First-Time Buyer Jargon Explained - A No-Nonsense Guide

Understanding Property Chains

No Onward Chain

If a property is advertised as having no onward chain, it means the seller doesn't need to buy another home before selling. This usually leads to a quicker and smoother transaction.

Example:

• Sophie is a first-time buyer. She finds a flat being sold by an elderly couple who are moving into a retirement home. Because they're not buying another house, the sale has no onward chain, making it faster and less complicated.

Property in a Chain

The opposite of no onward chain is when the seller needs to buy another property before completing the sale. This means they are part of a chain, which can cause delays if any link in the chain breaks.

Example:

• Ben finds a house he loves, but the seller is waiting to buy another house before they can move. That seller, in turn, is waiting for their seller to complete. This forms a chain; if one person pulls out, it can affect everyone.

Property Ownership Types

Freehold

Owning a freehold property means you own both the building and the land it sits on, with no time limit.

Example:

• Chris buys a detached house with a garden. The property is freehold, meaning he owns it outright with no ongoing payments (except for bills and taxes).

Leasehold

A leasehold property means you own the property for a set period but not the land it's built on. You may have to pay ground rent and service charges.

Example:

• Emma buys a flat in a block with a 125-year lease. She must pay £200 per year in ground rent and £1,000 per year in service charges for maintenance of shared areas.

Share of Freehold

In some cases, leaseholders jointly own the freehold of the building, meaning they have more control over service charges and maintenance.

Example:

• James buys a flat in a converted Victorian house. He and the other three flat owners own a share of the freehold, allowing them to manage the property's upkeep.

Mortgage and Finance Terms

Loan-to-Value (LTV)

The loan-to-value (LTV) ratio is the percentage of the property's price that you borrow compared to your deposit.

Example:

• Sarah buys a house for £200,000 with a £20,000 deposit. Her mortgage covers the remaining £180,000, giving her a 90% LTV.

Mortgage Agreement in Principle (AIP)

A document from a lender stating how much they will likely lend you based on an initial check.

Example:

• Before house hunting, Jack gets a Mortgage Agreement in Principle for £250,000, helping him make confident offers.

Fixed-Rate Mortgage

A mortgage where the interest rate stays the same for a period (e.g., 2, 5, or 10 years).

Example:

• Alice takes a five-year fixed-rate mortgage at 4%. Her monthly payments remain unchanged, protecting her from interest rate rises.

Variable-Rate Mortgage

A mortgage where interest rates fluctuate, meaning your monthly payments can go up or down.

Example:

• David chooses a tracker mortgage that follows the Bank of England base rate. If the base rate rises, his payments increase.

Legal and Survey Terms

Conveyancing

The legal process of transferring property ownership from the seller to the buyer.

Example:

• Jenny hires a solicitor to handle the conveyancing, ensuring all legal documents are correct before she buys her home.

Exchange of Contracts

The point at which the sale becomes legally binding. If you pull out after this, you lose your deposit.

Example:

• Tom exchanges contracts on his new flat. The seller can no longer accept other offers, and both sides must proceed to completion.

Gazumping

When a seller accepts a higher offer after already agreeing to sell to another buyer.

Example:

• Maria's offer on the house is accepted, but before contracts are exchanged, another buyer offers more, and the seller accepts. Maria has been gazumped.

Gazundering

When a buyer lowers their offer just before the exchange of contracts, often putting the seller in a difficult position.

Example:

• Just before exchanging contracts, Adam tells the seller he will only pay £10,000 less than agreed. This is called gazundering.

Other Important Terms

Survey

A professional property inspection to check for structural problems. Types include:

• Mortgage Valuation – A basic check for the lender.
• Homebuyer’s Report – Mid-level survey identifying issues.
• Full Structural Survey – A detailed inspection, recommended for older properties.

Energy Performance Certificate (EPC)

A rating of a property's energy efficiency, from A (best) to G (worst).

Example:

• Mike buys a house with an EPC rating of D. He plans to improve insulation to raise energy efficiency.

Understanding these terms can make your home-buying journey much smoother. Whether you're looking for a chain-free property, navigating mortgages, or dealing with solicitors, knowing the lingo gives you the upper hand.