A to Z Glossary

APR (annual percentage rate)
Sometimes called APRC (annual percentage rate of change), reflects the total cost of your mortgage borrowing for a year. It includes the interest rate you will pay each year to borrow money, as well as any other lender fees and charges. This is a standard calculation in the mortgage industry and allows mortgages from all lenders to be compared.

Base rate
The benchmark interest rate set by the central bank.

Broker
A mortgage broker helps borrowers connect with lenders and seeks out the best lender for the borrower's financial situation and interest-rate needs.

Buy-to-let
A property that is purchased specifically to let (or rent) out. A buy-to-let mortgage is a mortgage loan specifically designed for this purpose.

Capital gains tax (CGT)
The tax on the profit from the sale of your property. The CGT rate will depend on your income and whether you are a multiple homeowner, but you don't usually pay CGT when you sell your main home.

Chain
When a group of buyers and sellers are connected. If you want to buy a second-hand house, the seller may need to wait until they sell their home. Likewise, you may have a home to sell before you can purchase your next one.

Conveyancing or conveyancer
Also referred to as solicitor, handles the legal aspects of purchasing a property including contracts and property searches.

County Court Judgement (CCJ)
Indicates an inability to repay debt, potentially impacting mortgage applications.

 

Debt to income ratio
Your monthly debt payments divided by your gross monthly income.

 

Deeds
Legal documents proving ownership of a property.

 

Deposit Unlock
A scheme offered by some new home builders which could allow you to purchase a newly built home with a deposit between 5%-9.9% (usually 10% or more is required).

Developer or home builder or housebuilder
A company or individual who builds or renovates properties.

 

DU (Desk underwriting) Or ‘Desktop Underwriting’
Refers to an automated system which helps mortgage lenders to complete credit assessments and check their level of financial risk when lending you money.

Early Repayment Charge (ERC)
A charge imposed by the lender if you pay off or overpay your mortgage before its term ends.

Energy Performance Certificate (EPC)
An EPC, or Energy Performance Certificate, shows how energy-efficient a property is. A higher rating means the energy bills for that house or flat are likely to be lower. By law, an EPC is needed whenever a property is built, sold or rented.

Equity
Equity is the current market value of your home, less any outstanding mortgage balance. It’s an important figure because your equity is the money you will receive if you sell your home. People often use equity as the deposit for their next home purchase or to help them retire. Equity rises as you make repayments on the mortgage and will rise and fall as your property increases and decreases in value.

Exchanging contracts or missives
When both parties solicitors’ swap and sign the contracts. This is the point where you as the buyer will be asked to put down your deposit. Once the contracts are signed, you will be legally bound to buy the home. In Scotland this is called conclusion of missives.

Fixed rate mortgage
A type of mortgage whereby the interest rate and monthly repayments on the mortgage remain fixed for a specified period of time (commonly between 2 to 5 years).

Freehold
If you own the freehold to your home, it means that you own the property/building and the land it sits on.

Indemnity insurance
Indemnity insurance is sometimes needed if a property defect or special condition is revealed through a survey or searches. The buyer or seller can take out an indemnity insurance policy which will protect them from any legal action, or loss of value, that may arise in the future from the defect.

It's not mandatory to get indemnity insurance when buying a house, and it's typically only needed in situations where a solicitor recommends that a policy be bought.

Indemnity insurance is rarely required on a new build home.

Interest only mortgage
Only the interest on the loan is paid monthly with the outstanding balance paid at the end of the term. 

Land and buildings transaction tax (LBTT)
A tax payable in Scotland when you purchase your home. The LBTT you pay will vary depending on the purchase price, the purchase date and whether you are a first-time buyer or multiple homeowner. You can find out more information here.

Land Registry
Officially records the ownership of property and land in England and Wales. Land Registry documents are the official evidence of proof of ownership and are used by conveyancers to prepare the contract and transfer deed when transferring land from one owner to another.

Leasehold
If your property is leasehold, you usually own the property but not the land it sits on. You only own a leasehold property for a fixed period of time. You’ll have a legal agreement with the landlord (sometimes known as the ‘freeholder’) called a ‘lease’. This tells you how many years you’ll own the property. You may also have to pay ground rent to the freeholder while you own the property. Ownership of the property returns to the landlord or freeholder when the lease comes to an end.

Flats can often be leasehold as multiple properties share the same land, but some houses can be leasehold too.

Loan to Value (LTV)
What you borrow for your mortgage versus how much you pay as a deposit.

Market value
The estimated worth of a property based on current market conditions.

Mortgage illustration
A document that outlines key features, terms and costs of a mortgage.

 

Mortgage in principle or offer in principle
This is the first step to getting a mortgage. It is sometimes known as a Mortgage in Principle, Mortgage in Promise, Decision in Principle (DIP) or Agreement in Principle (AIP). It is a certificate from a mortgage lender to say that they agree in principle to lend you a certain amount of money, based on information you’ve shared with them. A formal approval and terms would come next, as a mortgage offer.

 

Mortgage offer
Formal approval and terms from a lender for a specific mortgage application.

 

Mortgage term
The length of time you have to repay your mortgage.

 

Negative equity
When the value of your property is less than your outstanding mortgage value.

 

Off-plan
Buying off-plan means before the property is built and with only the plans available for inspection. Usually a view home or showhome is available for the same or similar product.

 

Porting your mortgage
Transferring your current mortgage deal – including the rate and terms - to a different property when you move house.

PX or Part Exchange
Similar to part exchanging a car, this is an incentive offered by some new home builders and could enable you to trade in your current property as part payment towards the cost of a new build property. Try Cala’s PX Calculator to see how much you could save.

Remortgage
Switching your existing mortgage to a new lender or product for different terms.

 

Shared ownership
A scheme available if you cannot afford all of the deposit and mortgage payments for a home that meets your needs. You buy a share of the property and pay rent to on the rest. Normally, you buy a share between 10% and 75% of the home’s full market value. Shared ownership homes are offered by housing associations, local councils, and other organisations. Eligibility criteria applies.

Snagging list
A checklist of issues to be addressed before finalising a new build property purchase.

Stamp duty
A tax payable in England and Wales based on the value of your home that is paid to the government. The stamp duty you pay will vary depending on the purchase price, the purchase date and whether you are a first-time buyer or multiple homeowner.

Stamp duty
Tax paid on a property purchase above a certain price threshold.

 

Standard Variable Rate (SVR)
The default interest rate set by the lender after your mortgage term ends.

Stock plots
Most people tend to purchase a new build home either off-plan* or during construction, which has many benefits. A ‘stock plot’ is a new build home which is already complete and ready to move in to in as little as 4 weeks.

*before the property is built and with only the plans available for inspection.

Survey
Inspecting a property’s condition to identify any potential issues/structural problems.

Tracker rate
Interest on the mortgage follows a specific benchmark plus a set percentage.

 

Variable mortgage or variable rate
A type of mortgage whereby your interest rate and monthly repayments can go up or down based on market conditions (usually following the rate set by the Bank of England).

 

Terms and conditions: Your home may be repossessed if you do not keep up repayments on your mortgage. This article is intended as information only and does not constitute legal or financial advice. Cala recommends that you get advice from a professional advisor before you commit to buying any property.