Home buying glossary

Confused by financial acronyms and industry terminology? Buying your first house is daunting enough without having to decode property lingo. FTB’s homebuying glossary is here to make the process a whole lot easier to understand

Agreement In Principle

The initial document that a lender will give you outlining the amount you are likely to be lent if you applied for a mortgage. An agreement in principle is not a guarantee of getting a mortgage.

APR

APR stands for annual percentage rate. It is the interest rate you’d pay over a year. It takes into account not just the interest on your loan but also any other additional charges.

Arrears

This is a term used to describe payments that haven’t been made on time.

BASE RATE

The interest rate set by the Bank of England. Lenders usually use the Bank of England base rate to set their own interest rates.

BROKER

A broker is someone who gives you advice on your mortgage. Some are independent, while others work for particular lenders.

BUILDING SURVEY

A survey carried out by a qualified surveyor to spot any structural problems or faults in the home you are buying.

Collateral

Something of value that is offered as a guarantee against a loan. With mortgages, your home is collateral.

Completion

The finalisation of the sale. Completion day is when the paperwork is complete, all money is transferred and you become the legal owner of your new home.

Conveyancing

The legal process of transferring ownership of a property.

Disbursements

These are additional charges incurred during the homebuying process such as Stamp Duty and Land Registry charges. You must give the money to your conveyancer or solicitor who will then pay the charges on your behalf.

Early Repayment Charge

This is an amount of money you may have to pay a lender if you decide to move mortgage provider or if you pay off your mortgage quicker than expected.

Equity

The difference between the value of the property and the value of the mortgage you have secured.

Exchange Of Contracts

This is when you exchange contracts with the seller. When this has happened, both sides are legally bound to complete the transaction.

Freehold

A freehold is when you fully own a property and the land it stands on.

Gazumping

When a seller accepts an offer and then later on rejects it in favour of a higher offer from another bidder.

Guarantor

A person, usually a parent, who guarantees that you can pay your mortgage repayments. You often need a guarantor if you are struggling to get a mortgage based on your own income. If for some reason you cannot pay your mortgage, your guarantor has to pay it for you.

Higher Lending Charge

If you take out a large mortgage on a property, some lenders may charge a one-off extra fee. This funds an insurance policy that protects the lender (not you) from the additional risk.

Land Registry Fees

This is a fee you have to pay in order to register your ownership of the property with the Land Registry.

LEASEHOLD

A type of tenure where you buy the right to occupy a property for a fixed period of time. You usually have to pay annual ground rent each year.

LTV

This stands for loan to value – the ratio between the amount of money you have taken out as a loan and the valuation price of the property.

LUMP-SUM

Reduction

In order to reduce your mortgage, you can make a lump-sum reduction. This is where you pay more than you owe each month in mortgage repayments.

REDEMPTION

Paying off your mortgage in full is known as redemption.

Repayments

The amount you have to pay back each month to your mortgage provider

STAMP DUTY

Stamp Duty is a shortened name for Stamp Duty Land Tax, also called SDLT. This is a Government tax you may have to pay when you purchase a new property. Your solicitor or conveyancer will organise the payment for you.

Title Deeds

The legal documents that outline your rights and liabilities in relation to your new property. The title deeds also act as proof of ownership.