If you are buying a property in Northampton or Rugby, especially for the first time, you could be unfamiliar with terms like freehold, early repayment charge, or getting gazumped!
You're not in the minority if these concepts are all new to you. A recent study from property portal Zoopla reveals that many home buyers struggle to pinpoint exactly what such estate agent lingo means.
For homebuyers, it can feel like the journey to purchasing a home comes with its own unique vocabulary! So, to help you, the team at Horts has put together a comprehensive home buying dictionary of all the trickiest terms, so you’ll never be confused again!
We’ve arranged all the terms in alphabetical order to make it easy for you to find what you need to know.
Annual Percentage Rate (APR)
APR stands for Annual Percentage Rate. This is the total yearly expense of a mortgage, including all fees and charges which makes it a more comprehensive measure than just the interest rate. It’s helpful for comparing different mortgage options and the cost of borrowing money. A lower APR means lower costs over the life of the mortgage.
Base Rate
This is the interest rate set by the Bank of England that influences the borrowing costs of banks and ultimately affects mortgage interest rates. When the Bank of England sets a high base rate, borrowing money becomes more expensive, which can slow down spending and investment. Conversely, a lower base rate makes borrowing cheaper, potentially boosting spending and investment.
Bridging Loan
A bridging loan is a temporary mortgage helping to cover the interval between buying a new house and selling the old one, often quick to arrange but with higher interest rates. It’s a type of short-term financing that helps cover immediate cash flow needs while waiting for a more permanent financial solution. This can be especially useful in a competitive market when buying quickly is crucial. Because these loans are meant to "bridge" a gap, they're expected to be paid back quickly, often once the original property is sold or long-term financing is secured.
Buying Scheme
A "buying scheme" often refers to various programs designed to help individuals purchase homes, typically aimed at first-time buyers, those with lower incomes, or specific groups like key workers. These schemes are usually supported by the government or in partnership with developers to make homeownership more accessible. Common types of buying schemes are ‘help to buy’, ‘shared ownership’ and ‘right to buy’.
Closing Date
A straightforward deadline set by an estate agent for submitting offers on a property that has attracted significant interest. After this date, the seller reviews all offers, and decides which one to accept. Setting a closing date can create a competitive situation, encouraging buyers to put forward their best bids.
Completion
Completion refers to the final stage of the property buying process when the ownership of the property officially transfers from the seller to the buyer. This is the point at which the transaction is legally concluded, and the buyer becomes the legal owner of the property. It marks the buyer’s official move-in day when they can start calling the property their own.
Conveyancing
Conveyancing refers to the legal process of transferring ownership of property from one person to another. This process is essential in both buying and selling and involves several key steps to ensure that the transaction is legally valid, and that the buyer receives clear title to the property. Conveyancing ensures that the buyer knows exactly what they are buying and that there are no legal surprises after the purchase. It also protects the seller by ensuring that the financial aspects of the transaction are handled securely and within the law. Find out if you need a solicitor to buy a house.
Covenant
A covenant refers to a rule or restriction set out in the title deeds or lease of a property that dictates how the property can or cannot be used, or what can be built on it. Covenants are legally binding and are passed along to the new owners when a property is sold. They are intended to protect the value and enjoyment of properties within a particular area or development. When buying a property, it’s important to check for any covenants attached to it, as they can significantly affect how you can use your property.
Deeds
These are legal documents that verify property ownership, maintained electronically by the Land Registry after initial registration. They are crucial in the buying and selling of property as they provide proof of a property’s ownership history and details about the property itself.
Disbursements
Disbursements are the costs a conveyancing solicitor pays on behalf of the buyer during a home purchase, later billed to the buyer. These are not the fees for legal services themselves, but rather payments made to other organizations as necessary parts of the transaction. For example, land registry fees, local authority searches, drainage and environmental searches.
Early Repayment Charge (ERC)
An Early Repayment Charge is a fee that some lenders charge if you pay off your mortgage, or a significant part of it, before the end of an agreed period. This charge is particularly common during a fixed-rate, tracker, or discount period of a mortgage.
Energy Performance Certificate (EPC)
An EPC, or Energy Performance Certificate, is a document that provides information about the energy efficiency of a property. It's used to evaluate the environmental impact of buildings. The EPC gives a property an energy efficiency rating from A (most efficient) to G (least efficient) and is valid for ten years from the date it is issued.
Equity
Equity refers to the financial stake that a homeowner has in their property. It's the difference between the market value of the property and the amount still owed on any mortgages or loans secured against it. Equity can increase over time as the homeowner pays down the mortgage and as the property value appreciates.
