Property Glossary

A lender's written indication that they would, in principle, lend you a specified amount. Not a guarantee but strengthens your offer. Also called a Mortgage in Principle (MIP) or Decision in Principle (DIP). Does not affect your credit score if done via a soft search.

The total cost of a mortgage expressed as an annual percentage, including interest and fees. Used to compare mortgages on a like-for-like basis across the full term.

The Bank of England's benchmark interest rate, set by the Monetary Policy Committee (MPC). Tracker mortgages move directly with the base rate. Fixed-rate mortgages are unaffected during the fixed period.

Short-term finance used to bridge a gap — for example, if you need to complete on a purchase before your existing property has sold. Typically higher interest rates and arrangement fees.

A tax on profit made when selling an asset. If you sell a property that is not your main home (e.g. a buy-to-let or second property), you may owe CGT on the gain. The annual exempt amount is £3,000 (2024/25).

A series of linked property transactions where each depends on the others completing simultaneously. A chain-free transaction (e.g. a first-time buyer purchasing from someone moving into rented accommodation) is simpler and less likely to fall through.

The final stage of a property transaction when the remaining purchase money is transferred and ownership legally passes to the buyer. Completion day is the day you get your keys.

The legal process of transferring property ownership from seller to buyer. Carried out by a solicitor or licensed conveyancer. Typically takes 8–16 weeks and includes searches, enquiries, exchange of contracts, and completion.

A legal obligation attached to land or property. A restrictive covenant limits what the owner can do (e.g. no commercial use). A positive covenant requires the owner to do something (e.g. maintain a shared fence).

A legal document that records the transfer of ownership of property. The Title Deeds were historically physical documents; most properties in England and Wales are now registered at HM Land Registry.

The upfront payment a buyer contributes when purchasing property. Expressed as a percentage of the purchase price. A larger deposit means a lower Loan-to-Value (LTV) and usually a better mortgage rate.

A report rating a property's energy efficiency from A (most efficient) to G (least efficient). Required by law for most property sales and lettings. The rating affects heating costs and mortgage eligibility for some green products.

The difference between a property's current market value and the outstanding mortgage balance. Equity builds as you repay the mortgage and/or as the property value rises. Negative equity occurs when the mortgage exceeds the property value.

The moment both buyer and seller sign and legally commit to the sale. After exchange, neither party can withdraw without financial penalty. The completion date is agreed at exchange.

Ownership of the property and the land it stands on outright, with no time limit. Contrast with leasehold. Most houses are freehold; most flats are leasehold.

A part of a freehold property that extends over or under another freehold property. Common in terraced houses. Can cause complications with mortgages and insurance.

When a seller accepts a higher offer from another buyer after already agreeing to sell to you — before exchange of contracts. Legal in England and Wales (not Scotland). Protection: exchange contracts quickly.

The opposite of gazumping — when a buyer reduces their offer at the last minute, typically just before exchange. The seller either accepts or risks the sale falling through.

An annual charge paid by a leaseholder to the freeholder. Following the Leasehold Reform (Ground Rent) Act 2022, ground rent on new leases in England and Wales is capped at a peppercorn (effectively zero).

A now-closed UK government scheme that provided an equity loan to help buyers purchase new-build homes with a smaller deposit. The equity loan scheme closed March 2023. The Mortgage Guarantee Scheme and Shared Ownership remain active.

A mortgage where monthly payments cover only the interest, not the capital. The full loan amount remains outstanding at the end of the term and must be repaid (e.g. by selling the property). Common for buy-to-let.

HM Land Registry — the government organisation that registers and records ownership of land and property in England and Wales. You can download a title register for £3 at gov.uk.

Ownership of a property for a fixed period (the lease term), after which ownership reverts to the freeholder. Common for flats. Lease length matters: under 80 years can affect mortgageability and value.

The mortgage amount as a percentage of the property value. A £180,000 mortgage on a £225,000 property = 80% LTV. Lower LTV = lower risk for lenders = better interest rates.

See Agreement in Principle (AIP).

The legal document you sign committing to the mortgage, creating a charge over the property in the lender's favour. Registered at the Land Registry.

When the outstanding mortgage balance exceeds the current property value. Makes selling difficult as the proceeds would not cover the mortgage. More common after house price falls.

A formal bid to purchase a property at a stated price, typically made through the platform or directly. Not legally binding until exchange of contracts in England and Wales.

When a developer or agent accepts your existing property as full or part payment towards a new-build purchase. Useful for avoiding chains but you typically receive less than market value.

See Early Repayment Charge.

A mortgage where monthly payments cover both interest and capital, so the loan is fully repaid by the end of the term. Contrast with interest-only mortgage.

An annual charge paid by leaseholders for the upkeep of communal areas and the building. Can vary significantly year to year. Check 3 years of service charge accounts before purchasing a leasehold.

A government-backed part-buy, part-rent scheme. You buy a share (typically 25–75%) and pay rent on the remainder to a housing association. You can staircase (buy more shares) over time.

A tax on property purchases in England and Northern Ireland. Rates are banded and apply only to the portion of price within each band. Scotland uses LBTT; Wales uses LTT. Use our calculator for an instant figure.

A phrase indicating an agreement is not yet legally binding. An offer accepted "subject to contract" means either party can still withdraw without penalty until exchange of contracts.

A professional assessment of a property's condition. Types: RICS Level 1 (Condition Report), Level 2 (HomeBuyer Report), Level 3 (Building Survey — most thorough). Recommended before exchange.

The official Land Registry record of who owns a property, any mortgage registered against it, and covenants or restrictions. Downloadable for £3 from gov.uk.

Adding or removing someone from a property's ownership without selling. Common in divorce, inheritance, or when adding a partner. Requires a solicitor and possibly lender consent.

An assessment of a property's market value. A mortgage valuation is for the lender's purposes (not a structural survey). An independent RICS valuation is more thorough.

In buy-to-let, the annual rental income as a percentage of the property value. Gross yield ignores costs; net yield deducts mortgage interest, management fees and maintenance. See our BTL calculator.