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The First-Time Buyer Jargon Buster

Buying a house for the first time is a huge step. You’ve spent long hours saving, your little housing fund is now growing nicely, and your entire family is thrilled at the idea that you’re finally “settling down”! You’ve reached the point where you’re ready to put down that deposit and enjoy a space that is wholly yours. Simple, right? Not always! There are lots of phrases thrown about in the housing industry that make little or no sense to the first-time buyer. If you’re new to the property market and struggle with jargon like ‘stamp duty’ or ‘sinking fund’, then read on. We’ve put together the ultimate jargon-buster to help you through the buying process more easily.

Affordable Housing

Affordable housing is any property built by a Housing Association, with subsidies provided by the government. Because this housing is low-cost, it’s a more viable shared ownership option for those who can’t get afford a home in the private sector.

Agreement in Principle

Provided by lenders as a statement that this is what they are prepared to lend the named borrowers subject to the approval of the property. This will show any prospective seller that you are prepared and can afford the property.

Arrangement fee

Whenever a mortgage is set up, this can run up an arrangement fee of £1,000-2,000. This sum has an impact on the total cost of your mortgage, and is often added on to your monthly payments. Sometimes a lower arrangement fee can be negotiated in exchange for a slightly higher interest rate on the mortgage.

Bedroom Tax

Bedroom tax refers to the amount of housing benefit you’re entitled to if you live in social housing deemed to be under-occupied. Should you have one spare room, for example, your benefits would be cut by 14%. Two or more spare rooms cuts the benefit by 25%. 

Bridging loan

This loan is a short-term sum, used to ‘bridge’ the gap between the purchase of a new property and the sale of the old one. Often properties need work doing before a mortgage can be arranged, and so this loan acts as a safety net for all the payments.

Building Survey

An extensive and detailed survey which outlines the structural condition of the property. The surveyor will get into the attic, check behind walls, and look between floors and above ceilings. After surveying your building, they will be able to provide you with advice on repairs and provide estimated costs.

Buy-to-Let

A scheme that allows you to buy a property with the intention of letting it out to somebody else. For more information about buy-to-let mortgages, check out our handy guide right here!

Chain

Whilst less of an issue for first-time buyers, it’s always a good idea to understand how a ‘property chain’ works. This chain is created whenever there are many housing transactions that all need to go through to conclude a sale. A person buying a new house, for example, will likely need to sell their old one before they can sort out their new home. Likewise, the person moving out will need to go and buy another property, whose previous owner will also need to buy another – and on it goes! If this chain of buying and selling gets too long, there’s a greater risk of one person either backing out and putting a halt on sales and purchases.

Completion

When a sale reaches ‘completion’, all the monies have been passed over and the new buyer has the legal right to the take ownership of the property. This step is often marked with a document drawn up by your solicitor showing all the costs and monies due to complete the purchase of your property.

Conveyancing

The process undertaken by the buyer’s and seller’s solicitors of transferring the legal ownership of property or land from one person to another.

Deeds

Original documents confirming the details of ownership of a property.

Disbursements

Any monies or fees paid by the buyer’s solicitor that the buyer will later reimburse.

Equity/Negative equity

The value of the property less any money that you owe that is secured against it.  Negative equity is where the property is worth less than the mortgage you have on it.

Equity Loan

An Equity Loan is an amount of money borrowed based on a percentage of the purchase value of your property.  The amount to be repaid is based on the same percentage of the final value of your home when you pay it back.

Exchange of Contracts

This is the point when the buyers’ and sellers’ solicitors exchange contracts and the buyer pays a deposit of usually 10% of the agreed price. This is significant as it makes the deal legally binding so that neither party can pull out. From this point, a completion date is also set – usually up to a month from the exchange.

First charge

The mortgage company will have the first charge against your property which means that their debt is paid before any other debt secured on the property.

Fixtures and Fittings

The list of non-structural items in the property that the vendor will confirm if they are part of the sale.

Freeholder

The person who owns a property outright including the land it’s built on.

