Buying a home can feel confusing enough without all the jargon involved, especially if you’re a first-time buyer. From ‘exchange’ to ‘equity’, the language used to describe the home-buying process can sound like secret code. But don’t worry – knowledge is power and we’ve got you covered.
We’ve put together a glossary of the key home-buying terms you might hear, to help you make sense of the jargon. In no time, you’ll be cracking the code and cracking on with your home-buying journey with confidence.
Advance – The amount that a lender agrees to loan you as a mortgage.
Affordable home ownership schemes – Government-backed schemes designed to help people in the UK buy a property. Available schemes include Help to Buy ISAs, an Equity Loan, Shared Ownership and mortgage guarantees. There are specific schemes if you’re buying in Scotland and Wales – learn more here.
APR – Annual Percentage Rate – the total cost of borrowing over a year, including interest charges and standard fees. APR is reflected as a percentage. A ‘representative’ APR is an advertising term for the APR that the lender will offer to at least 51% of successful applicants.
Arrangement fee – A set-up fee for your mortgage, also known as the ‘product’, ‘booking’ or ‘admin’ fee.
Arrears – A legal term for overdue payments. Arrears are a ‘priority debt’ because they carry serious consequences. You could risk losing your home if you can’t keep up with your mortgage repayments.
Asking price – The advertised price that a seller hopes to receive for the property.
Bank of England base rate – The rate of interest set by the Bank of England, and the rate at which the banks themselves borrow money.
Booking fee – A non-refundable fee that some lenders charge upfront for reserving your mortgage product. This is sometimes called an ‘application fee’. It’s often included in the arrangement fee, but some lenders charge it as a separate fee.
Buildings insurance – An insurance policy that covers the cost of repairing or rebuilding your home if the structure is damaged (for example, by a fire or flood).
Buyer – That’s you! The person who is buying a property (also known as the purchaser).
Buy-to-let mortgage – A specialist mortgage, designed for landlords buying a property with the intention of renting it out to tenants.
Capital – The amount of money you borrow to buy a property.
Capital and interest mortgage – Also known as a ‘repayment mortgage’. You pay off the mortgage (the ‘capital’) over the term of the loan through monthly repayments, plus interest. As long as all repayments are made in full and on time, your mortgage will be repaid in full by the end of the term.
Capped rate mortgage – A type of variable rate mortgage where the interest rate is ‘capped’ at a certain limit and can’t increase above it. A capped rate mortgage typically lasts between two to five years, before you’re moved onto your lender’s standard variable rate (SVR).
Cash buyer – Someone who is able to buy a property without taking out a mortgage.
Cashback mortgage – A mortgage that offers you a lump sum of cash for simply taking out the mortgage, which can be used to cover additional costs, such as decorating or solicitor fees. It’s important to seek advice from a mortgage adviser and check the terms and conditions carefully before committing.
Certificate of title – See Title. A report that your solicitor gives to your lender confirming that any outstanding matters have been investigated and resolved. The certificate should state that the property has a ‘good and marketable title’, meaning the transaction is good to go ahead.
Chain – When you’re in a chain, the property you’re buying is part of a longer sequence of transactions that all depend on each other to complete. Each person is buying and selling a property from someone else in the chain. The chain starts with someone who is only buying, not selling. At the other end is someone who is only selling, not buying.
Common (or communal) areas – The areas of a property that all residents have the right to use, for example, communal gardens or corridors in a block of flats. The freehold owner is usually responsible for maintaining these areas.
Completion – The final step in the home-buying process. Once the transaction ‘completes’, you are the legal owner of the property and can move in! You’ll agree the completion date in advance with the seller via your solicitors.
Completion statement – The ‘bill’ for the property purchase, given to you by your solicitor. The completion statement summarises all payments made so far and any outstanding payments. It can include items such as solicitor fees, local authority search fees and stamp duty.
Condition report – A basic type of survey, sometimes called a ‘Level 1 survey’. A condition report uses a traffic light system to highlight critical issues. It’s less detailed than a homebuyer report or a full structural survey, and doesn’t include any guidance on repairs or maintenance.
Contents insurance – Unlike buildings insurance, contents insurance protects what’s inside your home. Contents insurance covers the cost of replacing personal items if they’re stolen or damaged whilst in the home.
