JARGON BUSTER "C"
The cashback mortgage is a popular type of mortgage that provides you with a lump sum in cash when you complete the mortgage agreement. It might also be calculated as a percentage of the loan made as a cash payment to you at that point
The timing of the cashback payment usually means you receive it a couple of weeks or so after you have completed the loan. This means it is unsuitable for use as part of a deposit on a property.
Cashback deals are available on both standard rate and variable rate deals, so it is worth looking around to see what is available. The loan to value (LTV) rate varies hugely between deals too, with some requiring 60% and others more relaxed with an 80% LTV or more.
The available amount of cashback depends on the size of your mortgage and on the maximum applicable to a specific deal. When comparing cashback offers, you should see a maximum cashback amount indicated in writing.
It is worth noting that while receiving a cash payment seems like a great deal, it may not be as good as you think. Interest rates on cashback loans are typically higher than those on deals that do not offer the perk. Look at the possibility of early redemption penalties too. While these can apply to all home loans, the terms could well be longer and stiffer for deals involving cashback. Be very sure the deal you have is a good one; it is easy to be swayed by the temptation of a few hundred pounds cashback upfront when it may not be the best deal.
A charge is an interest in the ownership of a property. This is most often a mortgage that allows someone to borrow a significant sum to make ownership possible. It could also relate to another debt secured on the property, however, such as a secured personal loan.
It differs from unsecured loans in that the property acts as collateral in case anything should go wrong. With an unsecured loan, your property wouldn’t be at risk if you fell behind with the repayments. You would still be liable to pay back the loan, of course, but the bank or building society that extended the loan would not have attached it to your home.
With a mortgage, the amount loaned is going to be far larger. This means there is a greater risk to the lender in loaning that sum of money – often in the hundreds of thousands of pounds or more – to the person requiring it. If you want to purchase a property worth £800,000, you are going to require a mortgage to make it happen (unless you are exceptionally fortunate). The lender will evaluate your request, and if they grant it, they will secure that loan against the property you are buying. This is a charge. It is also referred to as a charging order and it links the debt with something of enough value to pay it back should something go wrong.
The charge is also referred to as the first charge. It means the lender is first in line to have their loan repaid if the property is sold, either through the natural buying and selling process or because of debt complications.
What does completion mean?
This is arguably the most emotive word in the whole process of buying or selling a property. The word relates to the end of the purchase process. Many people find buying and selling properties stressful and uncertain. It is not surprising, therefore, that completion marks a sense of relief.
Completion day is the day when the money for the purchase of the property is paid to the seller. When payment is received, the ownership of the property officially passes from the seller to the buyer. At this point, the buyer can collect the keys and begin the moving in process. The estate agent will usually have the keys ready.
By this point, the contracts have already been exchanged between the parties. This means there is far less chance of things going wrong. If someone was to back out of the transaction after exchanging contracts, it would likely be very expensive for them.
Is completion day the same as moving day?
Very often, yes, but there are scenarios where it may be delayed. Typically speaking, house moves occur in chains. The shorter the chain, the fewer properties and people are involved. The longer the chain, the more likely it is there could be delays in moving somewhere along the line.
It is possible that you could complete your purchase prior to the person selling that property, if they are held up by the next person in the chain. In such cases, there can be a short delay in completing that part of the chain to allow everyone to move in good time.
Contents insurance is the provision of an insurance policy that covers accidental damage or theft of all moveable contents inside the property. This typically includes furniture, appliances, and soft furnishings. Carpets are also usually covered under contents insurance, but as with any policy, it is best to read through the small print to see exactly what is covered and what isn’t. If in doubt, ask.
Is it a legal requirement to have contents insurance?
No. It is up to the homeowner whether they wish to take out a policy to provide cover if there was any accidental damage or they were burgled. However, it is wise to consider the cost of replacing items if the worst did happen.
Some people prefer to save the monthly or annual cost of this type of insurance into a savings account. Since claims against these policies are typically rare, the reasoning is that you could save up enough to cover the cost of replacing items if anything did happen. This is a personal decision though, and you should weigh up the value of the items in your home before considering this step.
It is also important to make sure any policy you take out is enough to cover the contents of your property. It is easy to underestimate the total value of your moveable contents. It is best to take one room at a time and to consider what it would cost you to replace each moveable item in that room.
If you own a lot of collectables, make sure the policy will cover them. Some people take out a separate specialist policy for valuables that are worth more.
A contract is a document that describes the agreement under which a property will change hands. It should contain standard conditions that are attached to the sale of the property. However, depending on the property being purchased, it could potentially contain other conditions too. The solicitors acting on behalf of the buyer and seller respectively would read through the contract to see if anything unusual has been included. If so, they may request that changes are made or that certain conditions are removed.
If certain items of furniture or white goods are to be left at the property, a list of these should be included with the contract. Queries may be raised if the two parties agreed for something to be left and it does not appear on the list, for instance.
