We’ve all had that moment – when someone is waxing lyrical about their chosen, favourite subject, using acronym’s and phrases that, because they know what it all means, they expect you to know too. We sit there nodding, without an idea what they mean.
Well, that doesn’t need to be the case when you’re buying or selling a property in York or Wetherby through YHomes estate agents. We’re here to guide you through the terminology pool in the hope that whatever is thrown at you through the selling and purchasing process, you’ll understand the implications and processes.
AIP, DIP, MIP
An ‘agreement in principle’ (AIP), ‘decision in principle’ or ‘mortgage in principle’ are all terms that refer to much the same thing. When you’re researching your ability to qualify for a mortgage, a lender or mortgage broker will take some basic information in the first instance and perform a credit search and credit score before coming up with a figure that ‘in principle’ it would be able to lend.
This is not a guarantee of mortgage, despite its name. But it can be useful for you to know if your credit history will be strong enough to meet the lender’s requirements and will also give you some guideline as to your borrowing limit. The estate agent’s will ask you for confirmation that you have this, because they will need to know that any prospective buyer has at least investigated the financial minefield. If you are searching around the high street then you could find that a number of lenders want to offer an AIP resulting in several credit searches being racked up. Although one or two are unlikely to make a material difference to your credit score, multiple AIPs will leave footprints on your credit file and too many could have a detrimental impact.
Once you have found a property that you wish to buy, you will need to make a full mortgage application. This means that any lender will ask for more details, and require documentation to substantiate income and outgoings, all of which could ultimately lead to a different decision. It’s worth keeping in mind that offers that were available with a lender when you investigated your AIP, may not be valid and available once you’ve found a property to purchase so be prepared to shop around again at this point. Once you’ve had your offer accepted and mortgage approved you’ll need to appoint a solicitor and they will ask for…
Anti-Money Laundering Documentation
This is simply proof that you are who you say you are and live where you say you live. A valid passport or picture driving licence, and a current utility bill with your name and address on. Mobile phone bills are not accepted for this purpose. You’ll have to provide these documents for the estate agent too.
This is an inspection on behalf of the lender to investigate the property to make sure that it’s worth the money that they are going to lend you. You have to pay the lender for this inspection, but you won’t get your mortgage until it’s done.
Homebuyers Report or Survey
Similar to above, but more in-depth. You don’t have to have this, it’s entirely up to you. But if you are going to have one, you can organise this separately, or usually you can pay the equivalent of an ‘upgrade’ to your lender, meaning that the person going to do the valuation will inspect the property in more detail on both your lender’s and your own behalf, checking not only that the property is worth the money, but inspecting for damp, roof problems etc.
Your lender, depending on their own procedures, should offer you the option of a basic Mortgage Valuation or the more in-depth inspection, the Homebuyers Report.
When you are getting your quotes from solicitors they will quote ‘fees plus disbursements’. The fees part is your payment to the solicitor for their services, but the disbursements are fees that the solicitor will need to pay to outside bodies for legal services such as searches and bank charges and you will need to cover these costs too.
Always ask for a breakdown of disbursements when you’re getting your quote as these costs can differ resulting in what seems to be the cheapest fee, ending up being more expensive.
These are necessary investigations regarding the property. Local Searches are carried out by the local council to find out if the road is adopted, that there are no road, railway or traffic schemes planned, whether it’s in a conservation area or subject to a compulsory purchase order.
Environmental searches, as their title suggests, investigate flooding risks and whether or not the land has been contaminated amongst other similar things. There are assorted other searches including drainage and mining, all of which are self-explanatory.
This really is an offer of a mortgage and now we’re getting down to the nitty-gritty! This move means that you have passed all of the criteria to qualify for the mortgage and so has your chosen property and you and your solicitor will be officially notified of this. It’s a big milestone and means that you’re nearly home and dry. It will explain the mortgage rates that you’ll be charged, monthly payments etc. You’ll have to read it all and sign it to say that it’s correct.
Exchange of Contracts
The first legal commitment. Your mortgage is in place, as is your building insurance and all of your legal work has been completed. You’ll have paid your deposit to your solicitor and the completion date will have been agreed by all parties. Your lender will have been informed of when you’ll need the mortgage money to be paid and everyone is under starters orders. You’re legally committed to the sale/purchase and so is your seller/buyer.
Moving day. The mortgage money and deposit will have been sent from your buyers solicitor to your solicitor in payment for your existing property, then onwards to your sellers solicitor for your purchase. You release the key for your old property at the first stage and receive the key for your new property at the second stage. That’s the simple explanation anyway – see our previous blog on Completion Day for more in-depth information about this last piece of the puzzle.