The house building industry is full of jargon, acronyms and generally confusing words.
We hope to make clear some of the terms and phrases you might come across during your home buying journey and their definitions.
AGREEMENT IN PRINCIPLE
A document provided by the mortgage lender to show how much money they are prepared to lend you, subject to a full application and supporting documents.
ANNUAL PERCENTAGE RATE (APR)
The interest rate that you would pay over the course of each year. It covers the interest on your loan and any additional charges.
An amount that you pay for the lender to set up your mortgage. You can usually choose between paying the fee upfront and adding it to the mortgage, which can work out more expensive as you will pay interest on the fee. Sometimes it is charged as a percentage of your loan, rather than a flat fee.
AUTHORITY TO EXCHANGE (ATE)
The form issued by the Help to Buy Agent that authorises the legal exchange of contracts when you purchase a home.
AUTHORITY TO PROCEED (ATP)
The form issued by the Help to Buy Agent that authorises you to proceed with purchasing a home.
This is an interest rate that the Bank of England will charge to lend money to commercial banks. While each bank or lender is free to set their own interest rates for loans and mortgages, the rate tends to be derived from the base rate.
Someone who gives you advice on your mortgage. Some brokers are independent, and others work for banks or lenders.
A sequence of linked housing purchases, each of which is dependent on the next i.e. someone needs to sell their house to be able to buy your house.
A CML Certificate is a single page document signed by a professional construction consultant, certifying (in summary) that he or she has visited the building site and that the property has been constructed to a satisfactory standard and in compliance with the drawings.
The professional also states the amount of professional indemnity insurance that he or she will maintain. That insurance however covers the professional construction consultant, not the homeowner so the certificate is not an insurance policy for the homeowner.
When the sale is final and all the money has been transferred. At this stage, you become the legal owner of the home.
A document from your solicitor (conveyancer) that explains what you will need to pay so you can complete.
COMPUTER-GENERATED IMAGERY (CGI)
An image that provides an indicative illustration of your property or the wider development based on architectural plans. It is often used in the absence of photography.
A binding legal agreement between the buyer and seller about the purchase of your property.
The branch of law that focuses on the transfer of a property legally from one person to another. Your solicitors who perform this service are your ‘conveyancers’.
COUNCIL OF MORTGAGES LENDERS (CML) / UK FINANCE DISCLOSURE FORM
The Council of Mortgage Lenders is now part of the trade association, UK Finance. UK Finance represents around 300 companies in the UK that provide loans, credit and banking services.
A sum of money that is paid by the buyer on the exchange of contracts as part of the purchase of the property. The buyer’s conveyancer will usually ask for details on how the buyer will be funding the deposit and provide evidence through a personal bank statement or one provided by a family member, if they are contributing.
These are extra costs incurred during the process of buying a home and include stamp duty and Land Registry charges. Your conveyancer will pay them on your behalf, so you need to give the conveyancer the money.
EARLY REPAYMENT CHARGE
This is an amount of money that you have to pay a lender if you decide to change mortgage providers or repay your mortgage earlier than expected. It also might apply if you wish to make a lump sum payment on your mortgage.
ENERGY PERFORMANCE CERTIFICATE (EPC)
This certificate is required for all properties when constructed or sold and provides details of the energy performance of the property and what you can do the improve it.
An engrossment fee is a fee charged by your conveyancer for producing a fair copy of a legal document, such as a lease. Legal documents go through a number of drafts and are reviewed by the solicitors of both the buyer and the seller.
Once the draft has been agreed, the solicitor who developed the original draft will have a fair copy written out (or ‘engrossed’) incorporating all the agreed amendments, so that it can be signed.
The difference between the value of your mortgage and the value of your property.
EXCHANGE OF CONTRACTS
The point at which signed contracts are physically exchanged, legally binding the seller and buyer to the sale and purchase of a property at the agreed price.
FIXTURES AND FITTINGS
Fixtures are items that are fixed to the walls or floor, such as radiators, satellite dishes, electric sockets or built in wardrobes.
Fittings are usually free-standing items such as curtains, washing machines, beds, ovens or carpets. There is no legal definition for either and they are often open to interpretation.
A freehold is when you fully own the whole property and the land it stands on. If you own a freehold property, you are responsible for maintaining the property and land it stands on. The freeholder is also the party that grants a lease.
GENERAL DATA PROTECTION REGULATIONS (GDPR)
GDPR is a regulation intended to strengthen and unify data protection for all individuals within the European Union. Legally enforceable from 25 May 2018 onwards.
