Pay as you grow

Association of Foreign Investors in Real Estate
A non-profit making independent body providing opportunities for its members to exchange information at regular meetings in the US and Europe.

Association of Residential Letting Agents (ARLA)
Professional association and regulatory body for letting agents in the UK.

Bridging loan
A short-term loan to bridge the period between buying a new property and selling an existing property.

Broker/Intermediary
A person who will arrange a mortgage with a lender. Mortgage brokers must tell you which lenders they use and how much lenders pay them for arranging mortgages. They also have access to exclusive products not available to consumers directly.

Brownfield site
This is the term given to a derelict piece of land that has been affected by former usage. It usually requires significant intervention to be brought back to beneficial use.

Building survey
An extensive survey carried out by a qualified surveyor, to spot faults and potential problems in the property you are buying.

Buy-to-let
The purchase of residential property with the view to letting the property to tenants.

Capital Gains Tax (CGT)
This is a tax on the increase in value of an asset when it is sold or given away. It is not applicable on personal belongings worth less than £6000, or in most cases on your primary residence.

Capital growth
An increase in the market price of an asset such as a property.

Capitalisation
This is the term used when an individual converts earnings (or equity) into cash.

Capitalisation rate
A calculation that estimates the value of an income generating property. This figure is shown as a ratio which is calculated by dividing the operating income by the value of the property.

Capped rate mortgages
A variable rate mortgage where the interest rate will not exceed a specified limit.

Cash-on-cash returns
A calculation used by Instant Access Properties (IAP) to measure the level of return on a property investment. This is the net profit divided by the costs.

Caveat Emptor
‘Let the buyer beware’ – the onus is on the buyer and their legal representatives to assess the quality of a purchase before buying.

Certified Personal Accountant (CPA)
When buying property in the USA, a “non-resident alien” will need a CPA to get a withholding certificate. This certificate will enable the purchaser to claim back the 10% of the property’s value held by the agent for the Internal Revenue Service.

Completion
This is the term used when you become the legal owner of the property.
 
Contract
The legal document that transfers the ownership of the property from the seller to the buyer. It can also be the legal document used between tenants and landlords, otherwise known as a tenancy agreement.

Covenants
An obligation that you sign up to when you sign an interest in land such as maintaining a fence by repainting it every five years or agreeing to restrictions on land use and development.
 
Conveyancer
A solicitor or licensed conveyancer who carries out the legal work involved in selling and buying property.
 
Conveyancing
The legal work involved in selling and buying property, carried out by a conveyancer.

Credit reference agency
An organisation that keeps details of the credit history of individuals. Lenders will check with a credit reference agency to see if someone applying for a mortgage has any known credit problems.

Department of Trade and Industry (DTI)
This is the name of the government department that is concerned with business and enterprise. This is a good resource for impartial advice.

Disbursements
Fees such as stamp duty and Land Registry fees, which are paid to the conveyancer.

Dual Zone Development
This is a development of properties for both residential and short-term rental purposes.

Due diligence
A rigorous process by which the legality and investment potential of a development is investigated.

Early redemption fee/early repayment charge
The charge some lenders make if a mortgage is paid off early.

Easements
An easement is a right regarding a property, for example rights of way. The law can allow utilities, such as gas or electricity supplies on your land, to be accessed by others.

End-to-end
A service that takes care of every aspect of investing in property, from sourcing the investment opportunity to assisting in securing finance and from purchasing the property to furnishing and occupying it.

Equity
This is the cash value held in a property based on what the property is worth minus the amount owed to the mortgage lender.

Euribor (Euro Interbank Offered Rate)
This refers to the benchmark rate of the euro money market, established in 1999 with the introduction of the European Single Currency.

Exposure
This is a term that usually refers to the possible financial risk to an individual involved in making an investment.

Financial Services Authority (FSA)
This is the name of the independent body that monitors and regulates the financial services industry in the UK.

Fixed rate mortgage
This is a mortgage where the interest payments are fixed and not subject to fluctuations in the interest rates.

Fixtures and fittings
This refers to all the non-structural items included in the purchase of a property.

Florida Association Of Realtors (FAR)
This is a real estate trade association based in Florida, with 90,000 members.

Foreign Direct Investment (FDI)
This is the investment of foreign assets into domestic structures, equipment and organisations, but not stocks. This is also used as a useful tool to measure the development of emerging markets.

FTSE 100
This is the share index for the largest 100 companies on the London Stock Exchange. It proves a useful resource in benchmarking the UK’s economy with others in Europe.

Gearing
This is when an investor uses borrowed money, such as a buy-to-let mortgage to make investments. This is sometimes termed loan to value.