Contract – The legal document stating key details about the property. The contract includes the sale price you’ve agreed to pay, any legal restrictions, the completion date and the property boundaries. The seller and their solicitor (if they’re using one), are responsible for drafting the contract.
Conveyancing – The legal process of transferring the ownership of property from one person to another.
Conveyancer – A solicitor who specialises in the legal aspects of buying and selling property. Conveyancers should be approved by the Council for Licensed Conveyancers.
Covenant – See Deeds. A promise, included in the contract or the deeds, which you and any future owners must keep. Covenants can be either ‘restrictive’ or ‘positive’. Restrictive covenants mean that you can’t use the property in a certain way (for example, you can’t run a business from the property). Positive covenants are a promise to take action of some kind (for example, you agree to maintain a fence or shared driveway).
Credit search – When a lender or company searches your personal details to understand more about your credit history. Credit searches are noted on your credit record to let other lenders or companies know that information about you has been requested.
Declaration of Trust – When you buy a property with someone else, it’s possible that you won’t be dividing the costs 50/50. One person might be putting more towards the deposit, or paying more towards the mortgage repayments. A ‘Declaration of Trust’ (or ‘Deed of Trust’) is a legally-binding document that clearly outlines these contributions. It also states how much each person should receive if the property is sold or one person buys the other out.
Deeds (or title deeds) – See Title. Legal documents that confirm who is the owner of the property or land, along with their rights and responsibilities.
Default – If you fail to make your mortgage repayments when they’re due and fall into arrears, you ‘default’ on your mortgage. If this happens, your lender will send you a default notice to let you know. You could lose your home if you can’t keep up with your mortgage repayments.
Deposit – The amount of money that you contribute towards the property. A deposit can be funded by personal savings, a gift from a family member, equity in an existing property, or a combination. The minimum deposit required is 5%, but some lenders will require a 10-20% deposit.
Disbursements – Extra costs incurred for third-party services, including local authority searches and Land Registry fees. A solicitor will pay these charges upfront to speed up the process and add them to your completion statement, so you pay them back.
Discounted rate mortgage – Also known as a ‘discount mortgage’, this is a type of variable rate mortgage. The interest rate is discounted, usually below the lender’s standard variable rate (SVR). The discounted rate can either apply for a fixed term or the lifetime of the mortgage.
Early Repayment Charges (ERCs) – Penalty fees charged by a lender. You might pay an ERC if you switch mortgage products during a tie-in period, or overpay your mortgage above the amount your lender will allow you to.
Energy Performance Certificate (EPC) – A graph that rates the current and potential energy efficiency of a property. An EPC uses a traffic light system from A to G (A being the most efficient), and gives you a rough idea of how much energy bills will cost. The seller is legally responsible for ordering one and they’re valid for 10 years.
Exchange (of contracts) – When you swap signed copies of the contract with the seller, via your solicitors. At this point, the transaction becomes legally binding. You are legally obligated to buy the property, and the seller is legally obligated to sell it. Before the exchange of contracts takes place, either you or the seller can walk away.
Equity – The difference between the value of your property and the amount you owe on your mortgage. The equity in the property increases as you repay more of your mortgage. It can also increase if the market value of the property increases.
Fixed-rate mortgage – The interest rate of these mortgages stays the same for the initial tie-in period of the deal, which can range from 1-10 years. Because of this, the total cost of your monthly mortgage repayments also stays the same for that period.
Fixtures and fittings – Items included with the property. Fixtures are items that are attached to the property, such as boilers and built-in wardrobes. Fittings are items that aren’t attached, such as furniture. Appliances (or white goods) are generally classified as fittings, because they’re usually freestanding.
First-time buyer – Lenders have different definitions of a first-time buyer. In general, you’re a first-time buyer if you’ve never bought or owned a property before.
Freehold – When you buy a freehold, you own the property and the plot of land that it’s built on. A freehold owner is sometimes called a ‘freeholder’.
Full structural survey – The most detailed type of survey available, also known as a ‘building survey’. A structural survey uses a rating system to highlight problems with the property, the level of importance, and the cost of repair. It also includes detailed advice on maintenance and repairs.
Gazumping – When another buyer swoops in and makes a higher offer, which the seller accepts, taking you back to square one. Unfortunately, this is legal and can happen even after your offer has been accepted. Learn more about gazumping, including how to avoid it and what to do if it happens to you.
