A-Z of buying a home | NatWest




A-Z of Buying a Home

Our Home Buying Survey revealed that most home buyers would not be able to explain many of technical terms involved when buying a house, even if they’d already bought a property. Overall, only 8% of people felt comfortable explaining all the common terms related to the house buying process.

We’ve put together this guide to explain some of the most commonly misunderstood terms. Find out what it all means, so you can start your journey to home ownership with confidence.


Conveyancing - Conveyancing is the name for the legal process of transferring a property from one owner to another. This will be done by a solicitor or conveyancer, and the property will legally belong to the new owner at the end of the process.



Estate agent fees - When you’re selling a house, estate agents usually take a commission of around 0.75%-3.0% + VAT of the final sale price. This is usually one of the highest costs you’ll have to pay in the home buying process, but it’s sometimes possible to negotiate a lower percentage.  



Freehold - In England and Wales, freehold is when the property owner also owns the land and immovable structures attached to the land. The other type of property ownership is leasehold (see Leasehold).



Ground Rent - Ground rent is a regular payment made to the landowner (i.e. the freeholder) for a leasehold property.



Interest-Only Mortgage - With an interest-only mortgage, you only pay back the interest every month. This means your monthly repayments will be cheaper but you don’t actually pay off any of the loan. You need to use other repayment methods, such as savings and investments, to pay off the loan at the end of your mortgage term.



Leasehold - In England and Wales, leasehold is when the property owner owns the property but not the land it’s built on.  They will hold a lease with the landowner and will only own the property for the term of the lease.

Let to Buy - Let to Buy is when you let out your current home to pay for a mortgage on your new home. You can release equity by remortgaging your current property to put down a deposit on your new one, and use the rental income to pay off your new mortgage. Let to Buy can help you move into a new home if you’re struggling to sell your current property or the property has dropped in value.

Loan-to-Value - Loan-to-value (LTV) is the percentage of the mortgage amount being borrowed compared to the actual value of the property being bought. For instance, if you take out a £200,000 mortgage on a £250,000 property, your loan-to-value percentage is 80% – meaning you have 20% (£50,000) as equity.



Mortgage Adviser - A mortgage adviser’s job is to help you find the best mortgage arrangement for you and your personal circumstances. A mortgage adviser can offer help and advice on mortgage options, repayments, building insurance and other parts of the home buying process.

Mortgage Booking Fee - This is a fee paid to the mortgage lender when you take out an application for a mortgage. A mortgage booking fee is sometimes included in the arrangement fees.

Mortgage Broker Fees - Using a mortgage broker is optional, but doing so will come at a cost. This could be a flat fee or a percentage-based commission.

Mortgage Indemnity Fees - A mortgage indemnity guarantee insures the mortgage lender if you default on your loan. It’s there to protect the lender rather than the homebuyer.



Overpayment - An overpayment is when you pay more towards your mortgage at one time than you agreed when taking it out. It is also known as an early repayment.



Repayments - A repayment is the amount you pay towards your mortgage each month.

Right to Buy - Right to Buy is a UK government scheme that helps council and housing association tenants to buy and own their home, usually with a large discount.



Service Charge - When buying a leasehold property, the homeowners may have to pay service charges to the landowner for any services to the building. This could cover services such as maintenance, heating and cleaning of common areas.

Shared Ownership - A scheme aimed at first time buyers, where the buyer purchases part of the property and pays rent on the rest.

Solicitor Fees - Most home buyers will need a solicitor or conveyancer to carry out the legal work (see Conveyancing).

Stamp Duty - Stamp duty is a one-off tax that you’ll need to pay if the property you’re buying is worth more than £125,000 (or £145,000 in Scotland). The amount you pay is based on the price of the property. It is called LBTT (Land and Buildings Transaction Tax) in Scotland.

Surveys - This is a full evaluation of the structure of a property. It’s an optional step in the home buying process, but one that could alert you to any problems that a valuation hasn’t picked up on.



Valuation - A short survey of the property to assess the value, usually carried out by mortgage lender. 

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