Key terms when buying a property – a glossary

Here are some of the terms you will come across most often when buying a property in the UK, with an explanation of each.

Ownership and finance

• MortgageA loan used to finance the purchase of a property. The property itself secures the loan, and the borrower (the buyer) repays it in monthly instalments that usually cover both capital and interest.
• FreeholdIf you buy a property freehold, you own it and the land it stands on outright. You have full rights to the property and are responsible for it.
• LeaseholdWith a leasehold you buy the right to the property for a set period, usually under a long lease, but you don't own the land it stands on. The land belongs to the freeholder, who charges for the lease.
• Ground rentFor leasehold properties, a regular payment the leaseholder makes to the freeholder for the use of the land the property stands on.
• Service chargeAnother cost of leasehold properties. It's what the leaseholder pays the freeholder or managing agent to maintain and manage shared areas and services.
• EquityThe difference between the property's market value and the amount still owed on the mortgage. If the property's value rises, so does your equity, which gives you more financial flexibility.
• Agreement in Principle (AIP)Also known as a Decision in Principle (DIP). A statement from a lender showing how much it might be willing to lend you, based on basic financial information. It helps show sellers you are a serious buyer.
• Stamp Duty Land Tax (SDLT)A tax you pay when you buy a property above a certain price. How much you pay depends on the purchase price and whether you are a first-time buyer or buying an additional property.

Checking the property

• ValuationA professional assessment of the property's value by a surveyor, often required by lenders to make sure the property is worth the amount being lent.
• SurveyBefore you buy, it's important to check the property's condition. Different types of survey (such as a HomeBuyer Report or a building survey) help spot any structural or maintenance problems.
• SearchesAs part of conveyancing, several searches are carried out, such as the Local Authority Search, Environmental Search and Water and Drainage Search, to uncover any problems or obligations linked to the property.
• Title deedsThe legal documents that prove ownership of a property. They contain important information about the property's boundaries, rights of way and any restrictions on its use.
• CovenantA legally binding obligation or restriction written into the title deeds. It can limit certain uses of or changes to the property, to keep up particular standards on an estate.

The purchase step by step

• Estate agentA professional who acts as the go-between for buyer and seller. Estate agents market properties, show them to potential buyers and help with negotiations.
• ConveyancingThe legal process of transferring ownership of a property from the seller to the buyer. It covers the searches, checks and paperwork that make sure the transfer is correct and legal.
• ChainA chain forms when several property purchases depend on each other. For example, the seller of the home you want may be buying another property, whose seller is buying another, and so on. A chain can cause delays, because every sale has to be ready before the whole chain can move.
• Exchange of contractsThe point at which buyer and seller both sign the contract and it becomes legally binding. This is when you pay the deposit (usually 5–10% of the price).
• CompletionThe final stage of the purchase, when ownership passes to you and you get the keys. All payments are made and the paperwork is finished at this point.
• Completion dateThe agreed date on which the purchase completes and ownership passes to the buyer. It's usually a few weeks after exchange.
• RetentionSometimes a lender holds back part of the mortgage money until certain repairs or improvements to the property are done.
• Redemption statementIf you sell a property with a mortgage still outstanding, the redemption statement sets out the remaining balance and any early repayment charges to be paid when the sale completes.

When things go wrong

• GazumpingWhen a seller accepts a higher offer from another buyer after already accepting a lower one, but before contracts are exchanged. It can be a frustrating and disappointing experience for the first buyer.
• GazunderingThe opposite of gazumping: the buyer lowers their offer just before exchange, pressuring the seller to accept a lower price.

In short

Understanding these terms will help you find your way through buying a property in the UK and make informed decisions along the way. Every purchase has its own quirks, so it's worth getting professional advice and support throughout.

infoThink carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.