Gazundering – When a buyer lowers their offer, usually at the last minute. This forces the seller into a position where they either have to accept the lower price, or start from square one by finding another buyer.
Ground rent – In a leasehold property, this is a fee you may be required to pay to the freehold owner in return for living in the property. Ground rent can be charged monthly or as a one-off annual fee.
Guarantor mortgage – A type of mortgage that allows a third party, usually a parent, close relative or friend, to take on some of the risk of the loan. The ‘guarantor’ offers their savings or property as security and agrees to cover your mortgage repayments if you’re unable to. Guarantors are most common with first-time buyers.
Help to Buy – A government scheme designed to help first-time buyers purchase a property with a 5% deposit. Help to Buy allows you to borrow an equity loan from the government, up to 20% of the property price (40% in London). The loan is interest-free for the first five years. You then need to secure the remaining percentage (up to 75%) as a mortgage.
Homebuyer report – A type of survey, sometimes called a ‘Level 2 survey’. These surveys highlight issues with a property and include advice on maintenance and repairs. Homebuyer reports are more detailed than a condition report, but not as detailed as a full structural survey.
Inflation – The rate at which the price of goods and services has increased over time. Inflation is measured in many ways, the most common being the Consumer Price Index (CPI) and Retail Price Index (RPI). Inflation can affect mortgage interest rates, as the Bank of England set the base rate by looking at inflation (and other factors).
Instruction – You ‘instruct’ a solicitor to act on your behalf and start work, usually by signing and returning an instruction form to them.
Interest calculated daily – This means that interest on the mortgage is calculated every day, instead of every week, month or year. Interest is added to the balance each month, based on the number of days in the next month.
Interest rate – The interest rate is the percentage rate you pay on the amount you’ve borrowed as a mortgage. Typically, the higher the interest rate, the higher your total monthly mortgage repayments.
Interest-only mortgage – Unlike a capital and interest mortgage, your monthly repayment only covers the interest charges on your mortgage. During the term, you don’t repay any of the capital loan initially borrowed. The idea is that you save enough money to be able to repay the mortgage at the end of the term in other ways, for example, by selling another property.
Joint tenants – Where you’ll own the property equally with anyone you’re buying it with. When property is owned by two people as ‘joint tenants’, something called ‘right of survivorship’ applies. If one person dies, ownership of the property automatically passes to the survivor, regardless of the contents of the deceased’s will. It’s important to seek legal advice on this if you’re buying a home with another person.
Joint mortgage – When two or more people take out a mortgage. You might take out a joint mortgage if you’re buying a home with a partner, relative or friend. They can also be taken out by parents who want to help their children buy a property.
Land Registry – The official body responsible for maintaining records of property ownership.
Lease – Another term for contract.
Leasehold – When you buy a leasehold, you own the property, but not the land it’s built on, and only for a certain number of years. For example, when you buy a flat in a block of flats, you own the flat but not the entire building. When the term of the lease ends, the property will belong to the freehold owner, unless you can negotiate an extension on the lease.
Leasehold covenant – See covenant. A promise made in the contract for a leasehold property.
Lending criteria – Conditions set by a lender, which you have to meet to be considered eligible for a mortgage. Different lenders have different lending criteria. An experienced mortgage adviser can help you with this.
Lifetime ISA (LISA) – A product designed by the government to help you to purchase your first home or save towards retirement. You can pay in up to £4,000 per tax year and receive a 25% government bonus on all savings. This means for every £4 you save, you get £1 for free. If you pay in the maximum £4,000, you’ll receive a £1,000 bonus. Learn more about the Lifetime ISA. Eligibility criteria apply.
Listed building – A building that the government considers to be architecturally or historically important. As the name suggests, it has been added to a list. There are different ‘grades’ depending on the level of importance – for instance, you might see the term ‘Grade II Listed Building’. The property can’t be changed, extended or demolished without permission from the local planning authority.
Local authority searches – An inspection that reveals key information about your property and the surrounding area. Searches are a key part of the conveyancing process – the findings are useful for both you and your lender. If you’re taking out a mortgage, searches are usually a condition of the mortgage offer. Searches are ordered by a solicitor and carried out by the local authority.
Loan-to-value (LTV) – The size of your mortgage compared to the property value – how much is paid for by the mortgage, compared to the deposit. It’s expressed as a percentage figure.
