Jargon Buster "d"
The process of combining outstanding debts e.g. loans, credit cards etc, into one loan.
Deeds are legal documents that show who owns a property or a piece of land. They are also sometimes referred to as property deeds or title deeds. According to the official description at HM Land Registry, they are:
“Paper documents showing the chain of ownership for land and property.”
Many people assume the title deeds are always in paper format and are stored and preserved by HM Land Registry. However, this is not typically the case. Their records are now digital, so copies are securely held in that format instead. They may have the original paper forms of the deeds upon first registration of a property or piece of land, however. Once those papers have been used to create the entry in the register, they are sent back to whoever forwarded them for use to start with.
Do you need to have a copy of your deeds if you are selling a property?
No – in fact, it is very unlikely you would have them. Most buyers would not request these as all records are held on the Land Register, as mentioned above. Since this is available online, you can search for the property deeds to confirm whether the property is registered. If it is, a copy of the deeds held for that property can be requested. There is a charge for each document you require a copy of. It is also possible to obtain official copies of said documents if required, although this is not normally needed unless ownership of the property or land is in dispute.
A defective lease is one that has been badly drafted. Some can be worse than others, influencing the steps that may need to be taken to rectify the matter. If the lease is badly put together, the vendor may need to obtain a ‘deed of variation’. This would require the freeholder’s permission to change the original terms of the lease. This can be a lengthy and complex process, as other leaseholders may be affected by the changes that are required to be made.
A lease lays out the terms that are applied to the property and must be adhered to by the leaseholder. The terms are put in place by the freeholder, i.e. the owner of the land. This is usually the landlord. If those terms are deemed unfair from the point of view of the leaseholder, discussions can begin to see if alterations are required and can be put in place.
As mentioned above, this can be complex, even when no other leaseholders are involved. However, if the lease is on a flat and there are several other flats with the same terms laid out in their leases, it complicates things as all other flat owners will be affected by any changes that are made.
That said, resolving the issues caused by a defective lease is important. If you have a defective lease on your leasehold property and you try to sell it in future, you could well run into problems. Such a lease would make it much harder – if not impossible – for a would-be buyer to get a mortgage on that property.
A deposit is an amount of money provided by the buyer to obtain a mortgage after contracts are exchanged on the property in question. The most common amount to provide as a deposit is between 5% and 10% of the price paid to buy the property.
As a rule of thumb, the more money you can put down as a deposit, the better your options are for seeking a competitive mortgage. Typically, 5% is the smallest deposit you can provide. That said, many lenders insist on a 10% deposit as a minimum percentage. If you can save more, you’ll find banks and building societies can provide you with better deals. The larger the deposit, the lower the interest rates are on the available mortgage deals on the market.
Many sources state that 20% is the ideal sum to save as a deposit on a property in the UK for this very reason. If you can offer even more, the deals get better still. This is typically only possible for those who are moving from one property to another. They can use the proceeds from the property they are selling to provide a bigger deposit on their next property.
However, if all you can manage is a small deposit such as 5%, there are still some competitive deals on the market. Shopping around is always important, as it gives you a better idea of who is offering which deals.
You may sometimes hear about 0% deposit mortgages too. While these were popular in recent years, this cannot be said of the current mortgage market. Many saw them as risky deals that could lead to problems in paying back an expensive mortgage deal. It is always advisable to save whatever you can to create the biggest deposit you can when looking to buy your own property.
The most competitive mortgage deals can be had with a 40% deposit and this is the same for residential and buy to let mortgages.
This term refers to any damage sustained by a property that has been let to a tenant, whereby the damage or loss is noted following check out at the end of the tenancy.
Dilapidations could refer to damage sustained to the property itself. For example, a door may have been damaged, a window smashed, a carpet ruined, or similar incidents. However, the term is also used to describe other negative occurrences noted once the tenancy is complete.
For example, an inventory is always taken prior to the tenancy starting. This would include all items of furniture in the property and all other items provided for the tenant. If a property is unfurnished, the inventory would still include items such as white goods. If any of these were found to be missing following completion of the tenancy, this would be noted on a list of dilapidations.
Other examples would be any case whereby re-decoration is required. This could mean wallpaper that has degraded or been damaged during the tenancy, or similar instances where one or more elements of the décor require redoing. In all cases, dilapidations relate to items where the landlord must meet unexpected costs to return the property to the condition it was in prior to the tenant moving in.
Disputes can occur if the tenant does not agree with the list of dilapidations. Since the list will incur costs for the outgoing tenant, it is not uncommon for the tenant to take issue with them. Most tenants will expect to get their deposit back, and the list could mean that won’t happen – with some tenants potentially incurring additional costs too, depending on the condition of the property.
A direct debit is an instruction made by a customer to their bank or building society to make regular payments direct from their account. These are usually associated with bill payments and are often paid from the customer on a monthly basis.
Many people confuse direct debits with standing orders, but there is a crucial difference between the two. A standing order is always for a specific amount that cannot be changed by the person receiving the amount. It also occurs on a specified date or dates, such as monthly or quarterly, for instance. A direct debit is more flexible in that the customer is authorising the bank to pay a third party on a regular basis whenever such payment is due.
