Property Guides Glossary

Property Guides Glossary

Unconditional and unrestricted ownership.

A term used in official financial documents to describe bad credit, i.e. someone who is considered to be a high risk to lenders because they have experienced financial difficulties in the past, has missed payments or had debt recovery proceedings started against them.

The true cost of borrowing. It takes into account all the fees in obtaining a particular loan, such as arrangement fees, the actual interest rate on the loan and when the payments are due for the duration of the loan. An APR has, by law, to be quoted in all advertisements and publications with the aim of preventing lenders from misleading the public by quoting a low initial interest rate and then hitting borrowers with a high rate later.

Fees payable to lenders for arranging a loan. They may be added to the loan or paid upon completion.

A term used to describe when a borrower has missed one or more payments on their mortgage or loan, but hasn't yet defaulted on their loan.

A tenancy of a dwelling-house granted to an individual as their principal or only home on or after the commencement date of the Housing Act 1988, and being a tenancy to which the Housing Acts 1988 and 1996 apply in England & Wales, whereby the landlord may only regain possession of the property subject to the Assured Tenancy upon establishing one of the grounds for possession contained in the 1988 Housing Act (as amended) and the tenant therefore has the benefit of full security of tenure protection. In Scotland, the Housing (Scotland) Act 1988 applies.

The interest rate set by the Bank of England. A committee now meets once a month to consider changes to the rate which then, in turn, affects the rates set by banks and building societies.

The amount that someone bids for a property (the bidder). At auctions the auctioneer usually controls the amount by which the bids increase, although it's possible for the bidder to specify a different amount, if they so wish. A ‘sealed bid’ process can be used to buy repossessed property. This is where all the offers are put in writing and, in theory, should all be opened at the same time. Other estate agents will ask for ‘bids’ on a repossessed property that can be made at any time up until the exchange of contracts.

Below market value. A suspect phrase used to tempt some investors into buying a property.

A tax charged on profits from the disposal of assets, unless the disposal is in the course of trade when the profit will be taxed as income.

With this type of deal, repayments are variable and linked to the base rate, but they are ‘capped’ and will not go above a set level during the period of the mortgage deal.

This type of mortgage deal may be used in conjunction with a capped rate and/or tracker mortgage. Payments are variable, but will never fall below a set level.

The process by which leaseholders collectively compel the landlord to sell them the freehold of their building, at a fair market price in a statutory timeframe.

For leaseholders, the parts of the building used by all residents, such as the front entrance and lobby, common staircase and common hallways. For tenants, the parts of the property shared with other tenants or a lodger shares with the owner of the property, such as the bathroom, toilet, kitchen and sitting room.

This is the last stage of the purchasing process and is the date by which all funds are paid and all documentation is finalised. The house becomes the property of the purchaser on this date.

An order issued by a court to a person who hasn't satisfied payment to their creditors. The order is for an amount agreed between the debtor and creditor, or for an amount stipulated by the court. Unless the full amount of the judgment is paid within one month, the CCJ will be recorded on the Register of County Court Judgments for six years. This information is then used by lenders to decide whether someone should be given a loan or other credit. Incorrect information can be removed from the Register and once a debt has been paid, the entry can be marked ‘satisfied’. The Scottish equivalent of a CCJ is a ‘decree’.

There are three credit reference agencies that collect and collate information about the borrowing habits of adults in the UK. The information is used by lenders to check people’s identity, their credit history and ongoing credit commitment, so that they can decide whether or not to lend them money or offer credit. Information is obtained from various sources, such as local authorities, banks, building societies and other lenders. By law, credit reference agencies must provide you with your statutory credit file, when asked, although they will request a payment for doing so.

With this type of mortgage deal, payments are variable, but are set at a rate less than the standard rate for a set period of time.

This is a mortgage linked to an endowment mortgage insurance policy with the mortgage being repaid from the sum insured.

When the transfer of title/ownership of a property happens. At this time, the buyer signs the contract for sale and sends it to the seller, who also signs the document. Both parties are legally bound to complete the transfer, once the exchange has taken place, and they cannot pull out of the deal. The property contract will list the fixtures that are to be included in the sale and it will specify a date for completion. Buyers should ensure that buildings insurance is arranged from this date.

Where mortgage repayments are set at a certain level for a fixed period of time, and they will usually revert back to the standard rate after the agreed period.

This is where the overall term of a tenancy is laid down in the tenancy agreement; for example, 6 months or 52 weeks. It's best to specify the fixed term as a certain number of the periods of the tenancy. Don't say that the term is 6 months, but the period is weekly. Rather the term is 26 weeks for a weekly tenancy or 6 months for a monthly tenancy.

The holder of the freehold interest of a property, usually the landlord.

The acceptance by a seller of a higher offer despite having previously accepted a lower one from another buyer. In England & Wales, a seller is entitled to do this provided property contracts haven't been exchanged. The position is different in Scotland.

The submission by a buyer of a lower offer despite having previously agreed a higher price. In England & Wales, a buyer is entitled to do this provided property contracts haven't been exchanged. The position is different in Scotland.

The amount borrowed as a proportion of the amount invested. The greater the borrowing, the greater the gearing (and the risk).

