What Is A Covenant? – A Glossary Of Estate Agents Terms
A GLOSSARY OF COMMON ESTATE AGENTS JARGON
KNOW YOUR COVENANTS FROM YOUR GAZUMPING
Are you confused with some of the jargon? Don’t worry, we have explanations for the most commonly used jargon.
Every industry has its own set of jargon, which can be confusing if you are new to it. Estate Agents are no different, which is why we have listed some of the most common terms, and given you an explanation of what they mean.
Advance – money provided by a lender to a buyer to secure a property. Agreement in principle – also known as a decision in principle, mortgage in principle, approval in principle or mortgage promise. An estimate of how much money you can borrow from a money lender for a mortgage. Based on your income and credit history, this agreement can be used to help you get a mortgage or to have an offer accepted on a property. Annual Percentage Rate (APR) – the true total cost of a loan, including arrangement fees, interest charges and other costs. This is shown as a percentage and is useful when comparing mortgage offers. APRC – Annual Percentage Rate of Charge, the total rate of interest you’ll pay for a mortgage’s entire duration. This considers all the different rates your mortgage will be subject to and acts as an easy way of comparing mortgages. Lower rates usually mean a better deal. Arrangement fee – a fee paid to a lender for the admin of arranging a loan. Asking price – property price set by the seller as what they hope to receive an offer for. Assign – transfer the right to a property from one person to another.
Base rate – the interest rate that is determined by the Bank of England. Variable mortgage rates are often adjusted depending on fluctuations in this rate. Bridging loan – a temporary short-term loan which enables a buyer to purchase a property before selling their existing property. Building survey – a report into the physical state of the property, this is also sometimes referred to as a full structural survey. Buildings insurance – insurance policy that covers any structural damage to a property. This is often required by lenders. Buyer – that’s you!
Completion date – when the transaction is complete and ownership of the property passes from the seller to the buyer.
Chain – a chain is formed when several property sales and purchases are inter-dependent. A chain can be complicated but a good estate agent will be able to help keep it moving. Commission – fee due to an estate agent for services related to the selling of a property. This is typically a percentage of the property price and is usually paid upon completion. Commonhold – an alternative system to leasehold usually in place in buildings or estates of multiple occupancy (such as a block of flats), whereby you own the freehold to your property, and all property owners collectively help manage the upkeep of the building or estate (such as all chipping in to repair part of the building). Completion – when the legal ownership of the property changes from the seller to the buyer. At this point, all the funds and paperwork will have been distributed, and the keys will be handed over. Completion date – when the transaction is complete and ownership of the property passes from the seller to the buyer. Normally, the vendor’s solicitor will ask the estate agent to release the keys to the buyer at this time. Conditions of sale – the terms within a sale contract governing the duties of the seller and the rights of the buyer. Contents insurance – insurance covering any movable contents inside a property against theft or accidental damage. Contract – document that outlines the terms between the seller and buyer and binds both parties to the transaction, also called an agreement. Conveyancer – a solicitor who specialises in the transferring of homeownership. They are required if you are using a mortgage and will cover every legal aspect of the home purchasing process. Conveyancing – legal process involving transferring ownership of a property. A solicitor or licensed conveyancer takes care of the legal aspects of buying or selling. Council Tax – a tax levied by local councils to cover the cost of providing local services and amenities. A property is given a council tax band, and this determines how much the owner will pay. Covenant – a covenant is a provision or promise that has been written into a deed which may affect or limit the use of the property or land. There are two different types of covenant, positive and restrictive. A positive covenant is an obligation which requires some form of action (such as maintain a fence or wall), whereas a restrictive covenant limits or prevents the use of land in a specified way.
Deeds – Documents that show who owns the title of a property or land, along with any burdens (obligations/responsibilities) on the property e.g. what you can/cannot alter on the property, any access and rights of way on the property. Usually held by the mortgage lender until you pay off your property, where it can then be held by you or your solicitor. Deposit – a set amount of money which acts to secure a purchase, usually at a low percentage of the full price. Paying this usually means you are committed to going through with a purchase and will pay the rest of the amount off later.
Easement – an easement is the right of one landowner to make use of another nearby piece of land for the benefit of their own land, for example, a private right of way. Energy Performance Certificate (EPC) – this certificate provides an energy performance rating for a property and also recommendations on how to improve its energy efficiency. Ratings vary from A for most efficient to G for least efficient. The seller must provide this to the buyer. ERC – Early Repayment Charge, a charge given when you overpay on a mortgage or transfer to a different mortgage product during a specified amount of time (known as the early repayment charge period). The charge covers potential lost interest to your lender. Exchange of contracts – the point where both parties are committed to the transaction; both the buyer and seller can walk away at any point before the contracts have been exchanged. Execution-only – when a consumer chooses a mortgage themselves, rather than taking advice from a lender or mortgage advisor.
