Glossary of Terms

Bridging Loan

Sometimes the purchase of one property and the sale of another may not take place simultaneously. During the intervening period a bridging loan provided by your mortgage lender can be used to cover the gap in finance.

Charges Register

If you take out a mortgage on your property, you are effectively using your property to secure the mortgage. All properties used to secure mortgages are registered on the Charges Register at the Land Registry.

Completion

The moment when the ownership of the property and the keys are handed over to the new owner in exchange for full payment. This usually occurs 12 weeks after the exchange of contracts. Afterwards the solicitor will produce a completion statement detailing the payments and receipts that have occurred throughout the moving process.

Contract

The legal document detailing the agreement to transfer the property from the seller to the buyer. The contract becomes binding once it has been signed and exchanged.

Contract race

A race instigated by the seller in which multiple parties who want the same property find themselves competing against one another. The first prospective buyer to send a deposit and a signed contract wins the purchase. Legally, would-be buyers must be informed by their solicitors / conveyancers when a contract race is on.

Conveyancing

The legal process of transferring the ownership of a property. This process is managed by a solicitor or a licensed conveyancer.

Covenants

Restrictions and obligations contained within the Title Deeds or lease which imposes any legal requirements on the owner. An example may be a restriction on changing the external appearance of the property.

Deeds

Documents which give evidence of the ownership of a specific property or piece of land. Title Deeds include a Land Certificate or a Charge Certificate and are usually held by the lender.

Deposit

The money paid by the buyer to the seller when contracts are exchanged. This is normally 10% of the Sale Price. This amount is usually agreed by the sellers.

Disbursements

Payments made on behalf of the buyer by their solicitor. These include Stamp Duty, Land Registry charge and costs or searches relating to the property.

Equity

The present value of the property less the amount of mortgage outstanding gives an individual’s equity. In times of house market slumps a property’s price can become less than the value of a mortgage. This is known as negative equity.

Exchange of contract

The date when the contracts drawn up by the solicitors of the buyer and seller are signed and exchanged. The sale becomes legally binding from this date. The signing of contracts does not have to be simultaneous with exchange. Upon exchange a completion date is agreed by all and legally set.

Fixtures and Fittings

The items that are left in the property when the seller moves out. These are included in the purchase price. Examples are curtain rails and carpets. Any items which are for sale will normally be included within this list.

Freehold

The absolute ownership of land or property. The advantage of having a freehold title is that the owner of the property can more of less deal with it in whatever manner they wish.

Gazumping

When the seller has agreed a price with a buyer but then accepts a higher offer from another buyer. This can only occur in England and Wales before exchange of contracts.

Gazundering

When the seller has agreed a price with a buyer but the buyer offers a lower price. This can only occur in England and Wales before exchange of contracts.

Ground rent

A small annual payment from the leaseholder to the freeholder in exchange for the freeholder granting the leaseholder the right to live in the property.

Homebuyer’s report

A survey that reports on the overall condition of a property. It is less comprehensive than a structural survey and not suitable for older properties which are more likely to have issues concerning walls, wiring, foundations etc.

Index map search

A search by the buyer’s solicitors to check whether the ownership of the property is registered at the Land Registry.

Land Registry

A government department which keeps a register of properties in England and Wales. A house buyer has to pay a fee in order to register the property in their name. Once a property is registered a Land Certificate is sent out detailing ownership of the property.

Leasehold

The ownership of a property excluding the land it is built on. A leasehold is set for a fixed number of years and requires annual payments of ground rent to the landlord. Normally a leasehold is offered for either a 125 year or 99 year term although the term can be shorter.

Local authority search

A mandatory search carried out by the buyer’s solicitor to find out the information relating to the property. In particular, this search aims to discover any future Local Authority development plans in the area and previous problems that the property may have faced. These can affect the value of the property.

Long-term let

Where you can rent a property for 6 months or more. In some cases there may be options to extend the term of the lease.

Mortgage

The loan given to purchase a property. The property acts as security.

Mortgage certificate

An approval in principal from the lender to the borrower that they can borrow the stated amount for the purchase of a home. Mortgage certificates are useful if you apply for a mortgage before you have a property in mind.

Mortgage deed

The conditions of a mortgage are recorded in the mortgage deed.

Mortgage indemnity guarantee

Sometimes referred to as MIG. This is a lump-sum payment to the lender as protection against the borrower defaulting on mortgage payments. It is only required if the mortgage exceeds a set percentage of the property value (usually 75%).

Mortgage payment protection insurance

An insurance policy to cover mortgage payments in the case of unemployment, illness or death.

Negative equity

When the value of mortgage outstanding on the property exceeds the current market value of the property. See also equity.

NHBC guarantee

National Housebuilding Council guarantee which provides insurance for certain defects up to 10 years after building. All properties built within the last 10 years should possess a valid NHBC guarantee or similar. Check with the owner.

Preliminary enquiries

The set of questions that the buyer’s solicitor sends to the seller before contracts are exchanged. These questions covers aspects of the property such as boundaries and restrictive covenants.

Redemption penalty

A charge levied by the lender for early redemption of a mortgage in order to cover administrative costs.

Registered property

The ownership of most land is recorded at one of the HM Land Registries. Investigation of title where land is unregistered can be lengthy and more difficult. In an effort to reduce the amount of unregistered land the government now requires land registration at time of sale.

Retention

If the lender is unsatisfied with the structural quality of the property, they may choose to hold back some of the loan until repair work has been carried out.

Right of way

If access to a property requires passing on or through another property then rights of way must be granted. This often applies to adjoining houses or linked gardens.

Sitting tenant

The legal right to occupy a property without a lease.

Stamp duty

The tax paid to the government by the buyer. This money is paid on completion through the solicitor and increases in the full purchase price of the property: Less than £125,000 – nil, £125,0001 to £250,000 – 1%, £250,001 to £500,000 – 3%, £500,000 to £1,000,000 – 4%, £1,000,000 to 2,000,000 – 5%, over £2,000,000 – 7%. Amounts are always rounded up to the next £5.

Stepped mortgage

A mortgage where for the first few years of the term the interest rate rises in steps over predetermined time intervals before reverting to the lender’s variable rate.

Structural survey

A detailed survey that reports on the condition of the property as well as repairs that may be needed. Though it is more expensive that a homeowner’s report, it is also far more detailed and therefore more suitable for older properties where issues such as wiring and foundations are more prevalent.

Sold Subject to contract

The term used to describe the period between agreed offer and exchange of contracts in England and Wales. At this stage the buyer or seller are not legally bound because the contract has not been exchanged and the survey not yet completed. This terminology is often used in all documentation until the exchange of contracts.

Survey

There are two types of surveys (in addition to a basic valuation survey) that can be carried out by surveyors prior to the exchange of contacts – a homebuyer’s report and the structural survey. The homebuyer’s report is less comprehensive and reports on the coverall condition of the property. The structural survey is far more detailed and more expensive. It covers not only the condition of the property but also repairs that may be needed. The homebuyer’s report is not suitable for older properties, which are likely to have more issues concerning walls, wiring and foundations, etc.

Title

The right to ownership of a specific property. Evidence of this title is contained in the title deeds.

Valuation

Before the lender authorises a loan for a property, a surveyor will be asked to value the property to determine whether it is worth the amount of money required. The borrower pays for this valuation report.

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