Mortgage – A loan that is secured against a property and paid back over a period of time (the term). Most buyers will need to take out a mortgage. There are different types of mortgages – we define the main ones in this glossary.
Mortgage adviser – Also known as a ‘mortgage broker’ or ‘intermediary’, a mortgage adviser is a specialist with in-depth knowledge of the mortgage market. ‘Whole of market’ advisers have access to a wide range of mortgage deals from over 90 lenders. Lenders also have their own mortgage advisers.
Mortgage illustration – A key facts document containing all the information you need to be able to compare mortgages. Every lender sets out a mortgage illustration in the same format, so that you can easily compare products to make the right decision for you.
Mortgage payment holiday – You might have heard this term during the coronavirus pandemic. A payment holiday allows you to pause your mortgage repayments for an agreed period of time. When the holiday ends, you make up the shortfall by increasing your mortgage term or your monthly repayment amounts.
Mortgage in Principle (MIP) – Also known as a ‘Decision in Principle’ (DIP) or ‘Agreement in Principle’ (AIP). An official estimate from a mortgage lender confirming that, in principle, they would lend you a certain amount as a mortgage. A MIP is not a guarantee of a mortgage offer. While it’s not essential to have one, it does demonstrate to sellers and estate agents that you’re a serious buyer and can afford the property you want to buy.
Mortgage offer – Official confirmation from a lender, approving your mortgage application. The offer needs to be signed, accepted and returned to the lender.
Mortgage payment protection insurance (MPPI) – A type of insurance policy designed to cover your mortgage repayments if you’re unable to make them due to unemployment, illness or injury.
Mortgage repayments – The agreed amount that you pay to your mortgage lender every month.
Negative equity – When you owe more as a mortgage than the current market value of your home. You’re more likely to fall into negative equity if you buy a home with a smaller deposit, as you have less equity in the home to begin with. However, it can also happen when house prices fall.
New build – Lenders have different definitions of what makes a property a ‘new build’. To some lenders, a property qualifies as a new build even if it’s been lived in, depending on how recently it was built, converted or refurbished. If in doubt, check with your mortgage adviser or lender.
NHBC guarantee – A 10-year warranty provided by the National House Building Council, guaranteeing that the builder will fix serious defects on a newly built property.
Off-plan – When you buy ‘off-plan’, you buy a property that hasn’t been built yet, sometimes before construction has even started. Essentially, you buy a plot of land.
Offer – Easily confused with a mortgage offer, this is the amount of money that you offer to pay the seller for the property.
Offset mortgage – An offset mortgage links your mortgage with your savings and, sometimes, your current account. Your credit balances are offset against your mortgage debt so you only pay interest on the difference, while also paying off the capital loan.
Overpayments – Paying more towards your mortgage than the standard repayment agreed with your lender. Overpayments can take the form of a lump sum, regular overpayments, or a combination of both. Most mortgage products will allow you to make overpayments up to a certain limit, but the rules vary between products and lenders, so it’s best to check.
Planning permission – Approval from the local planning authority to do specific building work to the property or land you’re buying. You’re most likely to need planning permission if you want to build something new or make big structural changes, for example, an extension.
Portable mortgage – ‘Porting’ your mortgage allows you to transfer your mortgage from one property to another when you move, sometimes within your tie-in period, without incurring early repayment charges. Not all lenders will offer this facility.
Private sale – Selling a property without using an estate agent. Private sales can sometimes happen between neighbours or friends.
Rebuild cost – The amount it would cost to rebuild your property from the ground up if it was completely destroyed, including labour and materials. This is not the same as the property price. It’s important to calculate an accurate rebuild cost when taking out buildings insurance, so the provider insures your home for the correct amount.
Redemption statement – A document provided by your existing lender, confirming the amount outstanding on your current mortgage account.
Remortgage – When you change your mortgage without moving home, typically after your initial interest rate has ended.
Repossession – When a lender takes ownership of a property due to unpaid mortgage arrears. Your home may be repossessed if you can’t keep up repayments on your mortgage.
RICS – The Royal Institute of Chartered Surveyors – one of the main accredited bodies for surveying and other property-related activities.
Right of way – Sometimes called an ‘easement’, this means you are allowed to cross another person’s property to access your own. Rights of way can be public or private, and are identified during the conveyancing process.
