Sales - Jargon buster
Acceptance - If you accept a lender’s mortgage offer this document needs to be signed and also returned to the lender.
Advance - A mortgage loan- an additional loan is referred to as a further advance.
Adverse Credit - Used to apply to a borrower or application that has past problems with bad credit, for instance frequent late payment. Breached arrangement, bankruptcy or County Court Judgement.
Agent - An agent acting on behalf of the landlord who may be involved in the letting, rent collection, management, estate agent or other duly authorised person.
Annual Equivalent Rate (AER) - A notional rate that is often quoted on interest paid on savings and investments. It aims to demonstrate what your interest return would be if the interest was compounded and paid annually instead of monthly (or any other period).
Architect’s Certificate - A certificate provided by an architect, which confirms their overseeing of the construction of a building. Building societies are unlikely to lend on a new-build house in the absence of either an architect’s certificate or an NHBC warranty or equivalent.
Arrears - Money that is unpaid by a tenant in whole or in part after the date specified in the tenancy agreement.
Bank of England Base Rate - The Bank of England set a rate each month known as the 'Base Rate'. Banks and Building Societies use the Base Rate to set the interest rates they pay on deposits, or charge on debts.
Banker's Draft - A banker’s draft is similar to a cheque, however the money has been debited to your bank account and it means the person receiving this will know it is safe money. You will normally need to give a bank in the UK 24 hour notice and will be charged an administration fee.
Bonding or Bonded -The agent arranges and maintains, usually through a professional body, Client Money Protection Insurance which will reimburse the public in the event of fraudulent or dishonest misappropriation of clients' money; and that the extent of cover meets the minimum criteria set from time to time by the Board of The Dispute Service.
Capital - The amount of money either put into buying a property or the deposit placed on a property, also known as equity.
Caution - Entries on the land register protecting the interests of a third party. Any applicant for first registration of title is notified to him whereupon he can take appropriate action to protect his interests.
Contractual Obligation - A binding obligation imposed on parties to a contract which, if not complied with, breaches the contract.
Conversion - The sub-division of a residential property into bedsits, self-contained flats or maisonettes.
Covenant - A condition, contained within the Title Deeds or lease, that the buyer must comply with, which is usually applied to all future owners of the property. A restrictive covenant is one that prohibits the owner from doing something.
Debt Service Cover Ratio (DSCR) - The ratio of net operating income to debt payments on an investment real estate. It is a popular benchmark used in the measurement of an income-producing property's ability to cover its mortgage payments. The higher this ratio is, the easier it is to borrow money for the property.
Deeds - Legal documents that show who owns a property or piece of land.
Defective Lease - A badly drafted lease. If this is serious, the vendor may have to obtain a ?deed of variation? getting the freeholder’s permission to change the original terms of the lease. This can be a lengthy process as it may affect other leaseholders.
Dilapidations - Damage to a property, missing items in an inventory, re-decoration required etc, usually assessed on the check out at the end of the tenancy.
Disbursements - All the various costs associated to the legal work in relation to buying, selling or re-mortgaging your home.
Dutch Auction - The original meaning refers to an auction in reverse, where an offer price is announced and the auctioneer gradually reduces it until a bid is made. However this meaning has been lost, and a Dutch auction now refers to the informal bidding that takes place when two or more potential buyers are outbidding each other for a property.
Easement - A legal right over land, for example the right to access a specified area of land, such as a right of way.
EBITDA - Earnings before Interest, Taxes, Depreciation and Amortisation. EBITDA equates to operating revenue minus operating expenses plus other revenue.
Financial Services Authority (FSA) - The regulatory authority for the UK financial services industry. The FSA has taken over the regulation of mortgages and all lenders and mortgage intermediaries must be directly authorised and regulated by the FSA, or must be an appointed representative of an authorised firm.
Gazumping - When a seller pulls out of a sale after accepting an offer above the asking price. Often mistakenly used by people who have made an offer below the asking price and where a higher offer is later accepted. If you don't offer the asking price, you may lose out.
IDD / Initial Disclosure Document - This is a document designed to assist you in comparing the services provided and the fees and charges made by lenders and intermediaries.
IFA - Independent Financial Adviser.
Lease - Ownership of property by way of a leasehold interest for a fixed term, usually with a ground rent payable annually.
Lessor - The person/company who grants a lease i.e. the landlord.
Leasehold Ownership of land, normally for a fixed period, that is subject to an annual payment of a ground rent to the owner of the freehold
Lien - The legal right of one person to hold the property of another as security for a debt.
