The Glossary is in five sections below and will hopefully offer a guide to the house buying process. If you can't find what you're looking for, check out our Frequently Asked Questions
This just means the mortgage on your home/property. It's called a first charge as you own the property and the bank have the first charge against it, so if you ever have to sell, they get their money first, and you get what's left.
This is an additional mortgage on your home/property. It means if you have to sell, the first charge is paid from the proceeds, then the second charge, then you get what's left. Usually people look at a second charge option if they have a large penalty to get out of their first charge mortgage, or if they want to clear debts or have bad credit and high st lenders are not willing to consider lending.
A first time buyer is defined differently by different lenders.
Some say you are a first time buyer if you've never owned a property, others if you've not owned a property for three years or similar. This only affects the mortgage product you can get.
For the purposes of stamp duty, a first time buyer is defined as someone who has never owned a property anywhere in the world: -
Someone who is not a first time buyer and has bought and/or sold property before. A person or persons either looking to sell or rent their existing home and move to a new property. May have slightly different/better mortgage rates available than a first time buyer as the banks/lenders treat them as experienced so are more confident in them.
A Remortgage is simply replacing the current mortgage on your property.
Essentially it's starting again, looking at all the options in the mortgage market and selecting the right product for the current criteria you have. You can usually change everything about the mortgage. The term, the rate, the lender, the fixed period etc. It's always a good idea to contact a mortgage broker 3-4 months before the end of your current fixed rate to discuss options.
A product transfer is simply remortgaging with the same lender you already have. You might come to the end of your fixed rate and switch over to a new rate with the same bank.
This is when you remortgage your home or a rental property and release some of the money you have accrued in equity through the property increasing in value. If you remortgage to a new lender it's called Capital Raising and if you do a product transfer with your current lender its called a Further Advance. You might need the money for an extension, home improvements, buying a new property for yourself or investment, or to pay off some debts.
Porting is simply keeping the same mortgage but moving it to a new property. Sometimes topping up or reducing the amount of the mortgage. You can also potentially change the term of the mortgage and add or remove someone for it (depending on the lender), but you keep the fixed period, mortgage product and interest rate you already have.
Buying a property to rent out to tenants. If you are doing this you need a certain type of mortgage. You cannot put tenants into a property on a residential mortgage unless you have permission to let from your lender. You also may incur higher costs and need a larger deposit for Buy to Let. Read more in our Frequently Asked Questions section
You want to move home, but keep your existing property and rent it out. You will need a Let to Buy mortgage on that property, getting a new residential mortgage on the one you are buying/moving to. Very similar to a buy to let mortgage, and some lenders offer the same products. However, others do not, so make sure you know the difference.
If your personal circumstances change and you need to rent out your property while you are away, you can ask your lender for permission to let. They are likely to increase your interest rate and/or charge an administration fee, but should usually allow you to rent out the property. If you are not tied into a fixed rate period on your residential mortgage, or know you will not return to live in the property then a buy to let re-mortgage might be the better option.
It is possible to purchase investment properties through a limited company. This can be a traditional limited company (less common) or a Special Purpose Vehicle (SPV), which is the preferred company type of most lenders. Owning through a limited company has different tax implications and can potentially be beneficial to higher rate tax payers looking to invest. We'd always advise speaking to an accountant before proceeding, and discussing wiht a broker to see if it is the right option for you.
The definition on the government website is: -
A House in Multiple Occupation (HMO) is a property rented out by at least 3 people who are not from 1 ‘household’ (for example a family) but share facilities like the bathroom and kitchen. It’s sometimes called a ‘house share’.
Usually HMO's are rented out by the individual room. They have a tenancy agreement for each room and need a little more management than a traditional tenancy.
You may need a speacial HMO licence and in some areas specific HMO accreditation to be able to rent them out. The definition for these stipulations and the definition of an HMO can vary depending on the local authority. Best to check with your local council to find out what you need in your area, then speak to a broker if you're interested in pursuing this avenue.
