If you’re buying, selling or letting, property jargon can leave you scratching your head in confusion. Don’t worry, it’s a common problem. Long and wordy documents, quick-talking professionals and the different parties involved can leave you flustered by the terminology.
Our guide will get you up-to-speed with some of the common vocabulary you need, so you can take the plunge into your next adventure with confidence.
Annual Percentage Rate (APR)
APR is a popular term in relation to your mortgage. In short, the APR will give you an idea of the overall cost of a loan by taking into account the interest rate, repayment terms and any other fees. As a rule, the lower the APR, the better the deal.
To be in arrears is something you want to reverse – and fast. It means you will have fallen behind with your mortgage repayments and, if the situation escalates, could eventually lead to repossession.
This article by Money Saving Expert will give you more information on what to do if you find yourself in arrears with your mortgage.
Sometimes called a full structural survey, this is a thorough inspection of a property carried out by a chartered surveyor. The surveyor will then produce a report with any issues that may have been detected to make sure there is full disclosure for all parties.
A Chartered Surveyor is a member of the Royal Institution of Chartered Surveyors (RICS), which means they are professionally qualified to carry out a building survey on your property.
This basically means that you pay a fixed rate of interest on your mortgage for an agreed period of time. After this period ends, you will possibly end up paying a variable rate of interest, decided by your mortgage lender unless you decide to switch providers.
If you buy the freehold of a property you own it outright – which also means that you are responsible for all the maintenance and repairs of the building and land.
As odd as it sounds, gazumping is actually an industry term for when a seller accepts a higher offer from a third party before contracts are exchanged.
An interest-only mortgage means that the monthly payments to your mortgage provider will only cover the interest on the loan. The three main types are ISA (see below), endowment and pension scheme – read this article by Which for more information.
Another type of interest-only mortgage, an ISA mortgage means that as well as making regular payments that pay off the interest, you also pay into an ISA (Individual Savings Account) to save money to pay off the actual loan.
As opposed to freehold, if you buy the lease on a property you are essentially renting from the freeholder for an agreed length of time. The lease will lay out the terms, including its length, and state responsibilities for maintenance and repair. Read our article ‘How to Wrap Your Head Around Leasehold, Freehold & Commonhold’ for more in-depth advice.
Loan to Value (LTV)
LTV is the ratio of the value of your mortgage compared to the value of your house and will be expressed as a percentage. For example, if a property is worth £600,000 and your mortgage amount is £300,000 the LTV is 50%.
Take a look at Which? for more information and use their LTV calculator.
This is bad news – this is the result when the value of your house falls to less than the value of the mortgage you have taken out. In basic terms, you would be unable to repay your mortgage by selling the property and, therefore, unable to move.
With a repayment mortgage, you will make monthly payments to your mortgage lender for an agreed period, until you have paid back both the loan and interest.
A mortgage is secured against your home – if you don’t repay it, your lender may seek to retrieve the money by selling your home themselves.
Subject to Contract
This is one to keep a look out for – if you see these words, it means your agreement is not yet legally binding. By choosing an expert property solicitor you can make sure their eyes are fully on the legalities.
These are the legal documents relating to the ownership of a property and they set out anything that affects this ownership, such as boundaries and rights of way. Take a read of this Land Registry Guide for more information.
Not as intrusive as it sounds, this is a mortgage with a variable rate. What makes them different from other mortgages it that they ‘track’ another rate, most commonly the Bank of England.
If a property is under offer this means that the seller has accepted an offer from a buyer, but contracts haven’t yet been exchanged.
So there you have it. With this comprehensive guide, you should be well on your way to understanding the complex world of the property market. Understanding these terms will give you that extra confidence when making important decisions!