Searches – Enquiries that your solicitor makes to find out more information about the property you plan to buy. There are various types of searches that your solicitor will carry out with the local authority and other parties.
Service charges – Charges you pay to the freehold owner in a leasehold property, for the upkeep of common areas and exterior walls, windows and roofs. As with ground rent, service charges can be charged monthly or as a one-off annual fee.
Shared Ownership – One of the government’s affordable home ownership schemes. You buy a share of a property (usually between 25% and 75%) and pay rent on the remaining share, which is owned by the local housing association.
Sold, subject to contract (SSTC) – When a seller has accepted your offer, but it’s not legally binding yet, because you haven’t exchanged contracts.
Solicitor – A qualified lawyer who deals with most legal matters. A solicitor specialised in transferring the ownership of property is a conveyancer.
Staircasing – When you purchase further shares in your home from the housing association in a Shared Ownership property. You do this gradually, in ‘blocks’, to own more of your property outright.
Stamp duty – Stamp duty is a tax you pay when you buy property or land in the UK, calculated based on the value of your property and the type of buyer you are. In England and Northern Ireland, it’s called Stamp Duty Land Tax (SDLT). In Wales and Scotland, equivalent taxes with different rates apply. In Wales, you pay Land Transaction Tax (LTT), and in Scotland, you pay Land and Buildings Transaction Tax (LBTT).
Standard variable rate (SVR) – A type of mortgage interest rate that you are most likely to move onto after finishing an introductory fixed, tracker or discounted deal. As the name suggests, the rate can go up and down at any time, meaning your monthly mortgage repayment amounts can too. Some lenders will allow you to take out a mortgage on their SVR straight away, but this is typically a more expensive option.
Survey – An investigation into the condition of a property, highlighting any issues that you need to know about before buying. A survey isn’t mandatory, but it can give you peace of mind and save you money in the long-term. Surveys can uncover issues that a lender’s valuation might not. There are three main types – we briefly define them in this glossary. These are a condition report (Level 1), a homebuyers report (Level 2) and a full structural survey (Level 3). As the buyer, you’re responsible for organising your own survey.
Tenants in common – When buying a home as ‘tenants in common’, it’s possible for each buyer to have a different share in the property. For example, if there are two people on the lease, one person could own 60% and the other could own 40%. In this case, if one person dies, the deceased person’s share of the property will be passed on according to what is stated in their will. It’s important to seek legal advice on this if you’re buying a property with another person. This is also known as ‘joint owners’ in Scotland.
Term – The period of time that you’re taking the mortgage out for, for example, 25 years. Also referred to as the ‘mortgage term’.
Tie-in period – Some mortgages come with terms and conditions that require you to stay with the same lender for a fixed period of time, even after your mortgage deal ends. If you leave your mortgage during this period, you might pay early redemption charges. It’s important to seek advice from a mortgage adviser and check the terms and conditions carefully before committing.
Title – The legal right to own a property or land. A registered title proves that the land has been officially registered with the Land Registry.
Tracker mortgage – A type of variable rate mortgage, with an interest rate linked to the Bank of England base rate or another base rate. The interest rate goes up and down as it ‘tracks’ this rate. You benefit from lower monthly repayments when the tracked rate is low, and risk higher monthly repayments when the tracked rate is high.
Under offer – Another phrase that means sold, subject to contract (SSTC).
Underwriter – A qualified professional who checks how financially risky your mortgage application is for the lender. They’ll assess the risk against their lending criteria, by running a number of checks including a credit check.
Variable rate mortgage – The interest rate on these mortgages is set by the lender and can go up and down, as can your monthly repayment amounts.
Valuation – During a mortgage application, the lender will order a valuation to check that your home is worth the amount they would lend you. A valuation is not the same as a survey – it’s for the benefit of the lender. For a more detailed picture of any defects with the property, you should consider whether a survey is a good idea.
Valuation fee – An upfront fee charged by a lender for carrying out a valuation.
Vendor – A person selling a property.
White goods – Large electrical appliances found in the home. Examples of white goods include dishwashers, washing machines, boilers, fridge-freezers and ovens. These appliances were traditionally white in colour – you can now buy them in a variety of colours, but the name has stuck.
Will – A legal document setting out your wishes for your ‘estate’ (your home and any other assets or debts) after you die.
Your home may be repossessed if you do not keep up repayments on your mortgage.