You fix the interest rate for a number of years so you have some certainty about the monthly payments during that period. Most lenders will do 2yr and 5yr fixed rates as standard, but some offer 3yr, 7yr, 10yr rates
The interest rate is flexible and can be subject to change. The individual lender terms vary but an example would be a tracker following above the Bank of England base rate. If the base rate is 0.75%, your tracker might track 1.25% above this, meaning your mortgage rate is 2%. If the BoE puts the base rate up from 0.75% to 1.00%, your mortgage rate would become 2.25%. Tracker rates are set up on a similar basis to fixed rates, so you only get the initial period before reverting to the lenders Standard Variable Rate (SVR). However, some lenders do offer Lifetime Tracker rates.
Similar to a Tracker/Variable rate mortgage but linked to the lenders Standard Variable Rate (SVR), rather than Bank of England or LIBOR rates. Discounted for an initial periond of so many years and lenders SVR not as likely to move, but can change.
Sometimes called the lenders follow on rate and applies to the mortgage after the initial discount/fixed period offered by the lender. It can vary with the BoE base rate, and other indicators, and is traditionally much higher than a new fixed rate mortgage. If approaching the SVR on your mortgage it's a good time to approach your broker to review.
Basically a large short term loan secured against some form of asset. It's designed to allow you to do something you may not be able to do with more traditional finance. Commonly utilised for people buying at auction, where they have to immediately exchange and complete within 28 days. Can also be used for buying a property if you are trying to sell and it's taking a little more time than you thought.
If you're looking to buy a commercial premises, unusual development, like a pub/church/factory or maybe land to develop it may be difficult to raise the money. There are several specialist finance options available
If someone owns their own home and wants to take some of the money out of the property, continue to live there and may not be eligible for a traditional mortgage. Companies will offer money to the client at a percentage of the home value, plus interest, and the client can stay in the property until death. Can also be used for homemovers.
A separate company that acts as an employer for fixed term contractors. Sometimes paying tax and 'organising payment' for the contractor. If someone has short term fixed contracts, the umbrella company can source contracts and effectively keep the contractor in steady employment. Some lenders are ok with Umbrella and others are not. Speak to a broker for more information
Usually working for a set period of time. Most commonly on a 12 month contract, but it can vary. Can have a daily or weekly pay rate, or a total contract value. Different lenders look at different ways of calculating contractor income. Can be employed or self employed, again with different lender criteria for each.
As above, with the exception of contracts usually being a much shorter period. An example of this is people working in film and media. If someone is working on a TV show, they may be an independent contractor drafed in to do a job for 3 months, or however long needed, then will move on. The important thing here for lenders is the gap between contracts. Usually, a 2-3 month gap would rule out lending. They will also usually want 12 months continuos contracting experience.
Under the Construction Industry Scheme (CIS), contractors deduct money from a subcontractor's payments and pass it to HM Revenue and Customs (HMRC).
The deductions count as advance payments towards the subcontractor’s tax and National Insurance.
Contractors must register for the scheme. Subcontractors do not have to register, but deductions are taken from their payments at a higher rate if they’re not registered.
A CIS mortgage can be tricky if you aren't sure what you are looking for. However, there are several major high st lenders comfortable with CIS contractors, including specialists, so a mortgage really shouldn't be a problem.
Means you are leasing the internal space of the property for the number of years on the lease. You will not normally own the land or exterior of the building
Means you will own the property, inside and out, and usually the land it is built on. There are slightly different rules for freehold flats, but this is the most common definition
Basically means more than 50% of the owners in a block have got together and purchased the freehold. So the owners of the flats also own the land between them. The flats still have leases, but extending the leases are much less complicated and much less costly for the residents.
A sort of mix of freehold and leasehold, in Scotland, the property owner holds land in a hierarchical structure under the Crown and does not own land outright themselves
Ususally blocks of flats or smaller developments where the local council is still the freeholder (owner of the land). There may still be council tenants in some of the flats but the main definition is that the council owns the land
Sometimes also called 'estate charge' and is the charge for maintaining the communal areas of a development. Usually more common in flats or apartments and new build houses on an estate with communal areas. Most flats will include buildings insurance in the maintenance charge, not normally the case for houses which need their own building insurance as a condition of their mortgage. Leasehold will almost certainly have a maintenance charge, freehold it's worth checking.
The amount of money leaseholders pay to the freeholder each year as a kind of rent for the land the property is on. If you're buying a leasehold, it's worth checking the terms of the ground rent as some lenders will not lend if the ground rent doubles or is increased over a short period.
