Don’t know your arrangement fees from your equity? Our first-time buyer jargon buster is here to help you navigate the property buying process.
There’s a lot of jargon associated with buying a house.
If you don’t know your arrangement fees from your equity, this guide is for you.
Deposit: payment made on exchange of contracts; a percentage value of the house, not part of the mortgage.
Equity: the value of the home minus outstanding mortgage repayments; the amount you own.
Loan to Value (LTV): the ratio of money borrowed to value of the property; a lower LTV ratio means better mortgage deals.
Mortgage: loan taken to cover the cost of the house minus your deposit. Repayments made over an agreed term, at agreed interest rates.
Types of mortgage
Guarantor mortgage: an arrangement where someone close to the borrower (the guarantor) takes responsibility for some cost and risk of the property.
Property as security: the guarantor’s home is used as mortgage collateral.
Savings as security: a cash lump sum is used.
Joint mortgage: an arrangement where 2+ people take out a mortgage together.
Rates: the amount of interest you pay, calculated as a percentage of the mortgage amount.
Capped rate: interest varies but may not increase beyond an agreed amount.
Discount rate: interest is reduced for an agreed period.
Fixed rate: interest stays the same for the duration of the mortgage.
Variable rate: interest changes during the mortgage.
Self-certification mortgage: now-defunct type of mortgage where the borrower stated they could afford to pay, rather than proving it with documentation.
Types of ownership
Commonhold: a group of people form a company and take joint ownership of a building.
Freehold: you own the property and its land in perpetuity.
Joint tenancy: multiple owners, each legally considered single owners with equal rights in the equity and ownership.
Leasehold: you own the property and its land for the term outlined in a lease agreement. At the lease end, ownership reverts to the freeholder.
Tenants in common: multiple owners sharing equity and ownership, but not necessarily equally.
Arrangement / booking / completion fee: an administrative charge from the lender for arranging your mortgage.:
Broker fee: payment for your mortgage broker’s services.
Estate agent fee: percentage commission of the property value, taken on completion.
Legal fee: payment for your conveyancer’s services.
Local authority search fee: payment to determine whether there are restrictions on the property (listed, under compulsory purchase order, etc).
Mortgage account fee: payment covering lender’s admin costs.
Stamp duty: percentage fee charged on properties over £125,000.
Telegraphic transfer fee / CHAPS: payment covering lender’s transfer to conveyancer.
Valuation and survey fee: payment for valuation of the property.
Help-to-buy: government scheme to help first-time buyers more into a new-build property.
Right-to-acquire: help for housing association tenants who have had a public sector landlord for 3 years to buy their home.
Right-to-buy: similar to right-to-acquire but for council house tenants.
More info can be found in our guide to government schemes.
Certificate in Mortgage Advice & Practice (CeMAP): qualification allowing mortgage brokers to advertise themselves as licensed.
Deed of trust: outlines distribution of equity between tenants in common.
Key Facts Illustration (KFI): provides information about a particular mortgage, tailored to your terms.
Agreement in principle: indication of interest in moving ahead with a deal outlined in a KFI.
SA302: evidence of earnings document, useful for self-employed people looking for a mortgage.
People and organisations
Conveyancer (solicitor): legal professional trained in buying and selling property.
Financial Conduct Authority (FCA): regulatory body ensuring best practice from mortgage brokers.
Financial Ombudsman: from their site, “The UK's official expert in sorting out problems with banks, insurance, PPI, loans, mortgages, pensions and other money and financial complaints”.
Financial Services Compensation Scheme (FSCS): body to protect and compensate consumers “when authorised financial services firms fail”.
HM Land Registry: from Wikipedia: an organisation who “register the ownership of land and property in England and Wales”.
London Institute of Banking & Finance: an educational charity who issue CeMAPs.
Mortgage broker (or advisor): a qualified industry expert who acts as an intermediary between you and lenders.
Need anything else defined? Get in touch!