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Jargon Buster
Additional security fee
This is a one-off fee charged by the lender. It is usually payable, up-front, on mortgages of more than 75% of the house value in order to protect the lender from repayment defaults. It is also known as MIG (Mortgage Indemnity Guarantee), Indemnity Premium or Indemnity Guarantee Premium.
Annual percentage rate
This is commonly known by its acronym, APR. The APR gives the true annual cost of a finance agreement, expressed as a percentage, through the calculation of interest, insurance provided and any other fees charged. It provides an excellent basis for comparison across loans.
Apartment
A self contained property - normally on one floor - with its own front door off a communal hallway. Also termed a flat.
Arrangement fees
These fees cover the arrangement of loans on certain products. They usually apply to loans for which a special rate of interest applies; for example fixed or capped rates.
Assignment
This is the transfer of ownership of a lease or insurance policy.
Auction
This is a public sale in which the price is determined by bidding, and the item (in this case the property) is sold to the highest bidder.
Basic variable mortgage rate
This is the standard rate of interest charged by a mortgage lender, who, taking into consideration any influential economic conditions, may, at times, increase or decrease this rate accordingly.
Bridging loan
This is an interim loan that provides financial cover to allow the purchaser to complete on a new property before selling the one they currently own.
Building survey (formerly full structural survey)
This is an examination of a building by a surveyor in order to produce a full report on the structural integrity of the property as well as its state of repair. Although all houses should be surveyed, and, indeed, many mortgage providers require it, it is particularly useful for older properties, those in a state of disrepair, those that have been extensively altered or extended, or any property that you may wish to alter or extend yourself.
Buy to let mortgage
This is a type of mortgage that is specifically tailored for those individuals who are intending to buy a property in order to let it.
Capital
This is the amount of the loan upon which interest is calculated.
Capped mortgage
This is a mortgage, normally agreed over a fixed period of time, with an upper limit (or cap) above which the rate of interest cannot rise. If the standard interest rate is lower than the upper limit then you will be charged at the lower rate; if the standard variable rate is higher then you will be charged at the rate agreed.
Chain
This situation occurs when a line of buyers and sellers are all simultaneously involved in linked property transactions. When one of these is not successful - for instance, when someone's house sale falls through - the entire 'chain' breaks and each of the transactions is held up, or they fail entirely.
CML
This acronym stands for The Council of Mortgage Lenders, a body that devised the Mortgage Code to ensure that lenders treat consumers fairly. This Code no longer exists as the FSA (Financial Services Authority) is now responsible for regulating mortgage lending on a statutory basis.
Completion
This is the last stage in the purchase of a property. At this point, all transactions concerning the sale of the property have been finalised and legal transfer of ownership passes to the buyer.
Conditions of sale
The detailed, standard terms which govern the rights and duties of the buyer and the seller of the property as specified in the contract that they sign. These may be national, statutory, or conditions of the Law Society.
Contents insurance
This insurance covers loss or damage to your possessions within the property, subject to the terms and conditions of the agreement.
Contract
This is a legal agreement between the seller and buyer of a property which binds both parties to complete the sale and purchase of the same.
Contract race
This describes a situation where the vendor is preparing to sell to the first of two or more potential buyers to exchange contracts when all have made an offer on the same house.
Conveyancer
This is a third party, such as a solicitor or licensed conveyancer, who is hired by the buyer or seller to deal with the legal aspects of a property transaction.
Conveyancing
This is the name given to the legal process of transferring the ownership of property from one party to another.
Covenants
These govern the use, requirements and restrictions of a property and are contained in its title deeds or lease.
Deeds
These are legal title documents that transfer the ownership of property from one party to another. The deeds will be held by the mortgage lender.
Deposit
This is a proportion of the total cost of a property (very often 10%), which is paid out by the buyer (rather than included in the mortgage agreement) upon exchange of contracts.
Detached
This term describes a property that stands alone from other properties, having no adjoining walls.
Development
This term describes a newly built residence (or group of the same) or an older property that has been refurbished and modernised.
Dilapidations
This term describes any disrepair or damage to a property; it is usually used in relation to a rented property.
Disbursements
These are the fees paid by the buyer's solicitor on behalf of their client and include items such as stamp duty, land registry and search fees.
Discharge
This describes paying off (or discharging) a mortgage.
Draft Contract
This is a preliminary document, setting out unconfirmed contractual arrangements.
Early redemption charge (ERC)
This is a charge that may be levied by the lender if the borrower discharges a mortgage in advance of the terms of their particular agreement. This can take place in situations where the borrower has benefited from reduced payments or a cash back arrangement earlier on in the term of their mortgage.
Endowment mortgage
This is a mortgage upon which the borrower pays only interest, in addition to the premiums of an endowment assurance policy, the proceeds of which ultimately repay the mortgage.
Energy Performance Certificate (EPC)
This shows the overall efficiency of the homes heating and insulation installations. The certificate must be available within 7days of a property coming to the market.
