment.
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 will be
responsible for ensuring that you have sufficient funds available to
repay your mortgage at the end of the term.
Inventory
A list which describes the condition of furnishings and contents of a
leased property at the commencement of the tenancy in order that any
dilapidation during the tenancy can be identified.
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Land registry fee
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
specified length of time, after the expiry of which ownership may revert
to the freeholder or superior leaseholder.
Leasehold
Denotes that the ownership of the property is by way of a lease.
Lender’s
arrangement fees
Charge 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
One officially 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 the mortgage as a percentage of the property’s value.
Local authority search
Procedure whereby a buyer's solicitor makes an enquiry to the local
council regarding any outstanding enforcement or future development
issues which might affect the property or immediate area.
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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.
Maisonette
A property arranged over more than one floor (ie: a portion of the
house).
Mortgage
An amount 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 lenders 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 proportion 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)
This is 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 (ie: bank or building society).
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Negative equity
When the value of the property falls to less than the outstanding
mortgage.
NHBC scheme
(National House-Building Council)
A type of building guarantee available on some newly built homes under
which defects occurring within a specified time after construction are
remedied.
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Offer
A sum of money that the buyer offers to pay for a property.
Offer of a loan
A formal document approving the mortgage you have requested and
detailing the terms and conditions that will apply.
Ombudsman
Independent professional bodies who investigate complaints on behalf of
customers against, for example, estate agents, solicitors and insurance
companies.
Open market
value
The price a property would achieve when there is a willing buyer and
willing seller.
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Payment break
An option on flexible mortgages that allows you to stop making mortgage
payments for up to 6 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
Lump sum paid up front as rental for a property.
Principal
The sum of the loan on which interest is calculated.
Public liability
insurance
Insurance which covers injury or death to anyone on or around your
property.
Purchaser
A person who is buying a property.
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Redemption
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 down any equity
gained by a rise in value.
Repayment
mortgage
A mortgage repaid by way of monthly repayments of capital combined with
interest.
Repossession
When the mortgage lender takes possession of your property due to
non-payment of the mortgage.
Retention
Holding back part of a mortgage loan until repairs or specified works to
the property are satisfactorily completed.
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Search
A request or enquiry for information concerning the 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
When a seller chooses only one estate agent to sell their home.
Solicitor
Legal expert handling all documentation for the sale or purchase of a
property.
Stamp duty
A tax paid by purchasers of properties with a value in excess of £125,000, of between 1% and 4% depending on value.
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 to indicate that an agreement is not yet legally binding.
Surveyor
Professionally-qualified expert who carries out the survey.
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Tenancy
A temporary possession of a property by a tenant.
Tenancy
agreement
A legal agreement designed to protect the rights of the tenant and
landlord and setting out all the terms and conditions of the rental
arrangements.
Tenant
A person who has temporary possession of a property.
Tenants in
common
A form of ownership by two or more people in which if one of them dies,
their share of the property forms part of their estate and does not
automatically pass to the other(s).
Tenure
Conditions on which a property is held (ie: 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.
Transfer deeds
The land registry document that transfers legal ownership from seller to
buyer.
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Under offer
The status of a property for sale, when a seller has accepted an offer
from a purchaser but prior to exchange of contracts.
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Valuation
A basic 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
reaction to market conditions, so your monthly payments can go up or
down.
Vendor
The legal name for a person selling a property.
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Yield
Income from a property calculated as a percentage of it's value. |