Maintenance Charge - The charge made, usually annually, by the landlord, to cover the costs of maintaining the property as set out in the lease.
Mortgage Deed - The document incorporating the conditions of a loan secured on a property.
Mortgage Indemnity Guarantee (MIG) - An insurance policy taken out by a lender against any loss caused by a mortgage default. MIG is typically required for loans with an LTV of 90% or higher. Also known as Mortgage Indemnity Fee and as Mortgage Indemnity Premium.
Net Present Value (NPV) - A method used in evaluating investments whereby the net present value of all cash outflows (such as the cost of the investment) and cash inflows (returns) is calculated using a given discount rate, usually a Required Rate of Return. A positive NPV means the investment is acceptable.
Nominal Interest Rate - An interest rate which has not been adjusted for inflation.
Open Market Value (OMV) - The estimated amount for which a property should sell assuming there is a willing buyer and a willing seller involved in an arms-length transaction. This assumes there has been adequate marketing and that parties had each acted knowledgably, prudently, and without compulsion.
Peppercorn Rent - A term used to denote a trivial amount of ground rent.
Probate - The official process of proving the validity of a will. In many cases part of the estate will involve a property, which might need to be valued for Inheritance Tax purposes. A probate valuation is generally a negotiated value with the district valuer representing the Inland Revenue. A sale cannot proceed to exchange of contracts until probate has been granted.
Real Estate Investment Trusts (REITs) - These are pooled funds allowing investors to buy into property without actually owning buildings. The funds can invest in commercial and residential property and do not pay tax on rental incomes or capital gains on properties within the fund, but the investor pays tax on dividends and unit appreciation.
Repossession - The legal procedure by which a defaulting borrower is deprived of their interest in the mortgaged property, typically involving the forced sale of the property at public auction.
Searches - A term used to denote the physical and written procedure for determining any adverse effects in or on a particular property, whether already in effect or planned to take place.
Self Invested Personal Pensions (SIPPs) - SIPPs allow complete control over pension savings and where they are invested. SIPPs may be used to invest in stocks and shares, government securities, unit trusts and investment trusts. SIPPs may also be used for commercial property, insurance company funds, traded endowment policies, deposit accounts with banks and building societies, and National Savings products. They may, under certain circumstances, be used for residential property investment.
Senior Debt - Debt that has priority of claim ahead of other financial obligations.
Sitting Tenant - To occupy the property as a tenant, and have legal rights without a lease. Any sale would be subject to any rights of a tenant who has occupation. A property with a sitting tenant can often have a much reduced asking price.
Superior Lease or Head Lease - This is the lease that the landlord holds. This is often the case in a property where the owner has the leasehold interest, but another individual owns the freehold. There is then this lease under which the Property owner is responsible for the obligations/covenants. When a property is let the tenant renting also has to comply with any of these obligations - e.g. not to hang out washing on a balcony etc.
Tenancy at Will or Licence - After contracts are exchanged a purchaser may seek to take possession of a property before financial and legal completion. This could be to carry out repairs and decorations or to take up residence early. This can often be organised and a licence arranged between both parties' solicitors. The purchaser paying an appropriate rate of interest on the balance of the outstanding monies (i.e. purchase price less deposit paid) instead of rental.
Tenure - Refers to whether a property is freehold or leasehold.
Tracker - A type of mortgage whereby any changes in the rate of interest charged follow exactly (`track`) another, specified, interest rate or index. Typically a tracker mortgage will track the Bank of England base rate.
Underpayment - Situation where repayments are reduced so that the mortgage is not repaid by the end of the agreed term. Some mortgages (flexible mortgages) allow for a specified level of underpayment.
Unencumbered - A property that has no loans or borrowings secured on it
Vacant Possession - The previous occupants must vacate the property before you move in, including any tenants.
Writ of Summons - Mode of commencing legal proceedings.
Valuation - A simple survey carried out on a property for the benefit of the lender. Because the report is carried out for the lender, if the surveyor makes a mistake you have no legal claim against him.
Yield - Refers to the financial income from an investment. The income yield on an investment is the annual dividend or interest payment, multiplied by 100 and divided by the market price.
Yield – Net - Rate of return on an investment after subtracting all expenses, such as commissions, costs of purchase, and taxes.
Yield – Gross - The return on an investment before deducting costs or losses incurred in procuring and managing the investment
The above is to be used as a guide only and not to be used to make or influence any decisions, we hold no liability should the above be used as leverage or cause loss to the person using it.