First time buyer tips - Decoding the language of buying a home
There’s so much to think about when you’re buying your first home; saving for your deposit, finding a mortgage, looking at properties. It can be a daunting process, and sometimes the terminology used to describe things can be, well, confusing.
So, we’ve put together a quick jargon-buster for those who are taking their first steps on the ladder. We’ll decode some of the language that Solicitors and Mortgage lenders use, and hopefully make the process a little easier to understand!
Agreement in Principle
This is a letter that you’ll receive from either your mortgage lender (if you’ve sourced your mortgage directly) or your mortgage broker. This will let you know that you’ve been approved by the bank or building society to borrow up to a certain amount. It’s not a Mortgage Offer (see below) which is different. But it is a really important step, as it means that you’ve been rubber stamped for a mortgage when you find the right property.
Once you’ve found a home that you would like to buy, you’ll need to go back to your lender and ask them to arrange valuation on the property. This is carried out by a Surveyor, on behalf of your lender, and is basically to reassure the lender that the property you are buying is worth what you are going to borrow against it.
Once your lender has received the Mortgage Valuation from the Surveyor, they will carry out some final checks, after which they will write to you and your Solicitor with a Mortgage Offer. This basically confirms how much they will be lending you to purchase that property, and will also include the details of the mortgage product you’ve selected.
The legal process of buying a property is called Conveyancing. This involves a Solicitor who will work on your behalf conducting a series of checks on your behalf on the property you want to buy. Once these checks are completed, your Solicitor will send you a contract which you will need to sign to confirm that you’re happy to proceed.
The point that both the vendor and buyer have both signed the contracts and committed to the transaction is called Exchange. At this point, you are legally committed to buying the property.
There can be a gap of weeks, or in the cases of new build homes which are still under construction, sometimes months, between exchange and completion. But that’s OK, because once you’ve exchanged, that property has got your name on it and can’t be sold to anyone else!
At the point you exchange contracts, you will also agree a Completion date, which is the day that the transaction will be finalised, the mortgage funds will be drawn down from your lender and you’ll get your keys.
Just knowing the difference between an Agreement in Principle, a Mortgage Offer, and Exchange and Completion will really help you as you start your journey towards getting on the first rungs of the property ladder.
One final word of advice…always ask if you don’t understand anything. Buying a home is a complex process, and as a newbie to all of this no one will expect you to know everything, so it’s absolutely fine to ask if you need someone to explain something to you again or in more detail.