Gazumping

Where the property seller, having already accepted an offer, decides to accept a higher offer from another buyer.  As both parties are only legally committed to the purchase after the exchange of contracts (see above), the seller is legally entitled to do this, even if it’s frowned upon! One way to avoid this happening is to ask the vendor to stop advertising and doing viewings at the property once your offer has been accepted.

Gazundering

When a buyer reduces their offer just before the contracts are exchanged in the hope of forcing the seller to accept less for the property.  This can legally happen until the exchange of contracts.

Home Buy Agent

The person who processes your application under the Help to Buy Schemes.

Home Buyers Report

Mid-level property condition report suitable for conventional properties.  It does not include a full structural survey.

Housing Association

A blanket term for not for profit organisations that have the aim of making homes available and affordable for all, including the managing of shared ownership schemes.

Interest-only mortgage

The monthly payment only covers the interest due on the loan and so at the end of the mortgage term, the full amount of the mortgage advance will be payable to the lender.  This type of mortgage is generally only used by investors or where you have another method in place in order to be able to repay the loan at the end.

Joint Tenants

A form of ownership used when two or more people own a property. If one of them dies, their share of the property automatically passes to the other owners, regardless of the what it says in the deceased’s will.

Land Registry

A central government database which registers the details of ownership each time a property is sold.

Lease

The document between the leaseholder and the freeholder laying out the right and responsibilities of each party.

Leaseholder

The person who has a lease from the freeholder to occupy/own the property for a fixed period of time.

Local Authority Search

The local council are allowed to come and make checks to see if there are any issues that may affect the property.

Listed Building

A property that is ‘listed’ has been registered and protected as being of special interest or historic importance. To make any changes to these buildings, you need to get permission from the local authority.

Loan to Value (LTV)

The amount a mortgage lender is prepared to lend you against the value of your property. If the property was valued at £100,000 and the mortgage lender’s maximum LTV for a scheme was 75%, the maximum mortgage would be £75,000.

Mortgage

Your mortgage is the loan secured towards a property. The ‘first charge’ gets registered on the property so that you can’t sell go on to sell it without paying off your mortgage first. Mortgages tend to be paid off in monthly instalments, and if you don’t keep up the repayments the lender can repossess the property and evict you.

Mortgage Advance

The amount of money that the lender will lend you in order to purchase the property.

Mortgage Term

This is the amount of time over which the mortgage lender will lend you the mortgage advance, at the end of the term the mortgage advance.

NHBC scheme (National House-Building Council)

One of the main schemes that provide warranties for new build properties.

Power of Attorney (PoA)

Someone that you appoint to act on your behalf for legal/financial affairs when you are not able to.

Registered Provider (RP)

The new term for Registered Social Landlord (RSL). This includes Housing Associations and Local Authorities.

Repayment mortgage

The average mortgage is paid off over a term of 25 years through a series of monthly payments. These payments pay back part of the interest as well as the money you’ve borrowed.

RICS

Royal Institute of Chartered Surveyors.

Shared Ownership

Shared ownership is a part-buy, part-rent government-backed scheme. First-time buyers are eligible for the scheme, and you can find out if it’s right for you in our guide here.

Staircasing

Buying all of the remaining shares of your home under the shared ownership scheme.

Stamp Duty Land Tax (SDLT)

Stamp Duty is a tax paid on the purchase of residential properties where the price is more than £125,000. How much you pay depends on whether the land or property is, but you can reduce the amount of tax you pay if you’re a first-time buyer!

Standard Variable Rate (SVR)

Is the main mortgage interest rate charged by a lender and normally the default rate when fixed-rate deals come to an end.  It is based on the Bank of England Base rate.

Subject to contract (STC)

Offers are accepted ‘subject to contract’, meaning that they are finalised once contracts are signed and exchanged.

Under offer

The term used to describe when a vendor has accepted an offer from a buyer and all that is needed now is the exchange of contracts.

Valuation Survey

A check undertaken by the mortgage lender to assess the value and condition of the property. Not to be confused with a building survey!

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