If you’re thinking about buying a home, you’ve likely encountered a fair bit of jargon. From “completion dates” to “LTV ratios,” the home-buying process can sometimes feel like it’s full of cryptic language. To help you make sense of it all, here’s a straightforward glossary of common real estate terms that every new buyer should know.
1. Offer
An offer is the amount of money a potential buyer is willing to pay for a property. It can be conditional or unconditional, depending on whether it’s dependent on certain conditions, like a survey or finance approval.
2. Fixed-Price vs. Offers Over
- Fixed-Price: The seller is asking for a set price, and if your offer meets that price, you’ll likely secure the property.
- Offers Over: This means the seller is expecting offers above the stated price, which may lead to a higher final sale amount.
3. Closing Date
When there are multiple interested buyers, a closing date might be set. This is the deadline for all potential buyers to submit their best offers, and the seller will review them all to choose the most attractive one.
4. Home Report
In Scotland, a Home Report is required for most properties for sale. It includes a property survey, an energy report, and a property questionnaire. This helps buyers understand the property’s condition and value before making an offer.
5. Conveyancing
Conveyancing is the legal process of transferring property ownership from the seller to the buyer. This involves a solicitor who handles legal paperwork, title deeds, and searches to ensure the property is suitable for purchase.
6. Mortgage Agreement in Principle (AIP)
Also called a Decision in Principle, this is an estimate from a lender stating the amount they’re likely to lend you based on initial information. It’s not a final loan approval but gives you a rough budget when house hunting.
7. Loan-to-Value Ratio (LTV)
The LTV ratio is a percentage that compares your loan amount to the property’s value. For example, if you have a £20,000 deposit on a £100,000 property, your LTV is 80%. A lower LTV generally qualifies you for better mortgage rates.
8. Deposit
The deposit is the amount you pay upfront when buying a property, typically a percentage of the property’s value (often between 5% and 20%). This helps secure your mortgage and show your commitment to the purchase.
9. Completion Date
The completion date is the agreed-upon date when the final property payment is made, and you receive the keys. It’s when you officially become the owner and can move into your new home.
10. Stamp Duty (LBTT in Scotland)
In Scotland, Land and Buildings Transaction Tax (LBTT) is payable when buying property. It’s calculated based on the purchase price, with different thresholds for first-time buyers and varying rates depending on the price bracket.
11. Survey
A survey is a property inspection, typically done by a qualified surveyor, to assess the property’s condition. The Home Report includes a basic survey, but buyers may opt for additional surveys, such as a full structural survey, especially for older properties.
12. Title Deeds
Title deeds are legal documents proving ownership of a property. During conveyancing, a solicitor ensures the title deeds are clear of any legal issues, such as outstanding debts or restrictions.
13. Freehold vs. Leasehold
- Freehold: Owning the property and the land it sits on.
- Leasehold: Owning the property for a set period, but not the land it’s on. Leasehold arrangements are less common in Scotland compared to the rest of the UK.
14. Gazumping
Gazumping happens when a seller accepts a higher offer from another buyer after initially accepting yours. Although this is legal, it can be disappointing and disruptive. Scotland’s property laws aim to minimise gazumping by encouraging formal agreements early in the process.
15. Surveyor
A surveyor assesses a property’s value and structural condition, which helps buyers make informed decisions. They can advise on repairs or any potential future issues based on the building’s current state.
16. Solicitor
A solicitor handles all legal matters in the property purchase, including the conveyancing process. In Scotland, a solicitor is required for most transactions to ensure legal compliance.
17. Fixed-Rate Mortgage
A fixed-rate mortgage has a stable interest rate for a set period, typically two to five years. This means your monthly payments stay the same during that time, providing consistency in budgeting.
18. Variable-Rate Mortgage
With a variable-rate mortgage, the interest rate can change based on market conditions, affecting your monthly payments. Types include tracker and discount mortgages, which fluctuate with the base rate or lender’s standard variable rate.
19. Chain
In property terms, a chain refers to the sequence of buyers and sellers linked together because each purchase depends on another sale. Chains can sometimes cause delays if one part of the sequence encounters issues.
20. Equity
Equity is the difference between your property’s current market value and the remaining mortgage balance. If your home’s value increases, so does your equity, which can be used for future financial planning.
Final Thoughts
Buying a home doesn’t have to feel overwhelming or confusing. Understanding these common real estate terms will help you navigate the process with confidence. As you dive into the journey of buying your dream home, remember that estate agents, solicitors, and mortgage advisors are there to help explain anything you’re unsure about.
Did we miss any terms? Let us know in the comments if there’s a word or phrase you’d like explained, and we’ll add it to our glossary. Happy house hunting!
