Industry Jargon
Agreement in Principle
After having performed a credit check on you, this is a promise from a lender to advance you funds for a home purchase, so long as their conditions are met. This can be done at the same time as the full mortgage application if you have already had an offer accepted on a property or if you are remortgaging.
Arrangement fee
An administrative fee charged by a lender for processing a mortgage. This can usually be paid up front or added to the loan.
Basic valuation
The most basic form of survey acceptable to a lender, normally used for remortgages or when purchasing a property that you are already familiar with.
Booking fee
See Arrangement fee.
Buildings insurance
A policy that pays for the repair of your home in the event of damage or complete destruction of your home. This form of insurance is mandatory. This insurance should already be in place if the property you are buying is leasehold or share of freehold.
Completion
At this point, the ownership of the property legally changes hands.
Contents insurance
A policy that replaces the contents of your home in the event of damage, destruction, theft and sometimes loss.
Critical Illness insurance
A policy that repays your mortgage in the event that you contract one of a set list of Critical Illnesses.
Current Account mortgage
This is a combined mortgage and current account. Any deposits you make into the account will immediately reduce the amount owed on the mortgage, thereby reducing either the monthly payments or the term of the mortgage.
Decision in Principle
See Agreement in Principle.
Disbursements
Legal costs incurred on behalf of the client via the solicitor. See Searches and Stamp Duty.
Discount rate
A mortgage that offers a discount on a lender’s standard variable rate for a set period of time, typically 2 to 5 years.
Early Redemption penalties
Penalties incurred for breaking a mortgage contract, usually between 1% and 6% of the balance outstanding.
Environmental search
A search performed by your solicitor to verify that there are no health hazards in the vicinity of your new property.
Exchange of Contracts
This is the point at which both the buyer and the vendor are legally bound to go through with the purchase.
Exit fee
A final administrative fee for redeeming a mortgage contract.
Extended tie-in
This is when your Tie-in period is longer than the ‘good’ rate being offered by your lender.
Final repayment fee
See exit fee.
Fixed rate
A mortgage that has fixed repayments for a set period of time, typically 2 to 5 years.
Freehold
The ownership of a property outright, without involving lease, most commonly with houses.
Full structural survey
This is the most involved (and most expensive) form of survey and is generally reserved for properties with large amounts of existing damage.
Home Buyer’s report
An in-depth report highlighting defects in a property. The report is generally between 10 and 25 pages in length. This is usually recommended when purchasing a new property.
Home Information Pack
Mandatory for all properties put on the market in England & Wales after 14th December, 2007, these packs are meant to make the process of buying a home faster and less stressful. Each pack will contain a number of things, including evidence of searches, evidence of lease (if applicable) and an energy performance certificate. See the government's website for further details.
Home insurance
See Buildings insurance & Contents insurance.
Leasehold
The ownership of part of the interior of a building. This situation normally occurs with flats. The freeholder owns the structure of the building and is therefore responsible for its repair ad upkeep.
Income Protection insurance
A policy that provides you with an income in the event that you are no longer able to work due to long-term illness or injury.
Life insurance
A policy that repays your mortgage in the event of death.
Local search
A search performed by your solicitor to verify that there are no building works or other events taking place in the vicinity of your new property that could adversely affect the value.
Mortgage Protection insurance
See Income Protection insurance.
Offset mortgage
Strictly speaking, you have two accounts with the mortgage provider; one is a mortgage account and the other is typically a bank account. Any savings that you have in the bank account will act to deduct interest payments owed on the mortgage account.
Overhang
See Extended tie-in.
Redundancy insurance
A policy that provide you with an income in the event that you are made involuntarily redundant from your job.
Sealing fee
See Exit fee.
Searches
See Title search, Local search and Environmental search.
Share of Freehold
Similar to leasehold, except that all ot the leaseholders in the building also jointly own the freehold.
Stamp Duty
A purchase tax levied on properties. As of April 2007, homes worth up to £125,000 do not incur this tax. Homes valued between £125,001 and £250,000 are taxed at 1% of the purchase price. It is 3% for homes valued between £250,001 and £500,000 and 4% above that.
Standard Variable rate
This is a lender’s base rate, by which they calculate all their other mortgages. Typically it is between 1% to 2% higher than the Bank of England rate.
Tie-in period
The length of time you are bound to pay a penalty if you redeem your mortgage, typically between 2 to 5 years.
Title search
A search performed by your solicitor to verify that the person trying to sell you a property actually owns it.
Tracker rate
A mortgage that tracks the Bank of England rate for a set period of time, typically 2 to 5 years.