As if buying a new home isn’t complicated enough, it almost seems like there’s a whole new language that you need to learn to get through the process. From gazumping to disbursements, it can feel like people are just making up words specifically designed to confuse you. Luckily we’ve put together a list of some of the most common terms used in the conveyancing process, which you can use as your very own conveyancing jargon buster.
When there’s a chain in your move, this means that there’s a series of sales and purchases. As each transaction’s linked, a break in the chain can cause problems to others. This is why a lot of people prefer to find a buyer or seller that has no onward chain, perfect if you’re a first-time buyer or purchasing a new build home for example.
One of the most exciting days you’ll ever have, your completion date’s the day where funds are transferred and keys change hands. Once the money’s been exchanged between conveyancers, you’ve completed your sale or purchase and it’s time to move in or out for good. If you’re involved in a chain, all parties need to agree on completion dates, which is one of the reasons why chains can be complicated.
Also known as an agreement for sale, your contract details the terms and conditions of the sale and purchase. This includes the price you’ve agreed and the completion date. When your conveyancer exchanges contracts with your buyer or seller, it becomes legally binding and you’re obliged to complete the transaction.
Conveyancing is the legal process which transfers the ownership of a property from one person to another. Your conveyancer will help you fill out all the legal forms required to process your sale or purchase, liaise with your mortgage lender and the other party’s conveyancer, and complete tasks such as obtaining and checking the searches and transferring funds.
Commonly, the amount of money needed on top of your mortgage to buy the house is known as the deposit, however in conveyancing terms, the deposit under the contract will be 10% of the purchase price. Once you’ve exchanged contracts on a deal, you risk losing all of your deposit if you pull out. If you’re buying and selling at the same time, your conveyancer will organise the transfer of your deposit from the funds you’re receiving for selling your current property.
Disbursements are expenses that your conveyancer pays for as part of your move. This can include things like the costs of searches, and fees for registering details with the Land Registry. Usually you will need to pay an up-front fee to your conveyancer, which covers the disbursements that are going to crop up.
The equity in your home’s the amount that you actually own, as opposed to owing money to your mortgage lender. So if your property’s worth £200,000 and you have £75,000 outstanding on the mortgage, you own £125,000 of the equity in your home.
When you buy a freehold property, this means that you have complete ownership of the land and everything built on it. This effectively lasts forever, until you sell the property. Subject to legal and planning conditions, you have the right to do what you want to your land and home.
Despite the lovely ring this word has, it’s not a nice thing if it happens to you. Gazumping is where a seller accepts your initial offer, then goes on to accept a higher offer from someone else. As well as the disappointment, you can incur costs if you’re gazumped, which is why it’s important to stipulate that a property’s taken off the market as a condition of your offer.
The Land Registry is a government department which maintains a record of properties in England and Wales. The register holds details such as when a property was last sold and for how much, keeping a record of titles on freehold and leasehold land and properties.
If the property you buy is leasehold, this means that the land your home’s built on is owned by someone else. So effectively, you’re buying the right to own a property temporarily, because another party ultimately owns the land. You’ll likely have to pay ground rent to this person, while service charges can be payable if for example you buy a leasehold property in an apartment block.
This is a written contract which shows that you agree to a lender’s terms and conditions. It also grants your mortgage provider a right in the property you’re buying, as although your house will be your own, your lender can repossess and sell it if you don’t keep up your mortgage repayments. This is why it’s very important to be sure that you can afford the monthly payments, taking into account any potential rises in the rate.
Mortgage Agreement in Principle
Also known as pre-approval, securing a mortgage in principle from a lender means that you can get ahead of the game when it comes to house hunting. You’ll know your budget, show sellers that you’re a serious buyer, and be able to convert it into a concrete mortgage offer when you have an offer accepted on a property.
A formal mortgage offer from a lender will set out all the terms and conditions of your prospective mortgage. This includes details of the size of the loan to the mortgage product you’re going for and your monthly repayments. You conveyancer will receive a copy of the offer which they can go through and check the fine print on your behalf.
If you want to amend or cancel your mortgage, or if you decide to switch provider, you’ll require a redemption statement. Your existing lender will detail exactly how much of your mortgage is outstanding, and outline any early repayment charges or penalties. These are known as redemption fees.
As part of the conveyancing process, your conveyancer will carry out searches on the property you’re buying. Searches highlight any potential issues which may affect your desire to purchase the property, and can include things like a local authority search and water and drainage search.
Stamp Duty Land Tax is a government tax that’s charged on properties with a sale price over £125,000. As the price of your property moves up through the bands, it attracts higher rates of tax:
• Up to £125,000 – 0%
• £125,001 to £250,000 – 2%
• £250,001 to £925,000 – 5%
• £925,001 to £1,500,000 – 10%
• Over £1,500,000 – 12%
If you are a first-time buyer and have never owned land or property anywhere in the world, you may be able to claim SDLT relief which means that the first £300,000 won’t attract any tax, as long as you are buying for less than £500,000.
In order to check your property’s priced correctly, your mortgage provider will carry out a basic valuation. It’s usually worthwhile to carry out an additional survey which focuses on the state of the building you’re buying. This can safeguard you from missing any potential problems with the structural integrity of the property, which could lead to costly repairs further down the line. The Royal Institute of Chartered Surveyors offer three levels of survey, starting with the basic Home Condition Report. The HomeBuyer Report is more in depth, while the Building Survey provides the most detail on your new home.
When you have the title on a property, this recognises that you are the legal owner. The document proves your ownership, and while in the past your mortgage lender would’ve looked after the title in the form of original Deeds, these days the Land Registry stores it electronically.
This is the document which officially finalises a sale, transferring the title of the property from the seller to the buyer. You usually sign this at the same time as your contract documents, and it’ll be sent to the Land Registry so the property’s title can be transferred into the buyer’s name.