Investing in Property Buy-to-Let Glossary

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

Annual Percentage Rate of charge (APR)- the total cost of a loan, including all costs (interest rates, legal fees, etc.)

Advance - a mortgage loan

Abstract Of Title - a summary of the documents which prove your ownership of the property

Assurance (Life) - a life insurance policy linked with a mortgage or loan. A percentage of premium goes toward insuring your life and will pay off loan in event of death. The rest is invested and will pay a lump sum at the end of the term

Auction - public sale where property is sold to highest bidder

B

Balance outstanding - the amount of loan owed at any given time

Broker (Mortgage) - a middleman who finds customers requiring a mortgage a suitable mortgage lender able to provide it. A broker typically executes all undertakings within the loan process from start to finish

Building Society Questionnaire (BSQ) - a form completed by bank, building society or other lender, providing details of an applicant's mortgage account

Buildings insurance - insurance against the cost of building work required on a property resulting from structural damage

Building regulations - the health and safety requirements that any new construction must observe

Building society - a mutual institution owned by its investors and borrowers that provides a range of savings and mortgage-lending schemes

Buy-to-Let scheme - a scheme which allows buying a property with a view purely to let the premises for investment purposes


C

Capped Mortgage - agreed for a fixed period of time with an upper limit on the interest rate. If the standard interest rate is lower than the fixed upper limit the lower rate is charged, when the standard variable rate is higher the agreed rate is charged

Cashback - a type of loan whereby the borrower is given back an agreed amount of money

Chain - a chain of buyers and sellers all relying on each others property sale going through in order to complete their purchase

Charge - a legal term often used to describe a mortgage

Commission - the fee charged for services provided

Completion - a formal completing of a contract of sale - the money transaction is complete and the buyer becomes the legal owner of the property

Contents insurance - insurance against damage / theft of all moveable contents

Contract - The document that sets out the terms of sale between the seller and the buyer of the property

Contractor - a person or a firm that carries out jobs or services under a contract

Conveyancing - the legal work involved in transfering the ownership of land/property

Conveyancer - a person who carries out the legal work involved in buying/selling a property

Council Tax Charge - a tax paid to the local councils to cover the cost of local amenities and services


D

Deeds - see Title Deeds

Deposit - sum of money which the buyer puts down to secure the mortgage loan after exchange of contracts

Discharge - paying off a mortgage

Discounted Rate - it gives a reduction of the Standard Variable Rate (SVR) for a period

Down payment - see Deposit


E

Early redemption - the completion of loan payments before term

Endowment - a life assurance policy producing a lump sum to pay off an interest only mortgage

Equity - the difference between the value of a property and the total of mortgage owed

Estate Agent - an intermediary between sellers and buyers

Exchange of Contracts - the time when the home buyer signs the contract and becomes obliged to complete the purchase within a specific period of time

Ex-local authority property - a property formerly owned by the council


F

Freehold - a situation in which you (the freeholder) own the land or property absolutely and it is yours perpetually

Fixed Rate - the rate is fixed for a period of time and the payments will be over at the end of this period

Fixtures and fittings - all non-structural items included in the purchase of a property

Flexible mortgage - a mortgage giving you the benefit to repay it in line with your circumstances


G

Gazumping - a tactic whereby the seller demands more money, or accepts a higher offer, just before exchange of contracts

Gazundering - a tactic whereby the buyer offers less than the agreed price just before exchange of contracts

Ground Rent - the annual fee which a leaseholder pays to a freeholder


H

Home Buyer's Report - a surveyor's report containing more detail than the valuation

Home Contents Insurance - a policy insuring household contents against damage/theft

Housing Association - a non-profit organisation, which lets you buy a percentage of the property and pay rent on the rest


I

Interest Only Mortgage - a mortgage in which the repayments cover only the interest of the loan, the capital is paid by another repayment vehicle e.g. an endowment policy


J

Joint Mortgage - mortgage shared jointly between two people with the agreement that if one dies, the other automatically inherits the other's share


K

K - symbol for 'thousands' used in denoting house prices, for example £135K



L

Land Certificate - a Land Registry certificate proving ownership of a property

Land Registry - an organisation that keeps a record of land ownership

Leasehold - the land /property is owned for a fixed period of time

Lender - a company that provides the finance to satisfy a loan or mortgage request

Listed Building - property listed as being of architectural or historic interest, which cannot be altered without local government consent

Loan (Secured) - the equity of a property is a guarantee against not paying the loan back

Loan (Unsecured) - the financial position of the applicant is such that a guarantee for the loan is not required

Local Authority Search - an enquiry made by a buyer's solicitor to the local council regarding any issues or future development issues which may affect the property or immediate area

LTV - Loan to Value; a loan or a mortgage that is a percentage of the value of the property or the price being paid for the property


