We know mortgages can be confusing, so we try our best to avoid using jargon wherever possible. There are some terms that we can't avoid using, so here's an explanation of the most common words and phrases used in the home purchase process.
Arrangement Fee
A fee sometimes charged by your mortgage lender for arranging your loan. Find out early on whether this applies to your mortgage.
APR
The Annual Percentage Rate (APR) is the yearly cost of your mortgage and includes interest, one-off fees plus on-going costs.
Buildings Insurance
It's compulsory to have suitable buildings insurance if you have a mortgage. This covers the structure of your building, not the contents.
Contents Insurance
A contents insurance policy would cover your possessions against damage or theft. It's not compulsory but we recommend you have it.
Completion
This is the date when the property officially becomes yours. The money is transferred to the seller's solicitor, deeds are exchanged and you get the keys.
Conveyancing
When you are buying or selling property the paperwork required to transfer property title from the seller to the buyer is called Conveyancing.
Deed
The document that shows you own the house and details boundaries and rights of way.
DIP
The Decision in Principle (DIP) will tell potential buyers roughly how much he/she is able to borrow, allowing for buyers to search for properties within realistic price brackets. The DIP is a process whereby acceptance of the mortgage application is approved subject to the normal lender checks.
Early repayment charges
If you repay the loan early or switch to another lender you may be charged a fee.
Energy Performance Certificate (EPC)
A document outlining how energy efficient a home is on a scale of A-G with 'A' being the most efficient and having lower fuel bills. Every house going on the market must have one included in their Home Information Pack.
Exchange of contracts
Once the seller and buyer exchange contracts, the deal becomes legally binding.
Freehold
A freehold tenure means that you own not only the property but the land on which it stands.
Ground rent
As a leaseholder you may have to pay a ground rent to the owner of the land your property stands on.
Higher Lending Charge
This is used by the mortgage lender to protect itself should you default on your loan payments and the lender is unable to recover the debt in full. However, any outstanding debt remains the responsibility of the borrower.
Home Information Pack (HIP)
A legal document which must be compiled before a property is put on the market in order to provide information to potential buyers.
Leasehold
As a leaseholder you own the property but not the land on which it stands. You should find out how long is left on the lease before purchasing as once the lease expires the ownership of the home reverts to the owner of the land - the freeholder.
LTV
Loan to Value (LTV) is expressed as a percentage and describes how much of the purchase price or valuation the Society will lend you.
Mortgagee
A more formal term describing the bank or building society that is lending you the money.
Mortgagor
Another term for a borrower.
Remortgage
Switching your mortgage deal and/or lender.
Stamp Duty
Purchasing a residential property with a value of £125,001 or more is subject to a tax called stamp duty. The higher the property price the higher the duty to be paid.
Vendor
The person selling the property.
