Home Buyers Terminology - What Does It mean | RBS



Jargon buster

Muddled about mortgages? Confused by conveyancing? Find out what it all means...

A

Agreement in Principle - An Agreement in Principle is also known as a ‘Decision in Principle’ or a ‘Mortgage Promise’, a mortgage lender will give you this to confirm how much they might lend you, based on the details you give them. It’s not a binding offer but it could help show sellers and agents that you’re a serious buyer.

APR - Annual Percentage Rate is the interest payable on what you've borrowed is added up along with other charges (e.g. arrangement fees) and then expressed as an annual rate of charge. The APR helps you compare the true cost of borrowing, for example for a mortgage. The APR takes into account all fees and charges applied to the mortgage as well as the monthly payments over the life of the loan.

Arrangement fee - This is a fee that might be charged by your mortgage lender for arranging your mortgage. It can sometimes be added to your mortgage amount but if you choose to do this you will have to pay interest on it.

Asking price - This is the price the seller wants to get for the sale of their property. It is negotiable.

B

Base rate - This is the interest rate which lenders set their rates for lending and savings products. It’s usually based on the base rate set by the Bank of England. Please note some RBS mortgage products track the Bank of England base rate. To find out more about interest rates, visit our Interest Rates section.

Broker - A Broker is an independent mortgage broker can offer you independent advice on taking out a mortgage and help you compare mortgage products from different lenders. You don’t have to use a broker.

Buildings insurance - For any mortgage you have to have buildings insurance. You may be offered building insurance from your mortgage provider but it can pay to shop around for the best policy for you. 

To find out more about the types of insurance that we offer, please visit our insurance section.

Buy-to-let mortgage - If you’re planning to buy a property to rent out, you’ll need to get a buy-to-let mortgage. Or if you’re living in a property that you have a mortgage on and you’d like to move and rent it out, you may need to switch to a buy-to-let mortgage, you should speak to your provider to find out. If you are a RBS customer, speak to us to find out if you can rent out your property with your current mortgage (with our permission) or if you’ll need to switch to a buy to let mortgage. The minimum deposit for a buy to let mortgage is usually about 25% of the property’s value, though this varies by lender.

Your home or property may be repossessed if you do not keep up repayments on your mortgage.

To find out more about the Buy-to-Let process, take a look at our Buy-to Let section.

C

Capital - Capital is money that you've invested or borrowed (e.g. to buy a home). It doesn't include the income or profit you get from an investment, or the interest you have to pay on a loan or mortgage.

Closing date - A closing date means that once a number of parties have noted an interest, the sellers may set a closing date for offers. This is usually noon on a certain date, and offers should be submitted before that time on that day. You will normally be advised how many other parties have noted an interest, but not what they will be offering.

Completion -This is when the property becomes legally the buyers. All the forms have been signed, Stamp Duty or LBTT has been paid and the money is transferred to the seller’s solicitor. The buyer will be able to pick up the keys and move in from this date.

Conclude/Concluding missives - The process of formally concluding the deal in Scotland. Once the missives have concluded, you are legally bound to purchase the property.

Conveyancing - This is the process of transferring ownership from one property owner to another. This is carried out by either a solicitor or a qualified conveyancer.

Credit rating - Your credit rating is used to help lenders decide whether to lend you money, how much to lend you, how much to let you borrow, and sometimes, how much interest to charge.

Take a look at our Get everything in order before you apply section to get some tips that might make the process runs smoother.

D

Decision in Principle - Decision in Principle is also known as an ‘Agreement in Principle’ or a ‘Mortgage Promise’, a mortgage lender will give you this to confirm how much they might lend you, based on the details you give them and their initial checks. It’s not a binding or formal mortgage offer but it could help show sellers and agents that you’re a serious buyer.

E

Equity (in property) - The difference between how much your property is worth, the balance of your outstanding mortgage and any other debts secured on the property.

Equity release - Equity release is a way of releasing extra money by borrowing against the equity in your home.  Speak to your mortgage lender for more details.

F

Fixed-rate mortgage - When an interest rate is fixed for an agreed period of time, usually two or five years. Repayments will remain the same during this time, regardless of other interest rate rises or falls.

Your home may be repossessed if you do not keep up repayments on your mortgage.

To find out more, take a look at our Mortgages section.

Full building survey - This is carried out by a surveyor and is good for older, larger or non-traditional properties. It provides a thorough inspection and detailed breakdown of the property condition including any structural defects, necessary repairs and maintenance advice. The purchaser can instruct for this to be carried out but is not something which is mandatory.