A Communal walkway, open to the elements to get to your front door. Most common in local authority (council) developments. Lenders may have an issue with deck access so always speak to a broker about it, to make sure you have a lender who will be ok with deck access.
Traditionally, mortgage companies are not keen on short leases. This had become a little more flexible recently, with some of the larger lenders relaxing their stance. However, a short lease means a less valuable property and will probably need extending. Extending a lease can be a long, costly process so make sure you check out all the costs and connotations before you purchase. If you're worried, discuss things with your mortgage adviser.
A works notice on a development. The freeholder is doing work to the block of flats etc, and will pass on part of that charge to the leaseholders. Most common with ex-local authority (council) developments and should come up with your soliciotrs due dilligence if there is anything in the pipeline, however, can come up at any point and can be into the tens of thousands.
Since Grenfell, cladding on developments has been an issue for lenders. Most blocks above a certain height will need an EWS1 fire safety sign off form to provide to their lender. Some lenders are more lenient on this than others, but the best advice is to speak to your management company, then a broker to see what your options are.
The house or flat is construced from concrete instead of traditional brick. This can be an issue for lenders and will depend on the type of concrete. Check with a broker first and be aware that the construction type and lending difficulties will affect the value and re-sale, often these properties are marketed for less due to this and can look a bargain. If it looks too good to be true, it probably is.
Similar to concrete build, if it's not made of brick and tile, lenders may reject it as adequate security for their money. Some are more flexible than others, but always worth considering the re-sale value and speak to a broker about anything unusual.
Depending on the lender, the definition differs. Some are 6 floors plus, others are 7, some are 10+. Usually if classed as a high rise a lender will need a lift in the building and may not consider ex-local authority (council) high rises. If it's under 4 floors in the blosk it's fine, otherwise, its worth checking with a broker.
No definition needed as self explanatory, but lenders are not overly keen on 2 kitchens and the property may be difficult to get a mortgage on. May be acceptable as part of an annexe (see annexe), but always consult a mortgage broker if you are looking at a property with more than one kitchen
A separate dwelling on the same title as the main residence. Can be part of the same house, but with a separate access, or can be an outbuilding. Depending on certain factors, some lenders are happy and others are not. Consult a mortgage broker to make sure you have a lender will lend.
Simply the legal actions your solicitor undertakes during the sales process when acting on behalf of their client(s). Remember, your solicitor is not only acting for you, they are acting for the mortgage lender too, so will act in both of your best interests.
The go betweens in the property process.
If you're selling or renting, they will charge, sometimes a lot, for their services. These costs need to be factored in. Normally in the selling process, the estate agents don't charge the buyer, but put their charges on the vendor and selling the property.
Love them or hate them, they usually provide a required service as imagine if you had to negotiate with the owners/buyers directly. They deal with problems and manage expectations and if they are good, can actually be invaluable in the house buying process. From a mortgage point of view, they may ask for a decision in principle to put an offer forward. This can be provided by your broker
Stamp Duty Land Tax is what you pay to the government for the transaction of buying a property. Rates vary, so it's always best to use a calculator. Our favourite is: -
If you're looking for a fixed rate mortgage, chances are it will have some sort of ERC if you pay it off within the fixed period. It can vary from lender to lender and is usually a percentage of the loan outstanding. If your ERC is 1%, and your current mortgage is £200,000, your ERC translates to £2,000. Most lenders will allow a certain percentage of over-payments each year without incurring the ERC.
If you sell an investment property, you will usually be liable for capital gains tax. This does not apply to your primary residence. for more info visit: -
The amount of tax due on inheritance if the estate is above a certain value: -
Lenders will allow you to pay more than you need to each month up to a point. Many of the high st lenders will allow 10% of the loan amount to be paid back each year without incurring the ERC. This does vary from lender to lender, so it's always worth checking with your broker if you are unsure.
Has been quite well publicised during the covid pandemic. Lenders allow you to take a few months off paying your mortgage. That sounds great and very generous, but they will roll up the interest you are not paying and when you begin paying again, your mortgage will be more. It can also affect your credit and getting future mortgages, speak to your broker if you are considering a payment holiday.
A lender is always required to quote the APRC when advertising a loan or borrowing rate. It is a standard interest rate calculation designed to reflect the total amount of interest that will be paid over the entire period of the loan.
