If you’ve never bought a house before, you’ll likely come across terms you’ve never heard before. There’s a lot of industry jargon and most people won’t stop to explain it, unless you ask! 

That’s why we created this handy guide, walking you through some key terms you’re likely to encounter during a property purchase. From arranging viewings to exchanging contracts and everything in between, we’ve got you covered. 

Getting Financially Prepared For Your Home Purchase

AIP (Agreement in Principle)

Sometimes referred to as a DIP (Decision in Principle) or MIP (Mortgage in Principle). 

A statement from a mortgage lender saying they could lend you a certain amount, based on basic checks. Although it’s not a guarantee of how much you can borrow, we always recommend getting one before viewing any properties, as it shows sellers you’re serious and ready to move.  

An AIP can be obtained online via a bank or lender but we strongly recommend having a conversation with a mortgage broker to obtain one, to ensure you receive tailored, impartial advice. 

Some lenders will only provide mortgages to you if you meet specific criteria – things like proof of where you live, poor credit history, or self-employment may impact the amount you can borrow and the lenders who will agree to give you a mortgage. 

Don’t have an Agreement In Principle yet?  

Book a free consultation call with Ernest Grant Mortgages.

Arrangement Fee 

A fee charged by your mortgage lender to set up the mortgage. Don’t have the cash upfront? The arrangement fee can often be added to your loan to spread the cost but this means you’ll pay interest on the fee. 

Base Rate 

Set by the Bank of England, the base rate affects how much interest lenders charge on mortgages. This impacts how much you’ll pay back over the course of your mortgage. 

Payments on a fixed rate mortgage will stay the same for an agreed period, regardless of whether the base rate changes. The rate you pay on a tracker mortgage will fluctuate as it follows the base rate.  

To understand the different types of mortgages available and get advice based on your personal circumstances, we recommend booking a call with a mortgage broker. 

Deposit 

The lump sum you pay upfront when purchasing a property – typically between 5% and 20% of the total purchase price. The deposit is normally paid when you exchange contracts. 

Equity 

The part of the property you own outright (ie your deposit and any mortgage you’ve already repaid). It grows as your property goes up in value or you pay off more of your loan. 

LTV (Loan-to-Value) 

The percentage of the property’s value you’re borrowing. 

Example: If a house costs £200,000 and you put down a 10% deposit of £20,000, your LTV is 90%. The lower the LTV, the better the mortgage rate and the less interest you’ll pay over your mortgage term. 

Mortgage Term 

How long you’ll take to repay your mortgage. 

Stamp Duty (SDLT) 

A tax you pay when buying property. First-time buyers in England are exempt from paying SDLT on a property priced up to £300,000. Between £300,001 and £500,000 a 5% SDLT is payable. For non first-time buyers, the threshold at which you start paying SDLT is £125,000. 

Different rules apply for non-UK residents, corporate bodies, shared ownership properties and more. Make sure you understand exactly how much you’ll need to pay before making an offer on a property. 

Your mortgage broker should be able to help you calculate this. 

Getting Legally Prepared For Your Home Purchase

Conveyancing 

The legal process of transferring ownership of a property. Usually handled by a conveyancing solicitor. 

As a buyer or seller, it’s recommended to have a conveyancer to handle the transaction and ensure everything is legally sound. 

We recommend getting legally prepared and finding a solicitor or conveyancer as early as possible, as this can reduce the time it takes from making an offer on a property to completing the transaction.   

Don’t have a solicitor lined up? Get an estimate from the team at Jephson Legal.

Deeds 

Legal documents that record the ownership of a property and any accompanying land. Digital copies are available from the HM Land Registry for a small fee but you’ll typically get a copy from your solicitor after the purchase has been completed and registered. 

When you sell a property, you’ll need these in place to prove ownership. They are also useful if you encounter any disputes over your property’s boundaries. 

Finding a Property 

Buy-to-Let 

Buying a property specifically to rent out. If you plan to rent out your property, you typically need to pay a higher deposit and get a different type of mortgage. 

Freehold 

You own the property and the land it sits on. No landlord, no ground rent. Most house purchases would be freehold but not all, so please check this with your estate agent before making an offer. 

Leasehold 

You own the property for a set period (eg 99 or 125 years), but not the land. You’ll usually pay ground rent and service charges to the freeholder (the person who owns the land). If there are fewer than 70 years left on the lease, it can impact your ability to get a mortgage.  

Most flats or shared ownership properties are leasehold but not all. Make sure you understand the implications of buying a leasehold or freehold property before making a purchase. 

Market Appraisal 

When an estate agent values a property and suggests a guide price. It’s an estimate of a property’s sale potential, taking into consideration average selling prices of similar properties in the area. 

A market appraisal is not legally binding and isn’t as in-depth as a valuation carried out by a qualified surveyor. 

Probate Property 

A probate property refers to property that’s part of the estate of a deceased person. The process for buying or selling a probate property is a little different from a typical property transaction and may take several months. 

Sold Subject to Contract (SSTC) 

When an offer has been accepted on a property but the sale is not yet legally binding. 

Vendor 

The person selling the property.