Jargon Buster

At Simpson & Partners we like to use language our clients can understand. So to help work your way through the finance and property markets, here are explanations of some of the jargon you’re likely to encounter on the way.

Annual Interest: The balance upon which interest is charged is adjusted once each year.

Advance: The mortgage loan.

Annual Percentage Rate (APR):  The total charge for the loan including fees interest expressed as a percentage.

Applied or Nominal Interest Rate: The rate used to calculate the interest due.

Arrears: Overdue mortgage payments.

Bank of England Base Rate: The Bank of England rate - the main factor influencing interest rates charged by lenders.

Building Survey: A full inspection of the property by a surveyor on behalf of and paid for the buyer.

Buildings Insurance: Needed when you exchange contracts to cover your house.

CAT Standard: Stands for Charges, Access and Terms - which have to be low, easy and fair respectively. These standards were introduced by the government for mortgages to help borrowers, especially first-time buyers.

Chain:  The sequence of buyers and sellers linked by property transactions. A break in ‘the chain’ can affect the successful sale of properties.

Chain Free: The purchase of the next home is not reliant on a property transaction involved in the buyer or seller.

Closing Administration Charge: A charge made by the lender to cover administration costs when a mortgage is repaid.

Collateral / Security: The property which the lender can sell to repay a loan if the borrower does not keep up mortgage payments.

Completion: The final legal transfer of ownership of the property - when the property becomes yours.

Completion Date: This is the day you gain ownership of the property and all of the conditions of your mortgage come into effect.

Completion Statement: A letter from your property solicitor that details all of the finances involved within your property move.

Conditions of Sale: The conditions that are agreed upon by the buyer and seller ahead of the conclusion of the property transaction.

Contract:  The legal written agreement between the seller and the buyer of a property to transfer ownership.

Contract Race: The seller has received two or more offers on the property and will sell to whoever is ready to exchange contracts first.

Conveyancer:  A property lawyer that deals with the legal aspects of a slae or purchase.

Conveyance or Transfer: A legal document that transfers the rights of the land and property to the new owner.

Council for Licensed Conveyancers: This governing body that conveyancing lawyers should be registered with.

Deeds: The documents outlining the provenance and history of the property.

Deposit: The sum of money required over and above the mortgage amount, before contracts are exchanged.

Disbursements: Additional expenses such as search fees and stamp duty.

Equity: The financial amount of the property that you essentially own, in comparison to the amount that you owe to your mortgage lender.

Exchange of Contract: The transaction completion that both parties are legally obliged too.

Fixtures and Fittings: An entire list of items included with the property.

Flexible Mortgage: Mortgages with flexible repayment conditions.
Freehold: Outright ownership of the property and the land on which it stands.

FSA:  The Financial Services Authority is an independent governing regulator that looks at protecting customers with their finances.
Further Advance: An additional loan by the lender to the borrower, which may be for any purpose and secured by the existing mortgage deed.

Gazumping: The seller of the property accepts a higher offer for the property, despite your offer already being accepted.

Gazundering: The practice of the purchaser demanding a reduction in price to secure the sale of a property.

Ground Rent: An annual charge payable by leaseholders to the freeholder.

Guarantor: A person who promises they will pay the borrower's debt, usually if the borrower fails to.

Home-buyer's Survey: A surveyor's report on a property which is less extensive than a building survey and is paid for by the purchaser.

Indemnity Insurance: Conveyancing companies can take out a policy that covers losses.

Individual Savings Account (ISA): A Tax-free saving scheme whereby you can make financial provisions for the future by putting money into any of three types of investment cash savings, stock and shares and life assurance.

Initial Interest: Any payment due for the period from the day the mortgage began up to the first payment.

Interest Only Mortgage: A mortgage where only interest is paid during the mortgage term. The capital is repaid at the end of the term, usually from the proceeds of an investment plan such as an endowment policy.

