Investing in property comes with a little bit of a learning curve. It’s not quite rocket science; success relies on instinct and experience just as much as it does technical knowledge. But at the same time, there are quite a few concepts that successful investors will need to wrap their heads around – and this means mastering a treasure-trove of arcane words and phrases. To avoid becoming ensnared in a bog of incomprehensible jargon, a little bit of preparation is warranted.
Fortunately, we’re here to lend a hand. Let’s run through some of the more common words and phrases you might encounter during your adventures in investment. You might refer to this glossary when you encounter some new and unusual term, or you might make an effort to commit them to memory.
Annual Percentage Rate refers to the interest charged by a lender. It refers to the proportion of the amount borrowed that will be charged each year in interest. So, if there’s £200,000 outstanding on your 1% APR mortgage, an annual interest payment of £2,000 will be required.
Basic Variable Mortgage Rate
This is a sort of rate that adjusts according to the economic climate. Most mortgage lenders will provide rates of this sort – though it’s worth considering that there are multiple sorts of variable mortgage rate. Some are designed to track the Bank of England’s base rate; others are arbitrarily set by the lender.
If you’re buying a property, you’ll want to first be sure that it’s in good condition. A building survey is a fairly forensic investigation of the building, which will uncover any irregularities. This step isn’t optional; it’s a legal requirement. If you’re buying an older property, or one that’s had alterations made, then the process is especially useful.
This is a sort of mortgage designed for landlords looking to rent their property out rather than live in it. Mortgages of this sort are inherently risky, and so you’ll need to meet certain criteria before being granted one: having your own home and a good credit record is a good place to start.
The ‘chain’ refers to a succession of buyers and sellers, each of whose purchases are all reliant on the last. If one is trying to buy a property, then they might first need to sell their existing one. This means that problems and delays will have a ripple effect further up the chain, resulting in niggling problems whose origin you can’t quite trace. In some cases, a sale falling through can cause the entire chain to collapse. A property advertised as having ‘no upward chain’ is not reliant upon any other sales being made, and so tends to be comparatively free of frustration.
If you own the freehold of a property, it means that you own both the building itself and the land it’s standing on.
Flipping is the practice of buying a property and then immediately selling it for a profit. If you’ve got an eye for a bargain, this is a great way to go. If you want to know more about flipping property, be sure to read our Flipping Property: Who, What, and How guide.
This is a person who agrees to step in and cover any repayments, should the borrower be unable to. Some loans might require such a person to go through.
A joint venture is where the buyer pools their resources with another party in order to secure more capital. It comes in the form of a contract between the parties involved.
If you hold the lease of a property, it effectively means that you’re renting it from the landlord. A lease is often extremely long-term – lasting anywhere from 99 to 999 years.
Rent-to-buy is a system whereby the government will subsidise a tenant’s rent, with the eventual aim that they’ll be able to transition from renting to home-ownership. There are certain restrictions on who can apply for the scheme. If your household earns less than £60,000, and you’ve a good credit history, you might be considered – though there are a few more obscure conditions that must also be met.
This is the point at which a mortgage has been paid off.
Refurbishment involves replacing the interior of a property, either in part or in whole, in order to improve its value before a resale.
If you switch lenders, or take out a second mortgage out to go alongside the first one, then you’re said to have ‘remortgaged’. This might be desirable if your equity increases, thanks to a rise in the value of your property.
This term describes the procedure used to find fault with the property. A search will identify any problems with things like boundaries and planning. It’s an act of conveyancing, and can either be performed by your solicitor or a conveyancing officer.
This peculiarly-named tax is paid on any property whose value exceeds £125,000. It’s so-named because, historically, it required an actual stamp to be affixed to the front of the instrument.
Subject to Contract
This phrase, often bandied about by estate agents, means that a statement depends on the contract being signed. If you haven’t yet signed the contract, then you’ll still be free to pull out of the sale.
An ‘unadopted road’ is one which the local authority isn’t required to maintain. This means that you’ll probably need to pay to keep the road in good shape yourself – so be sure to factor in the possible cost before committing to a purchase.
A variable basic rate is one that changes over time according to some agreed-upon outside factor, typically the base rate set by the Bank of England.
The person selling the property is known as the vendor.
As you might have gathered, property investment requires doing a lot of quite specific and complex things, and thus discussing it requires using quite specific language – which can represent a stumbling block. Once you’ve mastered all of the terminology, you’ll be better positioned to thrive in the industry – but until you do, it’s a good idea to keep a list like this one to hand, so that you’ll be able to clear things up whenever you encounter an unfamiliar
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