Kirkwood Homes Blog

Glossary of terms for first time home buyers

A

Advance Mortgage Loan
APR Annual Percentage Rate is the total cost of the credit to the consumer expressed as an annual percentage of the total amount of credit, including interest and other charges applying.

Arrangement Fees Fees which may apply to signing up for a particular mortgage deal. These are usually payable up front, or in some cases can be added to the final loan amount. Be aware that adding them to the loan increases your mortgage debt and the amount of interest you’ll pay, so it’s always cheaper over the long term to pay these as up front.

B

Balance Outstanding The amount of loan owed at a particular time.

Bridging Loan A temporary loan advanced to help buy a new property before the existing one has been sold.

Buildings Insurance Insurance against the cost of repair or rebuilding a property from scratch following structural damage, for example by flood, fire or storm.

C

Capital In the context of a mortgage, capital is the mortgage debt that needs to be repaid by the end of the agreed term
– not including interest payments. With a repayment mortgage the capital will reduce over the mortgage term; the capital on an interest-only mortgage does not reduce unless you make additional part repayments.

Completion Date Completion of the legal transaction with all monies and documents having been distributed. This is also when the seller’s solicitor will instruct the estate agent to release the keys.

Contents Insurance Insurance against accidental damage or theft of all moveable contents, including furniture, appliances and soft furnishings.

Contract A formal agreement
between the buyer and the seller, usually prepared by a solicitor or licensed conveyancer, detailing the terms and conditions of the sale.

Conveyancer Person other than a solicitor who may conduct the conveyancing.

Conveyancing The legal work involved in buying and selling properties.

Council Tax Levied by local councils to cover the cost of local amenities and services.

Covenant A condition, contained within the Title Deeds or lease, that the buyer must comply with, which is usually applied to all future owners of the property. A restrictive covenant is one that prohibits the owner from doing something.

D

Deeds Legal documents assigning ownership of a property and/or land.

Deposit Sum of money that represents the personal capital that the buyer is putting toward the purchase of the property.

Depreciation The decrease in the value of a property. This is usually attributed to a downturn in either the broader UK housing market or issues within the local area.

Disbursements Fees, such as LBTT, Land Registry and search fees on top of conveyancing which you normally pay via your solicitor.

Draft Contract Unconfirmed version of the contract.

E

Early Repayment Charge A charge made by the lender if the borrower terminates a mortgage in advance of the terms of the particular mortgage. Normally occurs when the borrower has benefited from reduced payments or cash back in the early period of a mortgage.

Energy Performance Certificate An official document detailing the energy efficiency of a property.

Equity The overall value of the property, minus the mortgage or debt amount.
A property owner may encounter negative equity if their home depreciates in value and ends up worth less than the amount they owe on their mortgage.

F

Factoring The provision of services to maintain the common areas of a development or property. There is often a fee that is to be paid to the company managing the area. Services can include the upkeep of green areas and repairs and maintenance to common areas.

Fixtures and Fittings All non-structural items included in the purchase of a property.

Full Structural Survey A full structural survey looking at all the main features of the property, including walls, roof, foundations, plumbing, joinery, electrical wiring, drains, and garden.

G

Guarantor A person that agrees to meet mortgage repayments of the borrower if the borrower is unable to meet the repayment deadlines for any reason. A guarantor is usually a parent or guardian and can significantly increase the amount a first time buyer can borrow.

H

Help To Buy A range of government schemes aimed at supporting affordable home ownership, particularly for first time buyers.

Home Buyer’s Report The home buyer’s report comments on the structural condition of most parts of the property that are readily accessible, but does not involve in-depth investigation or the testing of water, drainage or heating systems.

I

Interest The percentage of the mortgage that is charged to the borrower on top of the mortgage repayments. Interest rates charged by mortgage lenders are usually influenced by the Bank of England base rate.

Instruction When a seller instructs an estate agent to market a property.

J

Joint Mortgage A mortgage where there is more than one individual named responsible for the mortgage.

L

Land Certificate A Land Registry certificate proving ownership of property.

LBTT LBTT is a tax applied to residential and commercial land and buildings transactions (including commercial purchases and commercial leases) where a chargeable interest is acquired. Revenue Scotland will administer LBTT with support from Registers of Scotland (RoS). Previously known as stamp duty.

Local Authority Search An application made to the appropriate Local Authority requesting details of any planning or other matters which might affect the property being sold.

M

Missives Concluded The solicitors must agree on the written negotiations of the sale – the ‘missives’. This can only be done once a mortgage offer is received. When the missives are agreed, this is known as ‘conclusion of missives’. Both parties are now legally bound to the sale/purchase.

Mortgage Deed A legal document relating to the mortgage lenders interest in the property.

Mortgage A special type of loan that enables buyers to pay for their new home over an agreed term.

Mortgage Offer A formal written offer made by a bank or building society to lend an approved amount to purchase
a property.

N

Negative Equity When the value of a property is less than the outstanding sum owed on a mortgage.

O

Offer A bid made by a prospective buyer. This is not legally binding.

Off-plan Refers to buying a new-build property before it is actually constructed, with only the plans available for inspection.

P

Part Exchange When you buy a new home using a Part Exchange scheme,
a property agent will offer to buy your existing property from you, at a price agreed with you, based on an independent valuation.

Property Your home or the property you wish to sell or buy.

R

Repayment Mortgage Your monthly repayment includes part interest and part capital repayment. So long as you meet all of the payments required by the lender on time, your mortgage will gradually reduce until it is repaid in full at the end of the mortgage term.

Repossession When loans are in default the mortgage lender can repossess the property and sell it so they can repay the debt.

Reservation Placing an order with a housebuilder on a particular property.

S

Sale Agreed A verbal agreement from the seller.

Searches Checks of local council records for planning applications and restrictions etc.

Solicitor Legal expert handling all documentation for the sale and purchase of a property.

Subject to Conclusion of Missives Words used to indicate that an agreement is not yet legally binding.

Subject to Contract Words used to indicate that an agreement is not yet legally binding.

Survey An inspection made by a qualified surveyor. There are three main types of survey. Valuation report (for mortgage purposes), Home buyer’s report (also comments on general condition) and Full Structural survey (examines structural detail).

T

Title The ultimate record of ownership of a property, the evidence of which is found in the title deeds.

Transfer Deeds The Land Registry document that transfers legal ownership from seller to buyer.

U

Under Offer When the seller has accepted an offer on the property but contracts have not yet been exchanged.

V

Variable Interest Rate Rate of interest payment that fluctuates over time in line with general interest rates.

Verbal Offer Offer from prospective purchaser, not legally binding on either party.

W

Writ Mode of commencing legal proceedings.

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