Glossary of buying terms

A

Advance

Mortgage Loan.

Advice

A recommendation about the most suitable mortgage for you made by an adviser who is regulated by the Financial Conduct Authority (FCA).

Annual Percentage Rate (APR)

The overall cost of a mortgage, including the interest and fees.

Approved in Principle / Agreement in Principle

A certificate some lenders will give you showing the amount they will probably be prepared to lend you. This is not a guarantee but can be helpful when registering with estate agents.

APR

Annual Percentage Rate, the total cost of a loan, including all costs, interest charges and arrangement fees, shown as a percentage rate and easily comparable with mortgage interest rates.

Auction

The sale of a property to the highest bidder.

B

Balance Outstanding

The amount of loan owed at a particular time

Base Rate

The interest rate set by the Bank of England is known as the Base Rate. This can change at any time. [View Base Rate Changes]

Beneficiary

The individual(s) designated to receive the benefits from a policy.

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.

Buy to Let

An investment where you buy a property – usually with a mortgage – and rent it out.

C

Cashback

Some lenders offer "cashback" on completion of your house purchase. This could be a fixed lump sum, or an agreed percentage of the mortgage loan. Remember to check whether there will be conditions attached.

Chain

A number of linked property sales where exchange of contracts must take place simultaneously.

Closing Date

The date set for submission of offers when more than one party show interest in the property.

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.

Conclusion

See under 'Subject to contracts exchanged'

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 and similar to 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.

Critical Illness Cover

Pays out a lump sum if you are diagnosed with a specified critical illness.

Typical illnesses include:

  • Alzheimer’s Disease (before age 60)
  • Benign Brain Tumour
  • Blindness
  • Cancer
  • Coma
  • HIV - caught in the UK from a blood transfusion, physical assault or at work
  • Heart Attack
  • Kidney Failure
  • Loss of sight
  • Major Organ Transplant
  • Motor Neurone Disease
  • Multiple Sclerosis
  • Parkinson’s Disease
  • Stroke
  • Third Degree Burns
  • Total Permanent Disability

D

Death in service

Life insurance an employer provides that may be linked to a pension scheme. As cover ceases should you change jobs this is not normally suitable for mortgage protection.

Decreasing term assurance

This provides a lump sum in the event of death during the policy term. The amount of cover (sum assured) decreases over the term of the plan. This type of cover is usually used as the basis of a Mortgage Life Insurance plan to protect the declining balance of loan.

Deeds

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

Deferred period

A period of time that has to pass before benefit from a policy is claimed. Typically Income Protection policies will have a choice of deferred periods to suit any benefit you may be eligible for from your employer.

Deposit

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

Disbursements

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

Discounted Variable Rate Mortgage

A set percentage discount below your lender's Standard Variable Rate for a predetermined length of time. Your monthly payments can still go up and down with this type of rate.

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.

Early Repayment Charge

It's important to remember that if you repay your mortgage early it can mean you end up paying an additional payment depending on the type of mortgage you have.

Energy Performance Certificate (EPC)

All properties let for private residential purposes must have an EPC, unless the property is Grade II Listed, It is used to report the energy performance of a property.

Equity

The difference between the value of a property and the amount of mortgage owed.

Exchange of Contracts

The point at which the sale becomes legally binding from which neither party can withdraw without financial penalties - In Scotland see 'Missives Concluded'.