Land Registry: Provides details of the property including a plan and, if the property is leasehold, a copy of the lease.

Leasehold: An agreement that allows a landlord to own a property and then let it out to a tenant.

Licensed Conveyancer: Typically a lawyer who specialises in property, the licensed conveyancer is trained in all the legalities behind a home move.
Life Assurance: An insurance policy that pays a lump sum on death. Often taken out with a mortgage to provide moan for the loan to be repaid if the borrower dies during the term.

Loan to Value (LTV): The size of a mortgage as a percentage of the value of the property or its purchase price.
Local Authority Search: Questions to the local authority regarding plans for new road building, planning permission for any building work previously carried out, connection to the mains sewer, etc.

Lessee: The person who grants a lease - the landlord.

Lender: The bank/building society who provided your mortgage.

Leasehold: The right to possession, but not ownership, of a property for an agreed period of time. Ultimate ownership remains with the freeholder.
Land Registry Fee: A fee paid to register ownership of a property.

Lessor: The person who grants a lease - the landlord.

Mortgage: Has a specific meaning in law but has come to mean a loan with property as security.

Mortgage Deed: A document that gives you the legal right to own the property.

Mortgage Fees: Financial advisor’s fee for organising a mortgage through a lender.

Mortgage Indemnity Premium (MIP): A payment to a lender for an insurance policy for the lender's benefit when they lend above a certain percentage of the property value. (Also sometimes called a higher lending fee or lender's risk fee).

NHBC Guarantee: A 10 year guarantee, provided by the National House Building Council, that the builder will put right serious defects on a newly -built property. Zurich Municipal and Premier Guarantee all offer similar guarantees.

Negative Equity: When the value of a property has fallen and is less that the loan secured on it.

Payment Protection: Insurance which pays your monthly mortgage payments, usually for a specified period, if you lose your income through sickness, injury or unemployment.

Pension Plan: An investment plan that can provide a lump sum on, and an income after retirement. A pension plan is sometimes used as a way of providing a lump sum to repay the capital of an Interest Only Mortgage.

Principal: The amount of the loan on which interest is calculated.

Redemption Fee: If you decide to amend or cancel your existing mortgage contract, then you could be charged with a fee. If you decide to switch mortgage provider then this can also apply.

Repayment: When a mortgage is repaid (Also called redemption).

Repayment Mortgage: A mortgage where the capital borrowed is gradually repaid over the agreed term.

Remortgage: Repaying one mortgage by taking out another secured on the same property, possibly to take advantage of a particular mortgage product or better interest rate.

Searches: There are a number of different searches available to check the value of the property. The only essential one is the Local Authority Search, which will cover planning applications etc.

Stamp Duty: Government tax payable by every home buyer when purchasing a property over £125,000. 1% between £125,001 and £250,000. 3% between £250,001 and £500,000. 4% over £500,000. 5% over £1,000,000.

Surveyor / Valuer: The person qualified by the Royal Institution of Chartered Surveyors or the Incorporated Society of the Valuers and Auctioneers to carry out valuations and surveys of properties.

Survey: A survey determines if the property in question is structurally satisfactory, this is produced by the building surveyor.

Subject to Contract: An agreement that is not legally binding, which is made between the house buyer and seller to organise the transaction completion that allows either party to withdraw without incurring a penalty.

Tie in Term: The period of time you would need to remain on certain mortgage terms to avoid an early repayment charge.

Title Deeds / Title Documents: The legal documents which provide proof of ownership of a property.

Transfer Deeds / Document: A form which provides details of the transfer of ownership to be entered on the Land Registry register.

Valuation: An inspection of the property to ascertain its acceptability to the lender as security against the mortgage loan, for which the borrower may have to pay.

Vendor: The person(s) from whom you are buying your new home.

Whitehot Property: Properties that are chain-free made available from corporate institutions. Typically priced for a swift sale, these properties are often part-exchanges, repossessions or probate housing.