Busting Property Jargon for First-Time-Buyers

4 Feb 2019


Gearing up to buy your first house? 

Getting on the property ladder is something to celebrate. But there are a lot of tricky terms, complex contract conditions and jabbering jargon to get to grips with. 

Don’t be left um-ing and ah-ing over property lingo.

Here are all the terms you need to know to get the best deal, no matter what stage of the buying process you’re in.


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Stage 1: Securing a First-Time-Buyer Mortgage


You’re working out the costs of buying your first house and the mortgages available to you.


·      Deposit

The sum of money you need to put towards the cost of the property before you can get a mortgage, usually 5% to 20% of the total purchase price.

 

·      Help to Buy ISA

An ISA schemehelping first-time-buyers save up to £4,000 per year to purchase a home, with the government adding 25% of the money you pay each year.

 

·       Mortgage 

A loan taken out against a property. A mortgage is made up of two parts - capital:the money you borrow and interest:the charge made by the mortgage provider on the amount you’ve borrowed.

 

There are two types of mortgages:

 

Repayment Mortgage 

The most popular type of mortgage in which you pay back the capital and the interest together in monthly instalments.

 

Interest-Only Mortgage 

A mortgage where you initially only pay back the interest each month, repaying the capital at the end of the mortgage term. First-time buyers may struggle to meet the requirements for interest-only mortgages. 

 

·       Mortgage Term

The number of years between the initial loan and the date at which the loan needs to be renewed, refinanced or paid in full.

 

·      Loan to Value (LTV)

The financial term used to show the size of mortgage as a percentage in relation to the value of the property.

 

·      Standard Variable Rate (SVR)

The interest rate charged by a lender, which can fluctuate month as interest rates change.

·      Mortgage Fees

The fees charged by a mortgage provider for setting up and closing the loan, often 1% of the total amount. There are two types of mortgage fees – mortgage arrangementfee and mortgage booking fee.

Arrangement Fee

Covers the cost of setting up the mortgage, typically costing around £1,000 - £2,000. 

 

Booking Fee 

Some lenders also charge an administration cost, typically between £100-£200.

 

·      Valuation Fees

The mortgage provider carries out a property valuation before approving the loan, to ensure it’s worth the amount you wish to borrow. 

 

·      Valuation Survey Fees

A more thorough inspection of the property can be carried out to flag any structural problems, damp or other issues. While this is optional, it’s important to be aware of any problems before placing an offer. You can also use this survey to renegotiate on price. 

 

·      Annual Percentage Rate (APR) 

The total amount of interest you’ll pay on your mortgage in the space of one year, including all charges such as mortgage and valuation fees.



Stage 2: Finding Your First Home 


You’re off to view properties and find your dream home.


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·       Land Registry 

central government databasewhere the details of ownership for each property that is sold is stored. 30% of properties in the UK aren’t registered so make surethe one you’re interested in is.

 

·      Local Authority Search 

Mortgage providers will require a Local Authority Searchto be carried by a solicitor or conveyancer to determine any local authority restrictions relating to the property.

 

·       Energy performance certificate (EPC)

certificateshowing the property’s typical energy use and performance, which the seller is legally obligated to provide free of charge. 

 

·      Caveat Emptor

Means “let the buyer beware,” highlighting that buyer alone is responsible for checking the quality of the property prior to purchasing.

·      Chain Free

A property whose seller does not need to purchase a new home after they sell, which reduces the chances of the sale falling through. Only 10% of all property transactions in the UK are chain-free

 

·      Leasehold/Freehold Property 

If you buy a leasehold property, you will own the building but not the land. Flats and apartments are most commonly sold in this way. When you buy a freehold property, you are the sole owner of both the building and land. 



Stage 3: Securing Your New Home


You’re ready to negotiate and close the deal. 


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·      Agreement in Principle 

Also known as Decision in Principle, this document from the mortgage provider states that they are prepared to lend to the buyer. It confirms for the seller that you can afford the property.

·       Conveyancing

The legal work involved in buying a property, carried out by a solicitor or conveyancer.

·       Completion Statement 

The document from your solicitor showing the total costs required to complete the property transaction.

 

·       Subject to Contract (STC) 

The homeowner has accepted an offer from a buyer, but the paperwork is not yet complete.

·       Gazumping

When a seller has accepted a buyer’s offer but then accepts a better offer from another buyer before the sale is complete.

 

·       Gazundering

When a buyer lowers their offer just before contracts are exchanged.

 

·       Exchange of Contracts 

Signed contracts are exchanged by the buyer’s and seller’s solicitors, making the matter legally binding. The deposit is also paid over to the seller’s solicitor at the same time. 

·       Completion

When all payments have been made and legal ownership of the property is transferred to the buyer. 

·      Stamp Duty Land Tax (SDLT)

A tax paid on the purchase of a property priced over £125,000.



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