Once both parties are happy with the contracts, they can be exchanged. Up to this moment, it is possible for either or both parties to withdraw from the sales process. There would be no fees incurred for backing out by the buyer or the seller. However, once contracts are exchanged, both parties are legally bound to go ahead with the sale. That said, it is possible to pull out, although there are hefty penalties for doing so. These can involve 10% of the purchase price – a huge sum to lose if you change your mind at this stage. It is the reason why so few people go back on their decision once they have signed and exchanged the contracts for the sale of the property in question.
A contract race occurs when two parties have made an offer on the same house. These offers will usually be for the same price. The vendor will then sell to the person who exchanges contracts ahead of all other parties in the race. If this situation does occur, all parties involved must be made aware that more than one contract has been issued. The seller is not under any legal obligation to exchange contracts with the first person to make a suitable offer, hence why a contract race can occur.
This scenario does not always occur, as it is likely that one party will marginally increase their offer to make it more attractive to the vendor. In this case, the vendor would likely accept the higher offer, knocking the other party out of the running.
There are some elements to consider here if you are selling a property and you are considering entering a contract race with two or more parties. Firstly, there are additional fees involved for you. With more than one contract to send out, there is more legal work to be done. That raises the fees, and it is something you should be aware of before proceeding.
Secondly, while a contract race might lead to a faster sale to one of the interested parties making an offer, this is not guaranteed. It is still possible the sale could fall through. It is also worth noting that not all parties might agree to be in such a race. It could put one or even all the potential buyers off making an offer at all. So, think carefully and weigh up the pros and cons before proceeding with a contract race.
A conveyancer is a person other than a solicitor who may conduct the conveyancing required during the sale of a property. You will need to enlist the services of a conveyancer regardless of whether you are the person buying a property or selling it. A conveyancer is also sometimes referred to as a conveyancing solicitor, but the role undertaken is the same in each case.
In theory, you could do the required work on your own if you do not require a mortgage. However, this is not advised as the process is complex and difficult for someone with no experience.
The conveyancer is required when you have made a successful offer on a property. In the case of selling, this would be the point at which you accept the offer on your property. When looking for a conveyancer to handle this part of the process for you, always check they have the proper credentials. This would involve being regulated by one of two authorities:
The Council for Licensed Conveyancers The Solicitors Regulation Authority
The conveyancer will handle every step along the road to the exchange of contracts. The journey will involve creating a purchase file, conducting searches relating to the property and plot, going through numerous checks, requesting and receiving your deposit, sorting out the chain, and exchanging contracts. Hence why it is important to get an experienced, qualified, and registered conveyancer to handle this important part of the process of home buying for you. It would be foolhardy to do anything else. (And if you do need a mortgage, your lender will require you to hire a conveyancer anyway.)
This term describes the process of transferring property from one party to another. The buyer will legally receive the property from the seller. This process is typically managed by one of two parties – either a solicitor or a licensed conveyancer.
While the transfer of ownership is a singular process, each party involved in the sale must find their own conveyancer to handle the process on their behalf. This means the seller and the buyer will need to find a suitable party to take care of the conveyancing for them.
Solicitors can handle the conveyancing process – indeed, anyone can. There is no law to say the conveyancing must be done by a qualified person. However, it is always best to hire an expert in this part of the property sales process. There is a lot that could potentially go wrong or be overlooked if this is not done. For example, the solicitor will check boundaries, rights to the land on which the property is built, your rights concerning parking, and so on. These are just a few examples of areas that are covered during the conveyancing process.
The conveyancing process covers the transfer of the legal title currently held by the seller, passing it onto the new owner. At that point, the transaction is complete, and the property has legally passed to the new owner. A qualified solicitor or conveyancer will check the terms of the deal and highlight any potential problems before the contracts for the sale are signed and exchanged. These property searches, as they are known, can take weeks to work through. Hence why most conveyancing takes around eight weeks (and sometimes longer) to be completed.
This is a condition found in the Title Deeds or lease for a property that a buyer must agree to if they go ahead and purchase the property. This is typically applied to the current property owners and anyone who may assume ownership in future. The word covenant means agreement, and it will be contained within the conditions of the deeds or lease.
A restrictive covenant highlights something that the owner cannot do under the terms of that covenant. For instance, a property may have a restrictive covenant that prevents the owner from using the property to run a business. If the land on which the property is built is owned by a farmer, that farmer could add a restrictive covenant that prevents the property owner from buying chickens or other animals (other than domestic animals). These are just a couple of examples; there are many others.
Conversely, a positive covenant could require the owner to do something. This might mean maintaining a fence around the perimeter (or a portion of the perimeter). If the property is in a conservation area or is of a certain age, a covenant could require the new owner to maintain existing windows rather than replacing them with modern uPVC ones.
If you are thinking of buying a property, you should always make sure your solicitor looks at the presence of any covenants attached to that property. This applies to both restrictive and positive covenants. While positive ones might sound like a good thing, they can still be restrictive. The cost of maintaining old windows (and the likelihood of higher heating bills thanks to their inefficiency) could be viewed as a negative, putting you off the purchase before progressing further.
Lenders often use a system called credit scoring to help them decide whether to lend to you. They ask a series of questions about you and your finances and score your answers. Depending on your score you will be accepted or declined.