Owning a Property: How to Understand the Specific Jargon

If you are planning to buy a property, you have already purchased one or you will have to face it in the future, it is better to know some of the basic terms used in this field.

So, your communication with the real estate broker, the bank institution, providing loans or lawyers, legislating purchase will be easier and will bring the desired results.

It is always useful to be prepared theoretically for what you are going because you save yourself time and unnecessary stress.

Here are some of the most important and commonly used terms in the field of real estate deals.

Annual percentage rate (APR)

When you are looking at getting a mortgage you will be told what the annual percentage rate on the loan is, this is based on the interest rates applied to the loan, how and when the mortgage is to be re-paid and any other fees such as admin fees. The lower the APR, the less you will have to pay back in total on your mortgage.

Arrears

When you are unable to pay your mortgage and have fallen behind in payments, you are considered to be in arrears. You will want to avoid this as the mortgage lender has the option to take back (repossess) the property and re-sell it to cover their loss.

Building survey

Otherwise known as a full structural survey. This is when a chartered surveyor is appointed to complete a detailed report on your property. You will most likely need to have a building survey completed on a property before you put in an offer for it, to determine its value and whether it needs any future work doing on it.

Chartered surveyor

A chartered surveyor conducts a report on a property to determine the value and any problems with the house. If they are a chartered surveyor they are fully qualified and a member of the RICS (Royal Institution of Chartered Surveyors).

Conveyance

This is what your solicitor does, i.e. all the legal stuff, this includes the drafting or checking of contracts, research into the property and advising you of your legal rights and duties.

Endowment mortgage

An interest only mortgage, whereby you pay only the interest on your loan monthly, but you also pay into an endowment savings policy to pay off the actual mortgage. The problem with these mortgages is that you may not have enough in your savings to clear the balance of your mortgage, this is termed an endowment shortfall.

Fixed rate mortgage

This is a mortgage in which the interest rate is fixed for a certain period of time, thus avoiding a monthly fluctuation in mortgage payments. After the fixed period you are likely to be paying a variable interest rate.

Freehold

When you buy a freehold house you own it completely. The responsibility for it lies solely with you.

Gazumping

This is when a seller has agreed to sell their home to someone, but before contracts have been exchanged the seller has received and accepted a better offer from someone else.

Interest only mortgage

With an interest only mortgage you pay only the interest on the mortgage each month. Alongside this you pay, into a long term savings plan, enough money each month to have accumulated a balance equivalent to your mortgage by the end of a fixed period (this is called the term). There are 3 types of interest only mortgages.

ISA mortgage

An interest only mortgage option, alongside paying the interest on your mortgage, you also pay into an Individual Savings Account to clear the balance of the mortgage.

Leasehold

Owning a leasehold property, means owning a property for a fixed amount of time, the lease will state how long this can be for. It will also note who is responsible for the property and whether ground rent needs to be paid to the freeholder, i.e. the owner.

Loan to Value (LTV)

This is the ratio of your mortgage balance against the value of your home, e.g. if your home was worth £200,000 and your mortgage balance is £100,000 the loan to value ratio is 21, expressed as a percentage (as it always is) this is 50%. The better your LTV is, the more mortgages and with lower interest rates, are available to you, to attain a better LTV pay as much deposit as you can..

Mortgage

This is what we call the loan that has been taken out by you to buy a specific property. If you re-mortgage your house you have either changed your mortgage lender or the payment terms with your current mortgage provider.

Negative equity

If the value of your home is less than the mortgage balance outstanding on it, you have negative equity in the property. This may mean that you are unable to sell your home as you would have to pay hundreds or thousands to your mortgage lender to satisfy the balance.