M

Maintenance Charge - the cost of repairing communal parts (external or/and internal) of a building

MCRI - Mortgage Coe Register of Intermediaries. This register is maintained by the Council of Mortgage Lenders and consists of the names of the mortgage brokers subscribed to the Mortgage Code

MGI - Mortage Guarantee Insurance. An insurance policy needed in case the amount owned on a mortgage and the value of the property do not match

MIG - Mortgage Indemnity Guarantee

MIRAS - Mortgage Interest Relief at Source. Government scheme providing tax relief on mortgage interest payments. Expired April 2000

Mortgagee - The organisation or person that lends you the money on a mortgage, usually a building society

Mortgage - a loan to purchase a property and the property is used as a security for paying the loan back

Mortgagor - the borrower who takes out the mortgage


N

Negative Equity - the shortfall between the value of the property and the amount owed on a mortgage


O

Offer - sum of money that the lender offers to pay for a property

Offer of Advance - known also as a mortgage offer. A document that the applicant must sign, detailing the terms and conditions of the mortgage loan

Office Copies - copies of the documents for property ownership and mortgage held by the Land Registry

OIRO - abbreviation of 'offers in the region of'

[Ombudsman] - independent professional bodies who investigate complaints on behalf of customers against (e.g. estate agents, solicitors, insurance companies)
ONO - abbreviation of 'or nearest offer'


P

Penalty - costs that may be incurred if the borrower repays the loan too early or switches between lenders

Planning permission - the permission granted by the local planning authority (usually the local council) for any new building or engineering operations or change of use of a building if it meets the public's interest

Preliminary enquiries - questions which the seller must answer before the exchange of contracts

Private sale - sale of a property without the use of an estate agent as intermediary

Processing - the administration and paperwork related to a loan from the time the application is received to completion of the whole process


Q

Quotation- statement of the current price of stock; borrowers are advised to 'shop around' different mortgage lenders and insurance companies before making a commitment


R

Rate (Capped) - The interest rate cannot rise or fall for an agreed period of time

Rate (Variable) - the interest rate may rise or fall

Redemption Penalties - should the borrower pay off a loan before the agreed termination date the lender may charge the borrower a fee. This applies to to Fixed, Discounted or Capped rate mortgages

Registered Land - land for which the ownership is registered at the Land Registry

Remortgage - the borrower takes out the loan to replace another loan secured on the same property

Repayment Mortgage - monthly interest combined with payment towards the capital sum borrowed

RTB - legislation that gives council tenants the Right to Buy their homes

Retention - holding back part of a mortgage loan until repairs to the property are satisfactorily completed


S

Scheme for Maximum Advances (SMA) - see Indemnity premium

Sealing Fee - a fee charged when the mortgage is paid off

Search - enquiries about the property, raised by a solicitor with the local authority

Second Charge - mortgage ranking behind a first mortgage

Second Mortgages - company or building society who have registered a mortgage behind that of the first mortgages

Service Charge - maintenance charge paid for communal building services

Sole Agency - the choice of a single estate agent to act on the seller's behalf, incurring a lower fee than a multi-agency sale

Solicitor - a lawyer who deals with the sale/purchase of land or property

Stamp Duty - a tax paid on property purchases; it applies if the property costs more than £119,999

Subject to Contract - words to indicate that an agreement is not yet legally binding

Survey (Structural Survey) - inspection of property for structural damage, carried out by a Structural engineer or Chartered Building Surveyors

Surveyor - person who conducts the survey


T

Tenancy - the right to live in a property, subject to agreement

Tenant - a person who pays rent to the landlord for the use of a room, house etc

Tenants in Common - tenants who own unequal shares of a property and are free to dispose of their share in any way they wish

Tenure - length of lease

Term - period of a loan or mortgage (months, years)

Title - the legal ownership of a property or land

Title Deeds - documents relevant to the previous and present ownership of a property

Total Amount Payable - the total cost of repaying a mortgage

Total Return - rental income plus capital growth

Transfer Deeds - the Land Registry document that transfers legal ownership from seller to buyer


U

Under offer - a term describing a situation in which the seller has accepted the buyer's

V

Vacant - unoccupied property

Valuation - an inspection of the property for mortgage purposes. Also the report that the lender requires from the surveyor

Variable Interest Rate - rate of interest payment that fluctuates over time with general interest rates

Vendor - the buyer of land/property

Viewing - appointment for potential purchaser/tenant to visit property

Void Ratio - the difference between what an investor expects to receive and what they actually receive (often caused by tenants not paying their rent)

W

Wood rot - a major cause of damage to timber floors, which should be discovered during the survey

X

Y

Yield - the percentage of the property's value achieved in rent

Z