Jargon buster

We’ve explained some of the words and phrases you might come across during the house buying process

APR
APR stands for the Annual Percentage Rate of charge. The APR takes into account not just the interest on the loan but also other charges you have to pay, for example, any product fee. The APR can also be used to compare the costs of different loans.

Building survey
The survey a qualified surveyor carries out to spot faults and potential problems in the property you’re buying.

Completion
When you become the legal owner of your new property.

Contract
The legally binding agreement between you and the seller in relation to the property.

Credit scoring
A search of your borrowing record – often called your credit history. A lender will check your credit history before deciding whether to lend you money.

Disbursements
Charges like Stamp Duty Land Tax and Land Registry/Land Register of Scotland fees. You give these to the conveyancer or solicitor to pay on your behalf.

Endowment
An investment plan that you usually pay into each month and that pays out a lump sum at the end of a set period. Usually used for interest-only mortgages.

Equity
The total value of your property minus the amount of the mortgage. So if your house is worth £120,000 and you have a mortgage of £100,000, you have equity of £20,000.

Exchange of contracts
This is when contracts are exchanged with the person selling the property and you’re committed to buying the property.

Financial Ombudsman Service
The official independent complaints scheme which works to sort out complaints between consumers and businesses which provide financial services.

Freehold (England and Wales)/Absolute Ownership (Scotland)
When you own a property and the land it stands on.

Higher lending charge
If you borrow a high percentage of the value of the property, you may be charged a fee to reflect the increased risk to the lender.

Interest
The money you’re charged for borrowing.

Key Facts Illustration (KFI)
Important document which details information about your loan.

Land Registry/Land Register of Scotland fee
A fee you pay to register your ownership of the property.

Lease/Leasehold
Buying a leasehold on a property gives the owner the right to occupy the property for a fixed period of time, for example 99 years.

Loan
The money you borrow and pay interest on.

Loan-to-value (LTV)
The ratio between the size of the loan you are looking for and the mortgage lender’s valuation of the property.

Legal/Conveyancing fees
Fees you pay to a solicitor/conveyancer for their services.

Lump-sum reduction
A lump sum you can pay on top of what you pay each month to reduce your mortgage.

Mortgage deed
The mortgage deed is a document which gives the lender the legal rights and interest in a property.

Mortgage term
The length of time you’ll be paying back your mortgage.

Offer of loan
An offer by a mortgage lender to provide you with a mortgage.

Redemption
Paying off your mortgage in full.

Repayments
The amount you have to pay back to the lender (usually monthly) when you borrow the money.

Security
When you sign a mortgage deed your property becomes the security for any debt which you owe under the mortgage. This means that if you don’t keep up with your obligations, such as making regular repayments, the lender becomes entitled to exercise their rights to try and recover the debt. This can even include repossession of the property.

Stamp Duty Land Tax
A government tax you pay if you buy a property over a certain value.

Valuation
A check of your property to confirm the value and suitability as security for the mortgage.