Whether you are using 'man with a van', professional removals or taking your car on 15 trips, you need to factor in this cost and the time it takes when moving. You won't have a guaranteed date until you exchange so this can be tricky to navigate.
Exchange happens when you pay part of your deposit (most commonly 10%) and everyone is legally tied into the contract. You should have buildings insurance in place at this point and put any life policies live as you are now liable for the mortgage
Completion is the day you get your keys and can finally relax and choose your first meal as a new owner.
The amount of money the buyer puts down as their contribution to purchasing the property. Exchange is normally done with 10%, and if the deposit is higher, the rest is added on completion
The amount of your money held within your property.
If you own a property worth £500,000, and you have a mortgage of £300,000, then your equity (your money) in the property is £200,000.
It is possible to take some of this money out (release equity) through remortgage or further advance for several reasons including Home Improvements, Extensions, Buying other Properties or Debt Consolidation
Often referred to by the estate agents, the chain is how many properties involved in the transaction. So you may be buying from someone, who is, in turn, buying from someone else, who is buying from someone else etc. The chain is every dependent property involved with your sale/purchase
The owner of a property
The person buying the property
This is how much mortgage, as a percentage, you need on your property. If you're buying something at £100,000, and you have a 20% (£20,000) deposit, then your LTV is 80%. Lenders usually use multiples of 5 for their rates. So if you buy at 75% LTV, you will get a better mortgage rate than buying at 80% LTV. The bigger your deposit, the lower the LTV and the cheaper your mortgage will be.
If you're at 71% LTV for example, it would potentially be beneficial to try and get that extra 1% deposit to bring the LTV to 70% and your mortgage rate will likely be much better.
Speak to a broker for more information
The process your solicitor undertakes while conveyancing. They are making sure everything is correct with the property/mortgage and that the transfer can be done from the old owner to the new.
Part of the legal process and the solicitors due dilligence. There are three main searches: -
Local Authority Search
Basically checking any planning currently underway in the area close to the prperty and any planning issues for the property itself. Making sure there's not going to be a motorway or trainline built at the bottom of your garden etc
Carried out by an environmental agency. It takes into account the past uses of the land, any contamination of the land the property is on and any environmental factors near by which may affect the property.
Water & Drainage Search
Checking mains connections to water, drainage and is the property connected to a mains sewer etc Also checks if the property is safe from flooding, leaking, and damp caused by public waterways
A less common search which also may be Chancel search. This pertains to a property in the vicinity of a church where there are charges levied on the property should the church need repair. Less common, but worth checking with older developments.
Part of the solicitors due dilligence on the purchase of a leasehold property or property with a management company. There will usually be a pack the management company has detailing the service charge breakdown, buildings insurance and any other considerations. Enquiries may be raised to clarify potential issues once the solicitor has them. Receiving them from a management company can take time, which delays the process and is one reason why leasehold transactions can take longer than freehold.
Part of the solicitors due dilligence on the purchase of a property. Basically, it's the term for the solicitor asking questions of the solicitor on the other side to make sure they are confident the property is ok for the buyer to go ahead with.
Another legal term in the process. Simply it's an insurance policy for something to do with the property. One example could be something is written in the title or lease which is non standard and the soliciotrs will agree an insurance policy between them to make sure the new buyer has no liability.
Your advisor may ask you for your credit report as it makes the mortgage application process much easier. It lists all your credit commitments for the broker and gives information about any adverse credit in the past, detailing late payments, missed payments, defaults and CCJ's over the past 6yrs. It's always best to get a multi agency report with all the detail your broker needs.
We recommend Checkmyfile as it lists three credit agency data for each client.
Follow the link below to get your comprehensive credit report and send it to your advisor or click the Checkmyfile banner below.
Usually stated as one reason to capital raise on your property. People release equity through a remortgage or further advance to do work improving their property. Maybe a new kitchen, bathroom etc
Similar to raising money for home improvements, you can also release equity to consolidate debts. If you have loans, credit cards etc costing you hundreds per month, you may be able to take out money from your property to pay them off, increasing your monthly mortgage payment by less than you were paying for all the combined debts. This can be a complex application, so always best to get advice from your broker
Basically the tenancy agreement most landlords us for their rental properties. It has everyone on the same agreement between tenant and landlord and is governed by the standard rules.