A person, often a parent, who guarantees that you can pay your mortgage repayments. If for some reason you cannot pay your mortgage, your guarantor has to pay it for you.
HELP TO BUY (HTB)
A government scheme aimed to help people get on the property ladder. An equity loan is available to first-time buyers as well as qualifying homeowners. It is available on new-build properties up to £600,000. You can find out more at: www.helptobuy.gov.uk.
HIGHER LENDING CHARGE
Some mortgage lenders will charge you an extra fee if you take out a large mortgage on a property. This is because the lender is taking more of a risk when you borrow more money.
Before completion, our customer service team will give you a demonstration on how things in your new home work, such as the appliances, boiler, lighting and heating system.
INDEPENDENT FINANCIAL ADVISOR (IFA)
A professional who offers advice on financial matters. Being ‘independent’ means they are able to recommend and sell financial products from any provider across the market.
A government office that registers the ownership of land and property in England and Wales. It holds the records of land ownership and any charges against the property e.g. mortgages.
LAND REGISTRY FEES
A fee you have to pay to register your ownership of a property with the Land Registry.
A legal document that governs a leasehold of a property for a specific length of time.
A type of homeownership when a person owns a property, but not the land it is built on. The owner of the freehold (the freeholder) grants a lease on the property for a specific length of time.
LOAN TO VALUE (LTV)
This is the ratio between the amount of money you have taken out as a loan and the price of the property you are buying.
MONIES ON ACCOUNT
Money that you pay to your conveyancer so that they can apply for a local authority search on your behalf.
A mortgage is a loan from a bank or building society to buy property or land. The loan is ‘secured’ against the value of your home until it’s paid off. If you can’t keep up your repayments the lender can repossess (take back) your home and sell it so they get their money back. It is important to consider the estimated completion date of your property as a mortgage offer will usually be valid for a maximum of six months.
NATIONAL HOUSE BUILDING COUNCIL (NHBC)
We are registered with the NHBC and our homes come with its Buildmark warranty and insurance cover. Mortgage lenders will only lend on properties that have appropriate cover. Buildmark is recognised, trusted and approved by all lenders. Cover starts from exchange of contracts and lasts up to a maximum period of 10 years after the legal completion date.
A homebuyer who doesn’t have to sell their home to proceed with the purchase of a property i.e. they are ‘chain-free’.
When a sale is agreed, the buyer’s conveyancer will send the seller’s conveyancer a standard list of questions about the property, which must be answered before contracts are exchanged.
PROPERTY INFORMATION FORM (PIF)
A form that is required to be submitted to the Help to Buy scheme, along with a reservation form, in order to apply for an equity loan of up to 20% of the property purchase price.
Details required for the form are personal contact information, details of the property being purchased and financial information.
Buying a new home.
This is when you pay off your mortgage in full.
SEARCHES / LOCAL AUTHORITY SEARCH
This is required by mortgage lenders. A buyer’s conveyancer will make a formal enquiry to the local authority to find out if there are any matters, which affect the property being bought. This includes things such as proposals for new roads, rail schemes or planning decisions that could affect the property.
SERVICE CHARGE / MAINTENANCE CHARGE
This pays for things such as the maintenance and insurance of the building, as well as services like central heating, lighting and landscaping.
The process of visually checking a new home for minor faults that will be fixed before completion.
STAMP DUTY LAND TAX (SDLT)
A tax the government charges you when you buy a new property. The amount varies depending on the value of the property with the rates ‘banded’ with thresholds in the same way as income tax.
SUITABLE ALTERNATIVE NATURE GREENSPACE (SANG)
The creation on new green space as part of the development and can be used by residents and the wider community.
This is a report prepared by a qualified building surveyor to check the structure of a property for any faults. Home owners can choose from three main types of survey, depending on how much information they want.
TELEGRAPHIC TRANSFER FEE
Telegraphic transfer fees are bank charges for the electronic transfer of money for your house move.
If you require the balance of your property sale transferred to you by bank transfer, then your solicitor will need to do a telegraphic transfer fee to complete the transaction.
Legal documents that are your proof of ownership of a property.
They also outline your rights and liabilities in relation to your new property.
The final legally binding document that transfers the property and all its rights from the seller to the buyer.
VALUATION SURVEY / MORTGAGE VALUATION
A basic survey of a property to estimate its value for mortgage purposes. Mortgage lenders will insist on this before lending.
The person selling a property.
An insurance policy which protects buyers of new homes from structural defects, usually offering 10 years of cover.