Hence why the direct debit format is perfect for mortgage payments, utility bills, and anything else that may change from time to time. If you take out a mortgage on a one-year fixed rate deal, you will know in advance what you will pay each month. Your bank will send the exact amount to the lender on an agreed date each month.
At the end of the fixed deal, you will either move onto a new fixed rate deal or be switched to a variable rate deal. Either way, your monthly mortgage payments are likely to change. With a direct debit, this is not an issue, as the payments can be altered without you needing to do anything to approve it. You must, however, receive confirmation of the new monthly payments and the dates on which they will be taken. This is a key aspect of the direct debit system, as it allows you to stop the direct debit or query it in advance of payments being made.
Disbursements are the various costs incurred for carrying out the legal work in relation to buying or remortgaging your home. Most home buyers instruct a solicitor to handle all the legal work for them. The alternative is to hire a conveyancing solicitor. In both cases, the individual will quote the buyer for the services they are using. A section labelled disbursements will be included in the quotation.
The word is used to highlight all the fees due to third parties during the process of buying a property. The word does not describe fees paid to the solicitor for their services; rather, it describes the fees the solicitor will handle on your behalf that are due to other organisations involved in the process. These may be to the local authority when conducting searches, for example. Many searches are typically conducted before a property is purchased, to make sure there are no issues with any aspect of it. The solicitor can arrange for these to be conducted and will add the cost of each search to the list of disbursements you receive.
Disbursements may vary if you are remortgaging your property rather than buying one. The Land Registry registration fee for noting the mortgage in their records is one example. A bankruptcy search is another.
Some fees listed under disbursements may consist of no more than a few pounds, while others will be higher. A lot depends on the services required to complete the transaction and which organisation provides those services. If you have any queries concerning any of the fees appearing in that section, you should ask your solicitor for clarification.
What has a horse got to do with disbursements? Absolutely nothing, we just struggled to find an exciting photo about disbursements…
Discharge is a term used to describe the act of paying off a mortgage. This may be achieved when reaching the end of the agreed term of the loan. Alternatively, some borrowers may make plans to discharge the mortgage early, thereby paying it off several months or even years ahead of schedule.
When you borrow the funds to help you buy a property, the bank or building society lending you the money to do so will register a charge on the property. You are the owner of the property, yet since the lender has an interest in the property, their name will also appear on the title deeds. As you continue to pay off the mortgage, you will essentially own more of the property and the lender will own less. The idea is that if you ran into problems, the lender could force the sale of the home to get their money back.
When the loan is discharged and your final payment is confirmed and complete, you should receive a letter stating this from your lender. At this stage, the lender should do the required work to ensure its name is removed from the deeds. If this does not happen, it doesn’t affect you being the owner of the property, free and clear. However, it would cause issues if you came to sell the property. A solicitor would need to sort out any problems that might occur if the lender’s name still appears on paperwork lodged at the Land Registry. This would cost the seller money. So, it is wise to check the proper steps have been taken to properly discharge the mortgage.
A discount mortgage is a home loan offered by mortgage lenders to borrowers. It is designed to reduce monthly mortgage repayments over a specified period. This usually takes place over the first two or three years of the loan period.
Such loans are advantageous to home buyers, as they provide greater certainty over how much the borrower is required to pay each month, at least for the first few years of ownership of that property.
All lenders have a standard variable rate, often abbreviated to SVR. A discount mortgage will have a rate set below this – sometimes some distance below it. The rate paid on the loan is determined according to the current SVR set by the lender. The loan itself will be set at a specific discount. For example, a lender might offer a discount mortgage at 2% off their standard variable rate. If their SVR is set at 4.99%, the loan would be set at 2.99%.
However, this type of mortgage does not have a fixed rate applied. The idea is that the interest calculated on the loan always relates to the SVR in force at the bank or building society at that moment in time. For instance, if the lender decides to increase their SVR to 5.5%, the discount loan would then be increased to 3.5%. This is still some way below the SVR as per our example, yet it represents an increase on the payments the borrower was previously paying. As such, it is wise to be aware of the pros and cons of selecting a discount mortgage to borrow the funds to buy a property.
A Dutch auction has two meanings, depending on how far back you go. Originally, a Dutch auction related to an auction occurring in reverse. This meant an offer price was announced by the auctioneer to begin the auction process. They would then gradually reduce that price until a bid was made.
However, this original meaning has now been lost. Today, a Dutch auction refers to an informal bidding process. Typically, two or more potential buyers are trying to outbid each other to attain the same property. This is better for the seller, as it means there is more interest in the property. Therefore, they are far more likely to achieve a higher price for it.
Very often, this type of auction requires that each would-be purchaser writes their offer for the property on a piece of paper. This is then placed in an envelope and sealed, before being passed to the estate agent. There is usually a deadline for doing this; any offers received after the time and date previously given would be excluded from the process. The estate agent then opens the offers and the seller would choose the highest one to get the best price for the sale.
As such, the modern meaning for the term Dutch auction is almost the exact opposite of what it used to be. These auctions are not commonly used in the property market, although there are scenarios where they can result in a quicker sale for more money than would otherwise have been possible.