From APR to ERC: what does it all mean?

We know there’s a lot of new information to take in when you’re buying a house. That’s why we’ve put together a glossary of some key terms. 

Annual percentage rate (APR)

This is the total amount of interest you’ll pay on your mortgage over a year. It also takes into account charges such as mortgage fees. 

Capital and interest

These are both terms you’ll probably encounter when you start researching mortgages. Capital is the money you borrow, and interest is what you pay on top of your mortgage. Interest rates vary from lender to lender, so it’s worth shopping around or enlisting the help of a mortgage broker. 

Chain

This refers to the sequence of buyers and sellers who will be exchanging contracts at the same time. A first-time buyer (someone who is only buying, not selling) will usually be the start of the chain. Someone who is selling a property but not buying one will be the last in the chain. One of the benefits of buying a new build is there is no upwards chain. This means less hassle and could make you more attractive to a potential buyer if you’re in the process of selling a property. 

Completion

Completion is the final stage of the transaction, at which point you release your funds. These will be released to your solicitor, or to the new lender if you’re remortgaging. 

Conveyancing

This is the official term for the process of legally transferring ownership of a property from one person to another. You will pay a conveyancer or solicitor to take care of this for you.

Decision in principle

A statement from a lender saying that they provisionally agree to lend you a certain amount of mortgage money. This might also be referred to as an ‘agreement in principle’.

Early repayment charge (ERC)

Should you choose to repay all or part of your mortgage early, your lender may charge you. They may also apply a limit on how much you can overpay by on your mortgage in any given year. A repayment charge may be applied if you go over this limit.  

Equity

This is the amount of your property that you actually own. Equity is worked out by calculating the difference between the value of your home and how much you still owe on your mortgage. 

Exchange of contracts

This refers to the exchange of contracts between buyer and vendor (seller). The exchange will be carried out by your solicitor or conveyancer and is the point at which the transaction becomes legally binding.

Freehold

Buying a freehold means you have outright ownership of a property, including the land on which it stands. As a freeholder, there is no limit to your period of ownership.

Help to Buy

Help to Buy is a government scheme that lets you buy a newly built home with as little as a 5% deposit (subject to terms and conditions). Limited to first-time buyers only, the Help to Buy equity loan essentially tops up your deposit to 25% of the cost of your new home (or 45% in London). You can then use a Help to Buy mortgage to fund the remaining cost of the property. Read more about Help to Buy here.

Stamp duty

When you purchase a property, you’ll usually pay tax on it. This is known as stamp duty. Stamp duty rates vary according to the cost of the property and whether you’re purchasing it as your main, or an additional, home. You can learn more about stamp duty, including how much you’ll need to pay, in our stamp duty guide.  


Looking for your dream new build home? Morrish Homes has a variety of homes for sale on our most prestigious developments across the South, including Poundbury in Dorset, Oakwood in Somerset, and Nansledan in Cornwall. 

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