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 4 weeks after the exchange of contracts. 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 impose 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 client by their solicitor. These include photcopying, postage, bank transfers, etc in addition to 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 contracts

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. Upon exchange, a completion date is agreed by ail and legally set.

Fixtures and Fittings

The items that are agreed to be left in the property when the seller moves out. These are included in the purchase price. Examples may include curtain rails and carpets. The sellers solicitor should produce a list of the items which the parties agree are to be left.

Freehold

The absolute ownership of land or property. Owners of freehold property can use it as they see fit, subject of course to the laws of the Land.

Gazumping

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

Gazundering

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

Ground rent

A modest annual payment from the leaseholder to the freeholder in exchange for the freeholder granting the leaseholder the right to live in the property. Watch out for rent reviews in the lease.

Homebuyer’s report

A survey that reports on the overall condition of a property. It is less comprehensive than a structural survey and may not be suitable for older properties which are more likely to have issues.

Index map search

A search by the buyer’s solicitors to check the extent of the ownership of the property registerd 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. The lease will set out the rights and obligations of landlord and tenant.

Local authority search

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

Long-term let

Generally any letting for 6 months or more. In some cases there may be options to extend the term of the lease.

Mortgage

The loan given by a bank or building society to purchase property. The property acts as 'security' against the loan and the bank will take a 'charge' over the property to protect their loan.

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. Miss-spelling of cover has resulted in a huge number of redress claims in recent years, and this product is considerably less popular than it once was.

Negative equity

When the total 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 a warranty against certain building defects for up to 10 years after construction. All properties built within the last 10 years should possess a valid NHBC warranty 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 identifies items of significant disrepair in the property, they may choose to hold back part of the loan until repair work has been carried out.

Right of way

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

Sitting tenant

A tenant who generally has a life-long right to occupy the property under a pre-1988 lease. Rents are generally at a discount to the open market, and can be registered.

Stamp duty

The tax paid to the Government by the buyer. This money is paid on completion through the solicitor and is a percentage of the purchase price of the property. Purchasers of second and subsequent properties pay a surcharge.

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 homebuyer’s report, it is also far more detailed and therefore more suitable for older properties where issues may be more 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 have not been exchanged.

Survey

There are two types of surveys (in addition to a basic valuation survey) that can be carried out by surveyors prior to exchange of contacts – a homebuyer’s report and a structural survey. The homebuyer’s report is less comprehensive and reports on the overall condition of the property. The structural survey is far more detailed, and will investigate drains, roof construction, damp issues etc. The structural survery is better suited to older properties, which are likely to have more issues..

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 price agreed. The borrower pays for this valuation report.

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