Other types of tenancy can be used, but this will be the standard one offered by most estate agents
Pays out a lump sum to your beneficiaries in the event of your death. Can be a level or decreasing term.
Pays a pre-defined amount to you on diagnosis of a listed condition with the provider you have chosen. Similar to a life policy except you actually see the benefit should the worst happen.
If you are unable to work due to illness or injury, income protection can kick in and replace part of your salary. Ideally enough to be able to keep paying your mortgage should you have no income for a period.
A Policy that protects a family should one parent pass away. More frequently paid as a monthly amount to the surviving partner on death of the other partner. Most commonly paid out until the child is deemed no longer a dependent by whatever age was selected when the policy began, i.e. 18, 21 etc However, can be set out to protect a spouse or other loved one in the event of death.
A set amount of life cover for whatever term you choose. If you took £200K life cover until you are age 75, it might be more or less than you need to cover the mortgage, but you always know the amount your beneficiaries would have should you pass away.
Usually set up to reflect the same terms as the mortgage and will decrease along with it. Only really works on a repayment mortgage. If the mortgage is £200K and 25yrs, you would set up the life policy as starting at £200K and decreasing over 25yrs. The idea is it clears the mortgage in the event of death. Can be used on a Critical Illness policy to keep costs down but is not advised.
This can offer a low cost alternative to life insurance, or additional cover. It usually has an accidental death payout, hospital cover where you get money per day you are hospitalised, fracture cover (see Fracture Cover) and can even include child cover or illness cover for certain diagnosed conditions.
The benefits of this cover are: -
It makes a good add on cover to life policies or is ideal for people unable to get traditional life cover
This means the amount you pay each month will not change for the duration of the policy. Life insurance for 30yrs with a guaranteed premium of £25 per month, means you pay £25 per month, every month for the next 30yrs, the amount doesn't change.
The insurance premium will change based on time or possibly age of the client. It may start out cheaper than the nearest guaranteed premium, but could start costing more after 10yrs or so. It may start at £18 per month, but after the first year this may increase to £19.25, year two and it increases to £21.15 and so on.
Almost the opposite of Decreasing insurance. You start with a set amount of cover and that increases linked to a % per annum, or the Retail Price Index (RPI) so the amount of cover you have usually increases with (or similar to) inflation.
Your broker should ask you if you want your Life or Protection Policy in trust. If they don't, they may not have your best interests at heart and it's worth a review. A trust simply means the policy is outside of your estate should you die. It will not need to go through probate and will pass to the trustees who can then allocate it to beneficiaries in a timely manner. There can be potential inheritance tax implications, so it would always be worth speaking you your tax adviser
One benefit a few life/CIC policies have is to cover children in the household for Critical illness and/or death. This can be standard within the policy, or an added extra
Has a fixed amount payout for broken bones and usually some tendon and muscle injuries. Varies from provider to provider and can be taken as stand alone cover or tagged on to most life/CIC/IP policies. Some include it as part of their policy as standard.
Speak to your broker for more information
Some providers offer various free benefits as part of their Life Insurance, Critical Illness, Income Protection or Family Income Benefit cover. These are not a reason to take the cover, but can perhaps be a reason to take one providers cover over another. Some potential benefits can be: -
Speak to a broker for more information
Protects your home in the event of something happening to the building itself. A mortgage lender will usually insist on having this in place before exchange of contracts. A good policy should have a high reinstatement payout maximum in the event of a claim to stop you being under-insured.
Protects your possessions in the event of damage or theft. A good policy should cover personal possessions outside the home, accidental damage, garden, and allow you to specify certain valuables.
If you're lucky enough to be a landlord, this cover can assist with legal issues arising from tenancies and can offer a level of rent guarantee should they stop paying
Insuring someone key to the business, so that should they die, the business is paid a sum to help it survive without the key person, or until the key person is replaced. A type of life insurance that's paid to the business in the event of the key persons death.
Life insurance offered by employers to employees as part of their employment package. A tax efficient way of offering employees a benefit to accompany their salary.
If a Limited company partner dies, what happens to their shares? Usually they would go to that persons next of kin, who may have no idea or interest in being part of the business, nor may the existing shareholders want them to. Share protection insurance provides the company with a payout to buy the shares from the next of kin, so instead of a share in the business, they get a cash payout, which can be compulsory, to protect existing shareholders and the business long term
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