You’re bound to feel a mixture of emotions when it comes to buying your first house. That excitement is sure to build as you look forward to having a place of your own. However, there are a variety of home-buying phrases which could have you feeling confused. Thankfully, you can count on Aldermore, as we share some simple explanations of common home buying terminology in this article.
The freeholder is entitled to demand ground rent where a property is owned under leasehold. The required payments are commonly set out within the lease and may either be fixed or escalating. There is some variation, with payments of £200 to £500 having to be made for the lease of modern flats and as little as £10 per year for ex-council flats. Your solicitor will be able to advise on any questions you may have on this.
Being of architectural or historical interest, a listed building will be given special protection under the law. This means that such buildings can’t be demolished, extended, or altered without approval by the local planning authority. Works may only be carried out if they have a limited impact on the interior and/or exterior character of the property.
Equity relates to the proportion of the property that you own. This can be calculated by subtracting the remaining mortgage payments from the current value of the home. As an example, the owner of a house valued at £300,000 with a remaining mortgage of £50,000 will have £250,000 in equity.
While not required under law, building surveys are generally required to provide an assessment of a property’s condition before purchase. Each survey will involve a building inspection carried out by a registered building surveyor, in person or using remote valuations with a written report to highlight any issues and market valuation. However, the level of inspection will vary, with the least expensive level-one survey being the recommended choice for modern properties in relatively good condition and more detailed surveys for older or complex properties
A homeowner with a variable mortgage will pay different amounts as the interest rate varies from month to month. The type of variable mortgage will be set by the lender and may not stay in line with the Bank of England interest rate (unless a tracker mortgage is selected). It’s common for a discount rate to be set during the introductory period, followed by a switch to a standard variable rate as decided by the lender.
Fixed-rate mortgage payments stay at the same level of interest for the entire term of the loan. Fixed mortgages are typically chosen by people looking to pay an agreed amount that doesn’t change during the term, so they can budget for set monthly repayments. When the lending term comes to an end, if the mortgage isn’t repaid in full, the mortgage term will move to standard variable rate if they don’t choose to switch to a new mortgage product.
A buy to let property is one that is bought with the specific intention of being rented out to tenants. The income generated from a buy-to-let investment should ideally cover the cost of the mortgage and expenses, besides giving the landlord a monthly profit.
This is a major milestone in the home-buying process, the exchange of contracts is managed by a conveyancing solicitor and involves the contracts being signed and swapped between the buyer and seller. At this point the sale will become legally binding and the deposit must be paid to the conveyancer.
When purchasing a property, they buyer and lender will work to an agreed completion date. On this date the ownership will be passed from the seller to the buyer. This will involve the transfer of the deposit and money lent under the mortgage to cover the value of the sale. Mortgage interest will also be charged from this date.
The property sale will become subject to contract (STC) after the seller has accepted the buyer’s offer. However, completion of the sale will depend on the paperwork being completed and contracts exchanged. It may take anywhere between six weeks and six months to go through these stages as the solicitor will need to contact a range of third-parties and establish any property risks.
As explained in our mortgage jargon buster, the agreement in principle is a document confirming that the buyer can borrow a set amount and afford the property. Otherwise referred to as a mortgage promise or decision in principle, it is generally seen as the first step in buying or remortgaging a property. The lender may change the terms or refuse to fulfil such an agreement if the buyer’s circumstances change in the run-up to the property purchase.
Gazundering involves the prospective buyer lowering their offer just before the exchange of contracts. This might be down to an unexpected change of financial circumstances or the survey revealing issues that reduce the property value.
Gazumping happens when a property’s seller accepts an initial offer, only for the sale to be made to a higher bidder at the last minute. While a dim view is taken of this practice, the law will only be broken if the prospective buyer is gazumped after the exchange of contracts.
We hope you enjoy a stress-free home buying process. Of course, buying a home does come with a certain degree of unavoidable stress. But, armed with these common pieces of home buying terminology, you’ll hopefully avoid a lot of confusion.
We hope you enjoy a stress-free home buying process. Of course, buying a home does come with a certain degree of unavoidable stress. But, armed with these common pieces of home buying terminology, you’ll hopefully avoid a lot of confusion.
Subject to status. Your mortgage is secured on your property. Your property may be repossessed if you do not keep up repayments.