Equity
This is the monetary value of a property or business beyond any amounts owed on it in mortgages or other claims.
Excess
This is the sum of money, agreed in advance, that the claimant is expected to pay out themselves prior to receiving the rest of the amount as an insurance claim for losses incurred.
Exchange of contracts
This is the point at which signed contracts are physically exchanged, signifying a legal commitment from both the buyer and seller to the purchase and sale of a property under the agreed terms.
Failed valuation survey
This occurs when the surveyor's report indicates that the value of the property is less than the sum requested by the borrower; on the basis of this the lender may then refuse the mortgage application.
Fixed rate mortgage
This is a mortgage for which the agreed rate of interest is set for a specific period and cannot be increased or decreased during that time.
Fixtures & fittings
This term describes all non-structural items included in the purchase or lease of a property.
Flat
See 'Apartment'.
Flexible mortgage
This describes a mortgage whereby the borrower can choose to increase or decrease their repayments, normally on a monthly basis, depending on what is convenient for them at the time.
Freehold
This term describes the ownership of a property that is not constrained by time (please refer also to 'Leasehold').
Gazumping
This can only happen before the exchange of contacts. It occurs when the seller agrees to sell to one buyer but sells to another at a higher price - or increases the price of the property when two or more parties show interest.
Gazundering
This can only happen before the exchange of contacts. It occurs when the buyer reduces his offer to the seller after an initial price has been agreed.
Ground rent
This is the annual charge that is levied by the freeholder on the leaseholder.
Guarantor
This is a party who guarantees repayment of a loan, using their own assets if necessary. A lender may sometimes require a borrower to appoint such a party.
Homebuyer's survey and valuation (house/flat buyer's report)
This is a survey report that is carried out by a chartered surveyor to assess the state of a property and its value. It is not as detailed as a structural survey,
HMO
Homes of Multiple Occupancy.
IFA
Independent Financial Adviser.
Individual savings account (ISA) mortgage
This is an interest- only mortgage which is linked to a tax-efficient Individual Savings Account (ISA) fund. At the end of the loan period, this pays off the outstanding loan amount.
Interest charges (mortgage)
This is the actual cost of a loan, calculated as a percentage of the amount borrowed and charged by the lender accordingly.
Interest-only mortgage
This is one of two types of mortgage, the other being a capital repayment mortgage. The total amount due on an interest-only mortgage stays the same throughout the mortgage term - only the interest ( and a premium to an investment vehicle) are paid. The proceeds from the investment vehicle are then intended to repay the mortgage at the end of the mortgage term. The amount available will depend on the performance of the investment vehicle. A borrower who chooses an interest- only mortgage is responsible for ensuring that there are sufficient funds available for the repayment of their mortgage at the end of the term.
Joint tenants
This describes ownership of property by two parties whereby if one of them dies, their share of the property automatically transfers to the surviving party, thus giving them full ownership. With this arrangement, no will is required to transfer the property.
Land registry fee
This is a fee, paid to the Land Registry, in order to register ownership of a property.
Lease
This is a contract granting use or occupation of property over a specified time and for a specified payment. After the expiry of a lease, ownership may revert to the freeholder or superior leaseholder.
Leasehold
This term describes the ownership of a property that is constrained by time - the period of time specified in the lease agreement. (Please see also 'Freehold').
Lender's arrangement fees
This is an amount charged by the lender to the borrower for the arrangement of a loan.
Lender's legal fees
These are the legal fees that the lender is required to pay when arranging a mortgage. The cost of the fees is passed on to the buyer of the property.
Listed building
This describes a property that has been included on a statutory list of buildings of special architectural or historic interest. Such buildings cannot be altered or demolished without (local) government consent.
Loan to value (LTV)
This is the amount of an outstanding mortgage expressed as a percentage of the property's value.
Local authority search
This is the procedure whereby a conveyancer approaches the local authority to ascertain whether there are any outstanding enforcement or future development issues which have the potential to affect a property or its surrounding area.
Maintenance charge (or service charge)
This is the cost of maintaining (and repairing) communal parts of a building, whether internal or external. It is payable by the tenant or leaseholder.
Maisonette
A self contained property on Ground or an upper level with its own front door on ground floor level.
Mortgage
This is a loan in which the borrower offers a property and land as security to the lender (the mortgagee) until the loan is repaid, normally over a long period due to the large amount borrowed.
Mortgage deed
This is a legal document that states the interest a lender has over your property. It contains the legal terms of the mortgage agreement
Mortgage indemnity guarantee (MIG)
This is an insurance payment that mortgage lenders may require buyers to make if their loan exceeds a specified proportion of the purchase price.
Mortgage indemnity premium (MIP)
This is an insurance policy that protects the lender against mortgage repayment defaults. Although the policy is of benefit to the lender, it is usually the borrower who pays the insurance premium.
