Mortgage Jargon Buster

jargonYou will need a new vocabulary if you are going to keep up with solicitors and estate agents. This is the most commonly used jargon you will come across when buying.

 

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Capital Gains Tax (CGT)

Tax that is payable on profits from the sale of certain assets such as property. Any profit from the sale of your main residence is likely to be exempt from CGT, but you may pay CGT if you sell a second home or a home that you have been letting.

Completion

The day when the seller receives the money from the sale and the legal ownership passes to the buyer.

Contract

Sets out the terms on which the property is sold, including the price. The buyer and seller each sign a copy and these are exchanged to form a binding contract.

Early Repayment Charge

If you repay your mortgage during the period of, for example, a fixed or discounted rate, or switch mortgage providers when you have one of these rates, your lender may charge an Early Repayment Charge. This can be substantial; you should read and understand the terms and conditions before you sign up for one of these rates.

Exchange

The contracts signed by the buyer and the seller are physically exchanged and a date is set for completion. On exchange, the buyer pays the deposit, usually around 10 per cent of the price.

Freehold

The ownership of a property and the land it stands on.

Gazumping

The buyer's nightmare. After you have agreed a price for the property, the seller accepts a higher offer from another buyer.

Ground rent

If you own a leasehold property you will normally have to pay a small annual ground rent to a freeholder.

Land Registry

The government body that records land ownership in England and Wales and transfers ownership from one person to another.

Loan-to-Value (LTV)

The amount of a mortgage as a percentage of the lower of the purchase price or bank's valuation. For example, if your mortgage is £100,000, the purchase value is £149,000 and the bank's valuation is £150,000, the Loan-to-Value is £100,000 divided by £149,000, then multiplied by 100="67.1" per cent.

Title deeds

These show who owns the property and give general details of any other legal matters, such as restrictions in use of the property and rights of way.

 

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