Exchange of Contracts
In property transactions, the "exchange of contracts" is a crucial and legally binding stage where both the buyer and the seller of a property formally agree to their respective commitments by signing and then exchanging written contracts. This process is overseen by their respective conveyancers. The exchange of contracts is a significant milestone in buying or selling property in the UK, marking the point where preliminary agreements become enforceable commitments.
Fixed Interest Rate
A fixed interest rate, in the context of mortgages, refers to an interest rate that stays constant throughout the term of the mortgage or for a specified period of the mortgage duration. This type of rate provides predictability and stability for both borrowers and lenders. Fixed rates offer a safeguard against rising interest rates, making them a popular choice for those who value predictability in their financial planning.
Freehold
This refers to outright ownership of the property and the land on which it stands. Freehold is often preferred (over leasehold) for residential properties because of the ownership freedom and control it offers, making it an attractive option for homebuyers seeking a long-term, stable investment in the property market.
Gazumping
Gazumping occurs when a seller accepts a verbal offer on a property from one potential buyer but then accepts a higher offer from someone else before exchange of contracts. This practice is seen when demand outstrips supply, leading to competitive bidding situations.
Gazundering
Gazundering is a term used to describe a situation where a buyer lowers their offer on a property after initially agreeing to a higher price, but before contracts are exchanged. This tactic is used for various reasons, often related to changes in the buyer's financial situation, or as a reaction to issues discovered during the property survey that might affect the property's value.
Land Certificate
Formerly known as the paper version of title deeds, a Land Certificate is a document issued by the Land Registry to the owner of registered land as proof of ownership. It includes details of the land's registration under the title number, the owner's name, and any charges or rights against the land. It’s important to note that land certificates were phased out in 2003 when the Land Registration Act came into force. Today, if you need to prove ownership or obtain details about a property in the UK, you would typically request an official copy of the register from the Land Registry.
Leasehold
This is a contract granting occupancy rights to a property for a specified term, with conditions such as ground rent or service charges and is typically seen in the context of flats and apartments. In this case, owning the structure outright would be impractical due to the shared nature of the building. The buyer owns the property (e.g an apartment within a building) but not the land on which it stands. Ownership of the property reverts to the landlord when the lease expires unless an extension is agreed upon.
Mortgage
A mortgage is financing obtained specifically to purchase a property. The property itself serves as collateral for the loan, which means if the borrower fails to make the required payments, the lender has the right to seize the property to recover their funds.
Mortgage Broker
A mortgage broker is a specialist who helps potential borrowers find the best mortgage options available for buying a home or refinancing an existing mortgage. They act as intermediaries between borrowers and lenders, with the goal of matching their clients with suitable mortgage products based on their financial situation and preferences.
Under Offer
A property that's 'under offer' means that a buyer or multiple interested buyers have made the seller an offer to purchase the property. Once the offer on the house is accepted, the status of the property will change to 'STC' or 'Subject to Contract'. This means that the property sale is progressing with the buyer whose offer was accepted. The sale isn't legally binding until the contracts are exchanged, which usually doesn't happen until at least a couple of months later.
Stamp Duty
Stamp Duty is a tax paid by home buyers on property purchases. This tax is imposed by the government and is based on the purchase price of the property. The amount of stamp duty owed can vary depending on factors such as the property's location, its value, and whether the buyer is a first-time buyer.
Surveying
Surveying refers to the process of assessing the condition and value of a property. This is typically carried out by a qualified surveyor who examines various aspects of the property, such as its structure, foundation, and overall condition. There are different types of surveys available in the UK, with varying levels of detail and cost. Surveying plays a crucial role in the home buying process as it helps buyers make informed decisions about their potential investment. Read more information on surveys here.
Tender
Tender refers to a method of selling a property where potential buyers submit sealed bids or offers by a specified deadline. The seller then reviews these bids and selects the one they deem most favourable. The tender process is often used for properties with unique characteristics or in situations where there is high demand and potential for competitive bidding. It allows sellers to maximize the sale price while giving buyers an opportunity to make their best offer in a transparent and structured way.
If there are any terms that we haven’t included here that you would like to understand, please call our Northampton office on 01604 639933 or email northampton@horts.co.uk or our Rugby office on 01788 550044 or email rugby@horts.co.uk and we will be happy to help you.
Horts are your local estate agents in Northampton and Rugby. Need a valuation? Go here and we'll be in touch promptly.
