Your quick guide to home buying jargon


Your home may be repossessed if you do not keep up repayments on your mortgage.

Last updated 04/08/2020 to update government Stamp Duty Land Tax changes, no other figures revised since article published on 29 July 2019.

If you’ve never bought a home before then you can expect to come across words and phrases that everyone from estate agents to mortgage brokers use but you may not be absolutely sure what they mean. Often property professionals can just assume that you know what they’re talking about but would you know your LTV from your APRC, especially when you’ve never come across them before?

But don’t worry. With the help of our in-house mortgage advisers, we’ll explain these, and many more phrases you’re likely to come across on your home buying journey, from the advisers search to the day you move in. It’s just one of the ways that Skipton Building Society can help on your property purchase adventure, including offering a range of mortgages for first time buyers.

Setting a budget

The very first stage of getting on the property ladder should be to get an idea of just how much you may be able to borrow. So here are some of the phrases you may come across when you’re trying to get this information.


Graham's quote

During an Affordability check we will check the amount you can borrow looking at your income and we want to see if you could still enjoy your lifestyle and hobbies as well as making your new mortgage payment!

Graham - Mortgage Adviser

Affordability check

This is an approximate estimate of how much you could borrow based on salary and you can carry it out using an online tool like this calculator. This is very much a ball-park figure as several other factors will also dictate how much a lender is likely to offer you.

Decision in Principle (DIP)

Sometimes also known as an Agreement or Mortgage in Principle, it gives an indication as to how much you could borrow and many estate agents will insist on seeing evidence as an assurance before they'll put your offer to the seller. To help make the process of getting a Skipton DIP as simple as we can, we make it easy to request one online.

Credit check

When you make an application for a mortgage all lenders will carry out a credit check to see how you have managed your finances in the past. The companies that provide these checks will give you a credit score. Generally the higher this number is, the more likely that you’ll be accepted for credit but some lenders can have different scoring systems.


Chris's quote

A hard footprint will enable other lenders/financial institutions to see how many searches are on your credit file. If there are a lot, this could have an impact on your ability to get a mortgage

Chris - Mortgage Adviser

Soft and hard footprints

Each time your credit is checked it leaves a so-called footprint. These are split into the soft and hard footprints. The former is only visible to you. Lenders won’t see it and it will not affect your credit score. A hard footprint leaves a record of the search on your credit file and having many of these over a limited period can negatively affect your credit score, which may make it harder for you to obtain credit in the future.

Searching for your first home

When looking for a home, property listings can often read as a host of other words or phrases that you may not be familiar with at all. Here are just a few key ones which are the most often misunderstood.

Freehold and leasehold property

In a freehold property you own both the property itself and the land that it stands on and there is no time limit to your period of ownership. This generally relates to houses. In a leasehold property you own the building but not the land and a lease defines the fixed period during which you can live in it. Possession of the property will be subject to the payment of an annual ground rent. It can be any period up to 999 years but for properties in which there are fewer than 70 years left on the lease it may be hard to get a mortgage. Flats tend to be leasehold properties.

Ground rent and service charges

These are additional charges that, as a leaseholder, you may have to pay the owner of the freehold or for the upkeep of common areas. Ground rent is rent that you pay to the landlord or freeholder, usually on an annual basis. Service charge is the payment is the payment for all services, such as maintenance of gardens and communal areas of the property, which you as the leaseholder will use but you are not specifically responsible for.

Listed buildings

These are buildings that have been classified as being of architectural or historic interest. If you own a listed building it may be harder to carry out alterations which change its character.

Finding a mortgage

With so many options available it could be a good idea to come to Skipton Building Society. After all, we’ve been helping people to own their own homes since 1853 so we could help you find a mortgage from our range that is suitable for you. We’ll also explain everything in plain English.


Umera's quote

If you get your mortgage from Skipton, you will have a dedicated mortgage adviser who will be here to help you through every stage of your mortgage journey. They will understand your income, outgoings, future plans and essentially what you are looking to achieve from your mortgage. Our qualified mortgage advisers then make a recommendation for a Skipton mortgage which is best suited for you

Umera - Mortgage Adviser

Fixed, variable and tracker rate mortgages

Lenders like us offer different kinds of mortgage. As the name suggests, a fixed rate mortgage has a rate that stays the same for a specified period of time.

A variable rate mortgage has a rate that can rise and fall at any time. The rate is varied at the discretion of the lender and is not directly linked to an independent external rate such as the Bank of England Base Rate.

A tracker rate mortgage is directly linked to changes of an independent external index such as the Bank of England Base Rate, rising and falling by a set amount.

Bank of England Base Rate

This is the interest rate which is set on a monthly basis by the Monetary Policy Committee (MPC) of the Bank of England and is the rate that it charges for its borrowing. If the rate changes, it could impact variable or tracker (if used as an index) interest rates.

APRC

Annual Percentage Rate of Charge is the annual total that your mortgage will cost you and includes all interest, fees and charges that may be applied expressed as a percentage. You can use this to compare different mortgages.

LTV

The Loan To Value is the proportion of a mortgage compared with a property’s value. It’s expressed as a percentage so an £85,000 loan on a £100,000 property would be an LTV of 85%. The LTV you have affects the mortgage rates available to you.

Guarantor

In some circumstances a lender will ask for a guarantor. This is usually a family member who undertakes to pay your monthly mortgage repayments if you aren’t able to meet the commitment yourself. We don't currently offer guarantor mortgages at Skipton.

Buying your property

So you’ve found your dream home and arranged your mortgage. Now it’s time to complete the legal process of buying a house – and that’s going to mean more jargon. Here are some of the key phrases you need to know.


Chris's quote

This is normally a solicitor who acts on behalf of the buyer and lender in the legal process of buying a property. Fees are charged by them, for which the buyer is responsible

Chris - Mortgage Adviser

Conveyancer

This is an individual who specialises in the legal process of buying and selling a property.

Stamp Duty Land Tax

(Applicable only in England and Northen Ireland)

This is a tax that’s payable to the government when you buy a property. The amount you pay depends on the purchase price of the property but for first time buyers there is currently no stamp duty land tax payable on properties costing up to £300,000. If you are buying with someone else, both people have to be first time buyers for this to apply.

Please note, on 8 July 2020 the government temporarily increased the stamp duty threshold to £500,000 for property sales in England and Northern Ireland, until 31 March 2021. This means anybody completing on a property costing up to £500,000 will not pay any stamp duty, and any properties above this amount will only be taxed on their value above that amount.

Different land taxes apply in Scotland and Wales - visit our Costs of Buying House article to find out more.

Exchange of Contracts

This is the moment when you exchange the legal agreements to buy or sell a property. At this point you are legally bound to go ahead with the purchase or sale. In Scotland this stage is known as Conclusion of Missives.

Completion

Your lender releases the mortgage money to the conveyancer who transfers it to the seller’s representative and it’s time to move in. This is the day when you finally achieve your aim of being a property owner.

The steps in the house buying process in Scotland are slightly different to England and Wales. Download our guide to house buying in Scotland (PDF) and guide to house buying in England and Wales (PDF) to find out more.

Of course, we've only had space to explain some of the many phrases that you may come across. The important thing to remember is that if there's ever something that's not clear it always pays to ask.

And, when it comes to applying for your first mortgage, the team at Skipton Building Society will be here for you.


Get in touch

Speak to our team online via webchat, or call us if you've got any questions.


Your home may be repossessed if you do not keep up repayments on your mortgage.

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