Occurs when a borrower has experienced credit problems and is disqualified from using the products of mainstream lenders. An impaired credit mortgage is a specialist loan available for people with a history of credit problems. These can also be known as ‘adverse credit loans’.

An IVA enables a person who is in debt to come to an agreement with their creditors by paying off a percentage of the debt over a specific period of time, thus avoiding bankruptcy or repossession. A regular payment plan is drawn up by a specialist practitioner who decides how much an individual can realistically afford to pay each month.

A mortgage under which the borrower only pays interest during the mortgage term and the whole of the capital is repaid at the end.

This resembles an Endowment Mortgage, but the saving scheme is an ISA and the contributions are restricted.

The transfer by a Housing Authority of its council houses to a housing association.

A 999-year lease with a ‘peppercorn’ or zero ground rent that the nominee purchaser must agree to grant to the freeholder at the time of an enfranchisement for any flats in the building that are owned by the freeholder.

Amount that a person wishes to borrow as a percentage of the purchase price or valuation (whichever is lower) and it's affected by the size of the deposit. Borrowers are likely to obtain a better deal if they have a lower LTV rate.

A person appointed under the Law of Property Act 1925 to take charge of a mortgaged property by a lender whose loan is in default. This usually involves selling the property or collecting a rental income for the lender. An LPA receiver tends to be used in more complex situations, such as where a property developer is in arrears and has money secured on several properties.

The additional value created in a flat or house by ‘marrying’ or combining the freehold and leasehold interests. The two interests are combined when leaseholders buy the freehold of the building or, on an individual basis, a leaseholder secures a lease extension for their flat of 90 years or more.

The acronym for ‘mortgage interest relief at source’.

A decision made by a judge that enables creditors to recover the total sum due, including arrears and all other costs. A money judgment can be attached to a possession order, which means that someone loses their home and has to pay arrears.

A debt secured by a document (called a ‘mortgage deed’) which gives security to the lender for the debt. The mortgage deed must be returned at the time of settlement of the debt.

The lender of a loan secured by property.

A comprehensive insurance policy that will cover your mortgage repayments over a specified length of time, if you're unable to meet the payments yourself. This could be due to accident, disability, illness or unemployment.

The borrower of a loan secured by property.

When the amount owing to the mortgagee exceeds the market value of the property provided as security, the difference is called 'negative equity'.

The person, company or other entity that buys the freehold of a building in an enfranchisement, on behalf of participating leaseholders.

A decision made by a judge that enables a homeowner to try to sell their property privately, within a certain timescale, before it's repossessed by the lender.

This resembles an Endowment Mortgage, but the saving scheme is a pension. It has various tax benefits but there are restrictions on total contributions and the borrower's age at the end of the term.

This is the relief that exempts any gain on the sale of the home of an owner-occupier from Capital Gains Tax.

Any compounding of future payments, but especially the discharge of a mortgage by paying off the loan and obtaining the release of the property. A redemption penalty may sometimes be payable for early redemption of a mortgage.

Paying off an existing mortgage and entering into a new one, usually to obtain a lower rate of interest or a larger loan.

Special relief for individuals who let rooms to lodgers in their homes.

A mortgage under which the borrower pays the interest and capital over the life of the mortgage.

Regaining or retaking of possession of property when a purchaser or borrower defaults in making payments. Typically, a finance company may repossess goods sold on hire purchase or a mortgagee may repossess a borrower's property in order to sell it to meet outstanding payments due under a mortgage.

A company owned by residents who in turn collectively own their building or intend to buy the building. Also known as an RMC company.

A company set up and owned by residents that has the right to manage the building. Also known as an RTM company.

The right of a tenant to remain in occupation of property that they don't own, but which they have been granted or have acquired a legal right to occupy. This can sometimes be against the wishes of the legal owner.

A process through which borrowers, usually those who are self-employed or those who are unable to provide evidence of their income, are able to state their level of income without providing documentary evidence. In certain circumstances, an accountant may be required to back up statements. This type of mortgage will almost certainly require a larger deposit than other types of mortgage.

Stamp Duty is the duty payable on transfers of shares and properties.

Where mortgage payments go up and down when the lender’s mortgage rate changes, usually in line with the Bank of England base rate. Standard variable rate with cashback is also offered, which means that once you have taken out the loan, you will receive a sum of cash, which could amount to five per cent of your loan.

A useful expression to prevent a binding agreement arising accidentally during negotiation. It means, "I am making no binding commitment at this stage because, in due course, there is to be a proper written agreement". Not to be confused with "without prejudice", which means something entirely different.

The term of a tenancy is the overall length of time for which a tenancy lasts, from the date when the tenant first takes up the tenancy to the date when the tenancy ends. See also Fixed Term.

Original documents proving legal ownership of property. Where land is registered at HM Land Registry, the Register itself proves title and, since October 2003, the Land Registry hasn't issued Land Certificates.

A variable rate loan which tracks changes in the base rate, at an agreed rate for an agreed amount of time.

A property that has an offer accepted by the vendor but contracts have yet to be exchanged.

Empty. On completion of a sale a seller is obliged to deliver the property with vacant possession which means clear of occupants and of objects which are not included in the sale. The same applies at the end of a tenancy.

A much-used legal phrase that means ‘without affecting any existing rights or remedies’.

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