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House buying terms explained

During the process of buying a new house there will be lots to deal including reading legal documents and signing contracts with confusing language. Here is a small list of common house buying terms explained to help:

House buying terms explained

Buyer: that’s you.

Vendor: another term for the seller.

Freehold: a type of occupancy which means you own the property and land it sits on.

Leasehold: 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 freeholder.

Bridging loan: a short-term loan which enables a buyer to purchase a property before selling their own.

Equity or capital: the amount of money a homeowner has put into a property. This 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 surveys carried out by John German

Covenant: a provision written into a deed which may affect the use of the property or land. There are two different types of covenants, positive and restrictive.  A positive covenant is an obligation which requires some form of action (maintain a fence or wall for example), whereas a restrictive covenant limits or prevents the use of land in a specified way.

Easement: 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 (A being the most efficient and G being the least).

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: 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 a buyer pays when purchasing a property or land over a certain price in England, Northern Ireland and Wales.

Land Transaction Tax: this is the tax to replacing Stamp Duty in Wales from 2018.

Base rate: the interest rate which 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 for a set period of time, so you know exactly what you are paying each month.

Tracker mortgage: with a tracker mortgage interest rates are linked to the Bank of England rate or another base rate. The interest rate will go up and down depending on this, 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 would love to help with your house move – see more.

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Date Posted

February 10, 2019

Article Category


Katy Storer

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