G

Government Support Schemes - The two main Government Support Schemes in Scotland are Help to Buy (Scotland) and LIFT. Help to Buy (Scotland) applies to new build homes up to a maximum of £250,000 with participating builders in Scotland. The Scottish Government will help buyers to purchase the property by taking an equity stake of between 10% and 20% on the value of your property. LIFT Scheme (Low Cost Initiative for First Time Buyers) is another Scottish government assistance scheme which helps by providing you with a certain percentage of funds so that when/if you sell in the future, the government would get that percentage of the proceeds.

H

Help to Buy - A UK Government initiative that aims to help first-time buyers get on the property ladder. It was designed to help those who can afford mortgage repayments but might be struggling to save up a 20% deposit. There are two different parts to the initiative: an Equity Loan mortgage and a Mortgage Guarantee.

Your home may be repossessed if you do not keep up repayments on your mortgage.

To find out more and for full eligibility criteria visit our Help to Buy section.

Home Report - There are different components of the Home Report. The Single Survey is an assessment by a surveyor of the condition of the home, a valuation and an accessibility audit for people with particular needs. The Energy Report contains an assessment by a surveyor of the energy efficiency of the home and its environmental impact. It also recommends ways to improve its energy efficiency. The Property Questionnaire is completed by the seller. It contains additional information about the home, such as Council Tax banding and factoring costs that will be useful to buyers

I

Interest rates - The rate at which you pay back interest, which is shown as a percentage of the amount you borrow.

To find out more about interest rates, visit our Interest Rates section.

L

Land and Buildings Transaction Tax (LBTT) - When you’re buying a property or land in Scotland, you have to pay Land and Buildings Transaction Tax. This is a tax to be paid, if you buy a property or land worth over £145,000. Again, the amount you need to pay depends on the purchase price of the house, it is higher for more expensive properties, and rises to 12% for homes that cost £750,000.

Take a look at our LBTT section to find out more.

LIFT Scheme - Low Cost Initiative for First Time Buyers is another Scottish government assistance scheme which helps by providing you with a certain percentage of funds so that when/if you sell in the future, the government would get that percentage of the proceeds.

Loan to Value (LTV) - The size of your loan compared to the value of your property. For example, if your home is valued at £100,000 and you have a mortgage of £80,000, your LTV is 80%.

M

Mortgage Illustration - This document is provided when the lender recommends a mortgage to you or where you have decided to go it alone on an information-only basis. It's tailored to you based on the chosen mortgage and the level of borrowing you need, and will show the overall cost of the mortgage - including interest - over the term. It details your monthly repayments, any fees and charges and explains what happens if interest rates rise, and how that would affect your repayments.

O

Offset mortgage - A type of mortgage where your savings and current account balances are linked to your mortgage. You could save money because you won’t pay interest on the amount of mortgage debt equivalent to your savings. So if you have a mortgage of £100,000, savings of £10,000 and a typical current account balance of £2,000, you pay mortgage interest on £88,000.

Remember, your home may be repossessed if you do not keep up repayments on your mortgage.

To find out more, take a look at our Mortgages section.

P

Payment holiday – a period of one or more months when you don’t make repayments on your mortgage, although interest continues to accrue during that time.

S

Stamp Duty Land Tax - A tax you have to pay if you buy a property or land worth over £125,000 in England or Wales. The amount you need to pay depends on the purchase price of the house. It’s higher for more expensive properties.

To find our more, visit our Stamp Duty section.

Standard variable rate (SVR) - An interest rate that you will pay at the end of any fixed tracker/period. The SVR of each lender is set by that lender and they can vary it at any time. This rate will normally change when the Bank of England’s base lending rate changes.

To find out more about interest rates, visit our Interest Rates section.

Standard valuation – this is the minimum check that has to be carried out on a property for a mortgage. It’s not the same as a survey. The property will be inspected and any obvious major defects that could affect the value are noted. It will then be compared to similar properties, taking age, condition and location into account. This information is used to write a valuation report, called a Standard valuation.

T

Tracker mortgage - This a mortgage where the interest rate moves directly in line with another rate (like the Bank of England’s base rate) for a certain period of time, usually two, three or five years. So if the interest rate rises or falls, your monthly mortgage payment will go up or down too. At the end of the tracker period, your interest rate will usually go back to the Standard Variable Rate.

Your home may be repossessed if you do not keep up repayments on your mortgage.

To find out more, take a look at our Mortgages section.

Set Tab for lightbox