As a first-time buyer, entering the property market can be stressful enough without an abundance of confusing jargon. To make the house buying process easier, we’ve put together of handy glossary of key terms all first-time buyers need to know.
Agreement in principle
This is a document saying how much your mortgage lender will be prepared to lend you, subject to a full application. This is also known as a Decision in Principle.
APR
APR is the Annual Percentage Rate which is the amount you pay per year for the amount of money borrowed, including any fees.
Arrears
Money that should have been paid. If you are in arrears with your mortgage, you have fallen behind on at least one mortgage repayment.
Base rate
This is a benchmark interest rate set by the Bank of England (BoE). The base rate influences most other interest rates, including mortgages.
Building survey
A surveyor will visit a property you’re thinking of buying and identify any faults or structural issues that might impact its value. This is not the same as a survey carried out by mortgage lenders.
Completion
This is the final stage in the house buying process when the sale has been completed and money has been transferred.
Credit score
Everyone who borrows money has a credit score and it is used by lenders to assess how suitable you are for lending money to. A low credit score suggests you have missed payments in the past and are therefore less desirable to lend to.
Contents insurance
This an insurance policy that covers all items in your home.
Conveyancing
Conveyancing is the legal transfer of property from one owner to another. This is usually carried out by a solicitor or a licensed conveyancer.
Deeds
The legal document that states a property’s ownership.
Deposit
The initial amount of money a homebuyer contributes to the price of a property.
Early repayment charges (ERC)
A charge by the mortgage lender if you switch to a new mortgage or repay your mortgage in full before the end of a period designated in your contract.
Equity
This is the value of your property minus the outstanding amount on your mortgage.
Fixed rate mortgage
This is a mortgage with a fixed interest rate for a specified length of time – most commonly, this is two, three or five years.
Gazumping
When a seller accepts an offer from a buyer but later accepts a higher offer from another buyer.
Guarantor
A guarantor is a person who legally agrees and will be liable to pay your mortgage if you are unable to.
Higher lending charge
A fee that is charged by a lender for a large mortgage, usually when the loan to value figure is above a certain threshold.
D A home loan with a fixed interest rate for a specified period, usually 2,3 or 5 years.
Interest rate
The percentage of your mortgage a homeowner pays the mortgage lender in exchange for for borrowing the money.
Loan-to-value (LTV)
The ratio between the value of your mortgage loan and the total value of your property.
Mortage offer
This is the formal offer by a mortgage provider of how much they will lend you.
Negative equity
When you owe your mortgage lender more than the value of your property, typically when your home decreases in value.
Offset mortgage
This is a type of mortage linked to your savings, where you only pay interest on the amount not in your savings account.
Remortgaging
Arranging a new mortgage for your current home. This might be to get a better deal, to release equity or for a range of other reasons.
Repossession
This is what happens if you fail to keep up with your mortage repayments. The lender takes possession of the property to recoup the outstanding balance.
Stamp duty
A government tax when you purchase a property.
Tracker rate
A mortage with a variable rate. Most often, these track the Bank of England’s base rate.
Choice Mortgage Advisers have first-time buyer specialists who will make the mortgage process easy for you. Get in touch today to book your free initial consultation.