Tue 10 Oct 2017
Whilst in the process of buying a new house there will be lots to deal with including reading legal documents and signing contracts with confusing language. Here's a small list of common house buying terms to help you understand what it all means
Buyer: that's you.
Vendor: another term for the seller.
Freehold: a type of occupancy which means you own the property and the land it sits on.
Leasehold: this is where you own the property but not the land it was built on - for example you may own a flat, but not the building it sits in. A leasehold property usually comes with annual maintenance and service charges, made payable to a management company or the freeholder.
Bridging loan: a short-term loan which is temporary and enables a buyer to purchase a property before selling their own.
Equity or capital: this is the amount of money a homeowner has put into a property. The amount builds up over time as the owner pays off a mortgage and the market value of the property goes up.
Building/structural survey: a report into the physical state of the property - See other types of surveys available.
Covenant: this is a provision which has been written into a deed which may affect the use of the property or land. There are two different types of covenant, positive and restrictive. A positive covenant is an obligation which requires some form of action (such as maintain a fence or wall), whereas a restrictive covenant limits or prevents the use of land in a specified way.
Easement: this is the right of one landowner to make use of another nearby piece of land for the benefit of their own land, for example, a private right of way.
Chain: a chain is formed when several property sales and purchases are inter-dependent. A chain can be complicated but a good estate agent will be able to help keep it moving.
EPC: an Energy Performance Certificate (EPC) gives information about a property's energy use and typical energy costs. The property will be rated on its environmental impact and how energy efficient it is. Ratings are from A to G, with A being the most efficient and G being the least. Related article: 6 Ways to Increase Your Property's EPC Rating.
Under offer: if a property is under offer this means a seller has accepted an offer from a buyer but the contracts have not been exchanged yet.
Exchange of contracts: this is the time both the buyer and seller are committed to the transaction; both parties can walk away from the sale at any point before the contracts have been exchanged.
Stamp Duty: a lump-sum tax that anyone buying a property or land over a certain price in England, Northern Ireland and Wales must pay.
Land Transaction Tax: this is the tax to replace Stamp Duty in Wales in 2018. The proposed tax and rate bands are due to be announced in October 2017.
Base rate: the interest rate which is set by the Bank of England for lending to other banks. It is generally set as a benchmark for the interest rates banks and building societies charge when lending money to customers.
Fixed rate mortgage: with a fixed rate mortgage, you pay a set rate of interest on your mortgage for a fixed period of time, so you know exactly what you are paying each month.
Tracker mortgage: this is a mortgage with interest rate linked to the Bank of England rate, or another base rate. The interest rate will go up and down depending on this rate, irrespective of the mortgage lender.
Variable rate mortgage: with a variable rate mortgage, the interest rate can change at any time. They are partly influenced by the Bank of England base rate but other factors also come into play. The interest you pay on a variable rate mortgage can change even without the base rate moving and similarly the base rate might come down but your mortgage stays the same.
John German Estate Agents can put you in touch with Apt Financial Management for free independent mortgage advice
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