Jargon-buster: Buying a property

We explain what some common terms in the property market actually mean

If you’re not already that familiar with the property-buying process, some of the terminology and jargon surrounding it can be sound quite alien. That’s why we’ve put together this handy reference guide, which includes the most common terms you’re bound to stumble across during your buying journey… 

 

Annual Percentage Rate (APR)

This is the total amount of a loan, including any arrangement fees, interest charges, and other costs - shown as a percentage. 
 

 

Arrangement fee

This is the fee payable to a mortgage lender or broker to have your mortgage loan arranged. 

 

Base rate

The Bank of England’s rate of interest; which it charges for lending to other banks. It’s often used as a benchmark figure for the interest rates they themselves will charge when a loan is given to consumers.  
 

 

Bridging loan

A short-term loan which allows a property buyer to go through with a purchase of a home - before they have sold their existing property. 

 

Capital

Equity is another name for capital and is the amount of money you have to invest in - or put down a deposit for - a property.  

 

Chain

Most people buying a property are also selling one simultaneously. This sequence of inter-dependent seller and buyer transactions is called a chain.  

 

Completion date

Completion is the last stage of the property-buying process, with the completion date being where the sale of the property is finalised and the new buyer gets access to keys.  

 

Conditions of sale

These are the specific items in a contract of sale which set out and confirm the duties of the seller and the rights of the buyer. 

 

Contract

This is the legal document which details the agreement of terms between the buyer and seller. A draft contract is sent to the buyer by the seller’s legal representative when a sale is agreed, and then when contracts are eventually exchanged, a completion date is agreed upon to complete the property sale.   

 

Conveyancer

Both a buyer and seller will need a legally-trained representative to manage all matters arising from their property sale/purchase. This might be a solicitor or a licensed conveyancer, and they will deal with all legal aspects on behalf of their client.   

 

Conveyancing

The legal process worked through in order to transfer a property’s ownership. 

 

Covenants

These are the rules governing the property in its title deeds or lease. 

 

Deeds

The ownership of the property is proven by these legal documents and will include the current owner’s full details. 

 

Deposit

This is the amount of money the buyer pays once the exchange of contracts has taken place and is usually a minimum of 10% of the purchase price of the property.  

 

Disbursements

These are items which are initially paid for by the solicitor or conveyancer but are additional to the legal aspects of a property purchase. They are recharged to the buyer. Examples may include Land Registry fees, local search fees, and Stamp Duty Land Tax.   

 

Draft contract

This is the initial version of the contract, which may be amended during the sale. At the point of exchange of contracts, it becomes a final document. 

 

Easement

An easement is a right which is granted to the owner of a property regarding an adjoining property, for example – right of way or access.  

 

EPC

EPC is short for Energy Performance Certificate. This document states the level of energy efficiency and carbon emissions of a property – with a given rating of between ‘G’ (very bad) and ‘A’ (very good).  

 

Equity

This is a commonly seen word in the home-buying world. It is simply how much of the property you own – so that’s the difference between the mortgage amount you still owe a lender and the value of your property. 

 

Exchange of contracts

This is the point at which both the seller and the buyer sign the contract – with their licensed conveyancer or solicitor then arranging for the paperwork to be exchanged simultaneously soon after.  

Once the contracts are exchanged, the property sale is binding and no terms within the contract can be changed.  

 

Gazumping

This is the term for when a sale is already agreed, but the seller then accepts a higher offer on the property from a different buyer.  

 

Gazundering

When, just on the point of exchanging contracts, the buyer reduces their offer for the property. 

 

Ground rent

Most commonly seen in relation to flats and apartments, this is the fee charged annually by the freeholder on a leaseholder of a property.   

 

Land Registry

The government office that is responsible for holding all records of any land ownership – as well as any associated charges against a property. 

 

Land Registry fee

When there is a change in property ownership, the Land Registry will charge a fee to cover administrative work associated with updating their records. 

 

Leasehold

A lease is frequently applicable to apartments/flats. It means that, whilst you may own the property, you don’t own the land it sits on. For that, you will have a contract with the freeholder where the number of years you can use the home is stipulated (commonly 99, 125 or 999 years).  

 

Listed building

A listed building is one which is of special historic or architectural interest. If you own this kind of property, you’ll be bound to certain rules and restrictions relating to how you use the property, how you can adapt or change the building, or how you carry out any maintenance or repairs.  

 

Local authority search

This is a mandatory activity conducted as part of the home-buying process. The buyer’s legal representative will send a formal enquiry to the local council in order to retrieve details relating to any matters affecting the property’s purchase. For example, likelihood of flooding.  

 

Maintenance charge or service charge

If you’re planning to purchase a leasehold property, it’s likely that one of the periodic fees you’ll need to pay will be a maintenance or service charge. This covers items such as the insurance and maintenance of the building, and upkeep of communal areas (if applicable). 

 

Mortage Survey/Report

This kind of report is designed to give a buyer a clear picture of the current physical condition of the property they intend to buy. It will include information on any defects or areas for concern, along with a grading relating to how serious each defect is.  It is not as comprehensive as a structural survey, which is a more expensive, but more detailed kind of report. 

 

Mortgage valuation

This term is sometimes incorrectly mixed up with “mortgage survey”.  A mortgage valuation is conducted by a surveyor acting on behalf of the prospective mortgage lender. They produce a report which confirms the assessed value of the property. The property buyer will usually pay a fee for this service. 

 

Negative equity

This is where a property is sold, but its value is less than the amount remaining on the associated mortgage. Simply put, it’s where you owe more to your lender than the sale price of the property. 

 

Open house

An estate agent sometimes arranges an ‘open house’ so that many different people can go and view the property over the course of a few hours, on the same day. It means that people may be viewing the same property for sale at the same time as others. 

 

The Property Ombudsman

An organisation which offers a free and independent service for resolving disputes between estate agent (members) and buyers or sellers of UK residential property.  

 

Purchaser

This is the formal term for a person buying a property. 

 

Repossession

A lender may take ownership of a property by the process of repossession should the owner fail to keep up with their mortgage payments over a certain period of time. 

 

Share of freehold

This is when the freehold of the property is owned by a limited company and the shareholders are the owners of the property, usually the owners of flats within that building. 

 

Stamp Duty Land Tax (SDLT) 

Stamp Duty is tax which is paid by a new property owner to the government.  Charges can vary depending on the purchase price. Currently, on homes that are worth up to £300,000, no Stamp Duty is due. 

 

Subject to contract

This means that, before contracts are exchanged nothing is legally binding. 

 

Transfer document

The final legally-binding paperwork which officially moves the property and all its rights from the seller to the buyer. 

 

Under offer

This is when a seller accepts an offer from a buyer, and the legal process behind the transaction begins. 

 

Valuation (or market appraisal)

The suggested selling price of a property based on an estate agent’s assessment and their experience in, and knowledge of, the marketplace. 

 

Vendor

The vendor is another name for the person selling a property.