Mortgage payment protection (MPP)
This is insurance against your inability to meet your mortgage repayments, should you be unable to work because of illness, disability or redundancy. It normally comes into effect for a limited period, usually a year.
Mortgage rate
This is the standard variable interest rate that is quoted by mortgage lenders. It will normally follow the Bank of England's base rate. Discounted mortgage rates are all based on this rate.
Mortgage term
This is the period of time over which the loan is to be repaid. For repayment mortgages this will happen over that period. For endowment mortgages, this will happen at the end of the period.
Mortgagee
This is the organisation that provides a mortgage to the buyer of a property and can include banks and
building societies.
Negative equity
This occurs when the amount owed on a mortgage is greater than the value of the property that has been mortgaged.
NHBC scheme (National House-Building Council)
This is a specific type of building guarantee that may be available on newly built homes. It guarantees that defects occurring within a specified time after construction are resolved.
Offer
This is the sum of money that the buyer offers the seller, in exchange for the property.
Offer of a loan
This is a formal document that approves the mortgage that has been applied for and details the terms and conditions that will apply to such a mortgage.
Ombudsman
This is a third-party professional body who deals with and investigates complaints on behalf of customers. These can include complaints against, for example, estate agents, insurance companies and solicitors.
Open market value
This is an opinion of the best price a property would achieve on the open market, assuming a willing buyer and seller.
Payment break
This is an option on some flexible mortgages that allows the borrower to take a break in making mortgage payments for a specified period. This is normally up to 6 months.
Penalties
These are the costs that can be incurred if the borrower wishes to repay a loan early (i.e. to facilitate a change of lender).
Peppercorn ground rent
Also known as 'Peppercorn rent' or just 'Ground rent'. This is a fee that is paid to the freeholder as a condition of a lease. It is normally a small amount and is generally paid annually.
Pied a terre
This is a property normally kept for occasional or secondary occupation.
Preliminary enquiries
These are the initial enquiries about a property that are put to a seller and to which the seller must respond before the exchange of contracts.
Premium
This is the cost of an insurance policy, normally paid monthly.
Principal
This is the original, total sum of the loan which is used to calculate interest.
Public liability insurance
This is an insurance policy, taken out by the owner, which covers them in case of injury or death to anyone on or within the perimeter of a property.
Purchaser
This is the person or legal entity who is buying a property from a seller.
Redemption
The point in time at which a mortgage has been fully repaid.
Re-mortgage
The refinancing of a property normally occurring when switching a mortgage between lenders or when a second mortgage is taken out to draw down equity gained by a rise in the value of a property.
Repayment mortgage
This is a mortgage that is repaid by way of regular, normally monthly, installments that combine capital repatments with interest.
Repossession
This is when the mortgage lender takes possession of a property due to non-payment of the mortgage, as per the agreed terms.
Retention
This is when a sum of money is held back from the original mortgage loan amount pending completion of outstanding repairs or improvments to the property.
Search
This is a request or enquiry for information about properties by a local authority of HM Land Registry.
Seller
The person or legal entity selling the property (Vendor).
Semi-detached
A property that is structurally joined to one other property, both of which will normally have been built at the same time.
Service charge
Please refer to 'Maintenance charge.'
Sole agent
This is an estate agent who has been exclusively appointed to sell a property by the seller.
Solicitor
A lawyer who gives legal advice and prepares legal documents who would normally handle all documentation for the sale or purchase of a property.
Stamp duty
A tax payable on the purchase of a property, normally levied as a percentage of the sale price and payable by the buyer. Rates can vary from time to time.
Structural survey
Please refer to 'Building survey.'
Studio Flat
A self-contained flat consisting of one main room, normally with a separate bathroom and, in some cases, a separate kitchen.
Subject to Contract
This indicates that an agreement is not yet legally binding and either party could back out without legal implications.
Surveyor
A professionally-qualified person who can carry out surveys and valuations.
Tenant
A person who occupies property owned by another person, based on a tenancy agreement between those parties.
Tenants in common
This is a form of ownership by which two or more people take equal share in a property. Should one of them die, their share of the property in question forms part of their estate and therefore would not pass to the other tenant(s).
Tenure
This is the manner in which a property is held (i.e. leasehold).
Terraced house
A property that is one of a connected row of houses, planned and built as a single unit.
Title deeds
These are documents that indicate the legal ownership of a property.
Transfer deeds
These are documents, prescribed by HM Land Registry that are used to transfer real property from its legal owner to another party.
Under offer
When a seller has accepted an offer from a purchaser but contracts have not yet been exchanged, the property is considered to be 'under offer'..
Valuation
This is the value of a property, normally used for mortgage purposes, attained from a basic survey of the property. Mortgage lenders insist on a valuation before lending.
Variable base Rate
This is the basic rate of interest that is charged on a mortgage. It may vary in accordance with the Bank of England's base rate and relevant market conditions.
Vendor
See 'Seller'
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Yield
This is the annual return income from a property expressed as a percentage of its value.