Gift deposit
This is when mortgage providers allow a percentage of the value of a property to be used as equity when securing the loan.

Green Belt
This is the term given to the area of undeveloped or agricultural land surrounding an urban development.

Guarantor
This is the name given to someone that guarantees to pay your mortgage if you can not or will not for any reason.

High lending fees
Not all lenders charge these, but if you borrow a high percentage of the price of the property such as 80% or 90%, you may pay a higher fee due to increased risks.

Home-buyer's report
This is the surveyor’s report on a property. This type of survey is less extensive than a full building survey but more extensive than the lender's valuation.

House Price Index (HPI)
This provides a weighted average of prices for a standard mix of dwellings. In the UK there is no official HPI, instead various banks, building societies or estate agents provide their own, such as the Halifax and Nationwide.

Income Tax
This is the tax taken from personal and business income. Any income received from buy-to-let investment properties are classed as taxable incomes.

Inheritance Tax
This is a tax paid on your ‘estate’ when you die. Properties valued at less than £275,000 are exempt from inheritance tax.

Interest
This is simply the money you are charged for borrowing.

Internal Revenue Service (IRS)
This is the name of the government department in the US that is concerned with collecting tax.

Investment Property Databank (IPD)
This is an independent company devoted to the objective measurement and analysis of property.
 
Land Registry fee
A fee paid to the Land Registry to register ownership of a property.
 
Lease
This is the term given to the legal contract that gives the ownership of a leasehold property to the buyer for a fixed period of time.

Leaseholder
Someone who owns a property, but not the land it stands on, for a fixed period of time.

Leveraging
Using the capital growth of one property to purchase another property and maximising tax deductions.

Loan To Value (LTV)
See Gearing.

Missive
This is a Scottish term that refers to the point where the property sale becomes legally binding.

Mortgage
This is a loan to buy a property. The property acts as security for the loan and so can be repossessed and sold if the mortgage repayments are not made.

Mortgage application fees
These are fees usually charged by the lender to organise the mortgage for you. These are not generally refunded if you decide not to go ahead with the mortgage. Some lenders will only charge such fees on certain mortgage deals.

Mortgage deed
This refers to the legal agreement which gives the lender a legal right to property.

Mortgage term
The length of time over which the mortgage will be repaid.

Negative Equity
This is the term used to describe a situation whereby the mortgage is higher than the value of the property. This can occur during times of recession.

Offer of advance
This simply refers to the formal offer of a mortgage from a lender.

Off-plan
This refers to the purchase of a property before the property has been built.

Ombudsman
This is an independent professional body set up by law to settle disputes, for example, between estate agents, solicitors and insurance companies.

Portfolio
A collection of investment properties held by an individual investor or group of investors.

Principle
This is the term used to describe the amount borrowed that remains unpaid. It can also be used to describe the amount of an initial investment.

Realtors
This is simply the name given to estate agents in the US.

Regeneration
This is the term used to describe improvements made to an area, building or environment.

Rental coverage
Refers to the amount of a buy-to-let mortgage paid for by the rental income. Typically, the rental coverage of buy-to-let properties is 125%, netting a rental income for the investor.

Rental valuation
This is an assessment of how much the owner of a property could charge tenants on the open market.

Rental void period
This refers to the time when a rental property is not generating income from tenants.

RICS
The Royal Institute of Chartered Surveyors. It has 120,000 members worldwide, and promotes best practice in all aspects of the property industry, representing consumers’ interests, and providing impartial advice to society, businesses, governments and global organisations on all matters relating to property.

Ripple Effect
A descriptive term that refers to the outward growth of property prices from the centre of a city to the surrounding area.

Shortfall
This is the difference between the required deposit on the buy-to-let mortgage property and the money that can be raised from a mortgage.

Snagging
This is a thorough inspection carried out to ensure that the builders have carried out their work to a high standard.

Snagging list
A term used by developers referring to all the small jobs that need finishing before a property is completed.

Stamp Duty
This is the tax that is paid when buying a property in excess of £120,000. The ceiling is increased to £150,000 for areas of regeneration.

Tenancy Agreement
This is a contract between the landlord and the tenant of a rental property, specifying terms and conditions of the agreement.

True market valuation
This is the assessment of a property’s cash value on the open market.

Valuation
This is a process by which a lender will assess a property to see if it is suitable for a mortgage.

Variable Rate Mortgage
This is a mortgage where the repayment is subject to changes in interest rates. Base rates are set by each country’s central bank. In the UK this is the Bank of England.

Vendor
This is the name given to the seller of a property or piece of land.