Glossary

Glossary for The Home Hub

• Agreement in Principle (AIP): A statement from a lender that indicates how much they may be willing to lend based on a preliminary assessment of your finances. It’s not a formal mortgage offer but can help you when making offers on a property.
• Break Clause: A clause in a rental agreement that allows either the tenant or landlord to end the tenancy before the fixed term ends, typically with a notice period of two months.
• Capital Gains Tax: A tax on the profit from the sale of assets, such as property that is not your primary residence. It is calculated based on the difference between the sale price and the purchase price.
• Conveyancing: The legal process of transferring property ownership from seller to buyer, usually handled by a solicitor or licensed conveyancer.
• Council Tax: A local tax paid by homeowners and tenants in the UK based on the property’s valuation band, used to fund local services like waste collection and policing.
• Credit Score: A numerical representation of your creditworthiness, based on your credit history. A high score can improve your chances of securing favourable mortgage terms.
• Deposit (Home Purchase): The upfront payment required to buy a property, typically between 5-20% of the property’s value.
• Deposit (Rental): A security deposit paid by tenants, usually equal to one month’s rent, to cover potential damages or unpaid rent. It is protected by a government-approved deposit scheme.
• Early Repayment Charges (ERCs): Fees charged by lenders if a borrower repays a mortgage or makes overpayments beyond a set limit within a fixed-rate period.
• Energy Performance Certificate (EPC): A certificate rating a property’s energy efficiency, required by law in the UK when selling or renting a property. EPCs are valid for ten years.
• Equity: The value of a homeowner’s property minus any outstanding mortgage balance. Equity can grow as the mortgage is repaid and property values increase.
• Fixed-Rate Mortgage: A mortgage with a set interest rate for a fixed period, ensuring predictable monthly payments. Common fixed periods are two, five, or ten years.
• Freehold: A type of property ownership where the owner owns both the property and the land it’s on indefinitely.
• Gazumping: When a seller accepts a higher offer from a different buyer after initially accepting an offer. This practice is legal in the UK but can be frustrating for buyers.
• Gazundering: When a buyer lowers their offer just before exchanging contracts, often used as a negotiation tactic in a buyer’s market.
• Guarantor: A person, usually a family member or close friend, who agrees to cover rent or mortgage payments if the tenant or borrower is unable to do so.
• Help to Buy: A government scheme that assists first-time buyers with an equity loan towards the purchase of a new-build property, requiring only a 5% deposit.
• Holding Deposit: A deposit (capped at one week’s rent) paid to secure a rental property while the application is processed. It may be non-refundable if the applicant backs out.
• Interest-Only Mortgage: A type of mortgage where monthly payments only cover the interest on the loan, leaving the original loan balance to be repaid at the end of the term.
• Inventory: A detailed list of the property’s contents and their condition at the start of a tenancy. This document is used to compare the property’s condition at the end of the lease, helping to determine any deductions from the deposit.
• Joint Tenants: A type of joint property ownership where each owner has equal rights to the property. If one owner dies, their share automatically passes to the surviving owner(s).
• Leasehold: A type of property ownership where the owner owns the property for a specified period but not the land it’s on. Leaseholders may need to pay ground rent and service charges to the freeholder.
• Lifetime ISA (LISA): A savings account for first-time buyers that allows contributions up to £4,000 annually, with a 25% government bonus. Funds can be used for a house deposit or retirement.
• Mortgage Term: The number of years over which a mortgage is repaid. Common terms range from 25 to 30 years, with shorter terms resulting in higher monthly payments but less total interest paid.
• Offset Mortgage: A mortgage linked to a savings account where the balance offsets the mortgage debt, reducing the interest charged.
• Remortgage: Switching your mortgage to a new lender or product, often to secure a better rate or release equity from the property.
• Rent Increase: An adjustment to the rent amount, usually allowed at the end of a fixed-term tenancy or according to the tenancy agreement terms. The increase must be fair and in line with local market rates.
• Stamp Duty Land Tax (SDLT): A tax on property purchases over a certain price threshold, with reduced rates or exemptions for first-time buyers. SDLT varies depending on property value and buyer status.
• Standard Variable Rate (SVR): The default interest rate set by a lender after an initial fixed or discounted period. It fluctuates based on the lender’s decisions and market conditions.
• Survey: An inspection carried out to assess the condition of a property before purchase. Common types include the Condition Report, HomeBuyer’s Report, and Building Survey, depending on property age and condition.
• Tenants in Common: A type of joint property ownership where each owner has a defined share. Unlike joint tenants, each owner’s share does not automatically pass to the other owner(s) upon death and can be included in a will.
• Tenancy Agreement: A legal contract between a landlord and tenant outlining the rights and responsibilities of each party, including rent amount, payment schedule, and maintenance terms.
• Variable-Rate Mortgage: A mortgage with an interest rate that fluctuates based on market conditions or the lender’s base rate, affecting monthly payments.
• Void Period: A period when a rental property is unoccupied and not generating rental income, often due to tenant turnover or a lack of demand.