First Time Buyer – an individual who has never bought or owned a property before. Renting a property does not count as buying or owning. Fixed-rate mortgage – with a fixed-rate mortgage, you pay a set rate of interest on your mortgage for a fixed period, so you know exactly what you’ll be paying each month. Fixtures and fittings – fixtures include items that have become part of a building or land and are included in a sale, while fittings are not attached and are not included in a sale unless agreed otherwise. A seller should complete a fixture and fittings form to confirm what is included in the sale. Freehold – a type of occupancy which means you own the building and the land it sits on.
Gazumping – when a seller has accepted an offer on a property, but later the seller accepts a higher offer from a different party. Gazundering – when a buyer has reduced the agreed offer directly before the official exchange of contracts. Ground rent – a fee paid annually to a freeholder in order to occupy the land a property stands on.
Instruction – engagement by a seller for an estate agent to market their property. Interest rates – a charge added to the amount you pay back on a loan, written as a percentage. For example: a mortgage with a 4% interest rate would mean you have to pay back the full amount of the loan plus 4% of its value.
Land & Building Transaction Tax – the tax you pay when purchasing land or property in Scotland. The current threshold is £145,000 ** for residential properties and £150,000 ** for non-residential land and properties, however the rate payable is subject to the total purchase cost. **Correct at time of publishing** Land Registry – the government body responsible for records of land and property ownership in England and Wales. There are set fees that need to be paid to Land Registry to register property ownership. Land Transaction Tax – land tax replaced Stamp Duty in Wales from April 2018. Buyers looking to purchase in Wales will be charged land transaction tax on any residential purchase above £180,000 ** and above £150,000 ** for non-residential purchases, however, the price you pay varies depending on the overall cost of the property. **Correct at time of publishing** Leasehold – this is where you own the property but not the land it is built on – for example, you may own a flat, but not the building it sits in. LTV – Loan-to-Value – the ratio of how much your loan (usually a mortgage) will cover the price of your property, written as a percentage. For example: a mortgage that offers 60% LTV will cover 60% of the property’s price.
Mortgage valuation – a report that assesses the value of a property and helps determine the maximum amount that should be loaned. This is carried out by a surveyor on behalf of the lender, and the buyer typically has to pay a fee for this. Mortgage – a loan of money used to pay for a property, which you pay back over time with interest to whoever lent you the money. The property itself is considered collateral, which means if you don’t keep up with your repayments, it can be seized and sold to make back the money.
New Build – usually this refers to a property that hasn’t been purchased or lived in yet and has recently been built. However different banks and lenders have different definitions, which can vary from whether the property has been lived in, but not bought, whether it has been converted or refurbished, or whether it has been finished within a certain amount of years.
Offer – a bid made by a prospective buyer on how much they would be willing to pay for a property. In England and Wales, an offer is not legally binding and can be changed or withdrawn at any point prior to exchanging contracts. Offset mortgage – a mortgage that allows you to pay less interest if you link it to a bank account with savings in it. Open market value – the expected price of a property with a willing seller and buyer.
Repayment mortgage – a mortgage with monthly repayments covering the amount borrowed and the accrued interest.
Sale agreed – when the seller has agreed to an offer made verbally.
Sale agreed – when the seller has agreed to an offer made verbally. Sale contract – a legal agreement between an estate agent and seller. Searches – these are checks done by the buyer’s conveyancer or solicitor on anything that could impact the current or future property value. Seller – someone who is selling their property, usually through an estate agent. Service charge – a charge for the upkeep of a leasehold property, also called maintenance charge. Snagging – snagging is where the developer of new build properties touches up paintwork, adjusts appliances and fixes any other faults within the property. A snagging survey is usually completed prior to the buyer moving in, in order to spot minor cosmetic issues and check the quality of workmanship. Solicitor – someone who deals professionally with legal matters, also known as a lawyer, and holds a recognised qualification or degree in law. Stamp Duty Land Tax – tax paid to the government when buying land or property. Rates vary depending on the purchase price, and first-time buyers purchasing a property at or below £500,000 are eligible for relief. Subject to contract – when an offer has been accepted and there is a provisional, non-legally binding agreement in place before exchanging contracts. Survey – a report on the condition of a property undertaken by a qualified surveyor. There are three main types, including a mortgage valuation, home-buyers report and full structural survey. Surveyor – in the context of property, they are a qualified expert who specialises in examining and highlighting any potential issues or benefits within a property, that may affect its price or need fixing in future. SVR: Standard Variable Rate – the rate your lender charges after your initial mortgage deal finishes. This rate is set by your lender, not by the Bank of England, and your lender can change the rate at any time.
Tenure – the type of land ownership, whether freehold or leasehold. Title – the legal right of owning a property or land. Tracker mortgage – this is a mortgage with an interest rate linked to the Bank of England rate or another base rate. The interest rate will go up and down depending on this rate, irrespective of the mortgage lender.
Under offer – if a property is under offer it means that the seller has accepted an offer from the buyer but the contracts have not yet been exchanged.
Variable-rate mortgage – with a variable rate mortgage, the interest rate can change at any time. They are partly influenced by the Bank of England base rate but other factors come into play as well. The interest rate you pay on a variable rate mortgage can change even without base rate moving and similarly base rate might come down but your mortgage rate stays the same. Vendor – the seller or person selling a property.
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