Mortgage jargon buster A to K

APR Annual percentage rate, the figure that shows the true cost of the loan (or mortgage).

Arrangement fee A fee for setting up your mortgage. Most mortgages charge an arrangement fee, although some charge no fees but higher interest rates.

Asking price Price at which a property is marketed.

Balance outstanding The amount of a loan still owed.

Base rate Interest rate set by the Bank of England, which is the rate at which banks can borrow money from the Bank of England, and is usually what the banks use to set their own base interest rates.

Bridging loan A loan allowing you to buy a property before finalising the sale of another property.

Building regulations Standards of build set for new buildings, extensions and renovations.

Buildings insurance The insurance on the structure of a property.

Buy to let Purchasing a property to rent out to tenants.

Buying off plan Purchasing an unbuilt property from the plans.

Capped rate mortgage A mortgage where the interest rate cannot rise beyond a certain threshold

Capital The amount of equity one has in a property which can be released in the event of a re-mortgage or sale.

Capital Gains Tax Tax on profit from selling certain assets, not including your main place of residence.

Chain A series of people linked by related property sales and purchases.

Commission A fee based on a percentage of the selling or purchase price; can apply to an independent financial adviser as well as an estate agent.

Commonhold A recently introduced form of tenure offering an alternative to leasehold agreements.

Completion This is the date the solicitor arranges for the funds to be released to complete the transaction.

Condition report This complements a mortgage valuation to assess the property’s overall condition.

Conditions of sale The detailed standard terms governing the duties and rights of the buyer and seller.

Contract The agreement to sell or purchase.

Conveyancing The legal and administrative process of transferring ownership of land and/or property.

Covenant A promise in a deed to do (or not do) certain things.

Deeds The documents confirming ownership of property. Also known as title deeds.

Deposit The down payment on a property, paid when contracts are exchanged.

Disbursements Costs incurred during the conveyancing process, which will be charged to the client.

Discount mortgage A variable rate mortgage which typically rises and falls in line with the lender’s standard variable interest rate.

Early repayment charge The amount of money a lender may charge if you pay off your mortgage early. These charges differ by product type and term.

e-conveyancing Carrying out conveyancing through web and email as well as over the
phone.

Endowment mortgage A loan where you only pay off the interest, linked to an endowment investment policy designed to pay off the sum borrowed at the end of the term.

Equity The difference between the price of a property sold and the loan on it.

Exchange of contracts A binding legal agreement that confirms the intention to transfer ownership of a property between a buyer and seller.

Final sale price The agreed price of a property that is finalised at the time of exchange.

Fixtures and fittings The term for the items attached to or part of a property, such as doors and light switches.

Freehold Ownership of a property and the land it is situated on.

Fixed rate mortgage A mortgage where the interest rate is fixed for an agreed period of time – typically two, three or five years.

Gazumping When another person’s (higher) offer is accepted, after a lower offer has already been accepted, but not become legally binding (i.e. before exchange of contracts).

Gazundering When a purchaser reduces their offer at a late stage in the buying process, such as on the day of exchange.

Ground rent Payment by the leaseholder to the freeholder. Low sums are sometimes referred to as a peppercorn rent.

Guide price The marketing price of a property in Scotland, usually lower than the final price.

Higher lending charge Policy taken out by the lender (but usually paid for by you) to cover
them if the borrower does not make payments.

Home Report Purchaser’s information Pack, mandatory in Scotland from 2008.

Indemnity policy Insurance to protect a property owner in a dispute over ownership or restrictive covenants.

Instruction Telling an agent you want them to sell your property.

Interest-only mortgage A loan where you only pay the interest on the amount borrowed over the term of the mortgage.

Joint tenancy When two people own a property together and if one dies, the property automatically passes to the other, irrespective of the will.