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Property Buying Jargon

A beginners guide to property buying terms



Bank Guarantee

These are guarantees from banks to repay any deposits, should the developer of your new build property default on the building contract or go into receivership.

Capital Growth

The increase of the overall value of the property

Condominium

Apartments in a residential complex where owners also own a share of communal areas, such as garden & pool, laundry facilities and typically let their property through an onsite management company for tourism purposes

Currency brokers / specialists

Companies that dedicate their business to exchanging currencies & transferring money to bank accounts overseas. Their rates are renowned as being more favourable than a high street bank can offer.

Currency Fluctuation

Changes in the value of one currency in relation to another. For example the pound versus the euro

Deposit

A small percentage of the agreed property price, which once given to the owner, secures that property from being sold to another potential buyer. Giving you time to arrange the full balance which can be up to a couple of months.

Distressed Sale

This is when an owner is forced to put their property on the market, due to financial pressures or enforced personal circumstances. This usually means the price is below market value in order to encourage a quick sale
Due Diligence
The research & investigation done by a lawyer or individual into a property & its surroundings, prior to deciding to purchase.

Equity

The amount of a property┬┤s value that belongs to the owner, once any mortgage loans or outstanding debts have been repaid. i.e. what is left after they have been repaid. The equity can be either positive or negative

Escrow account

This is an account controlled by an impartial third party, usually a solicitor, who releases the payments to the vendor, only with the permission of the buyer and the vendor.

Exit Strategy

The way you close or liquidate an investment, in this case selling a property.
Flipping

A term used in the act of selling the contract for an off-plan property before it is actually built, ideally for a profit. Because the property has been moved on to another buyer before you have even completed. Your name has never been put on the title deeds. Therefore the initial outlay should only have ever been an initial deposit & legal advice

Foreclosures

The same way to describe Repossessions

Fractional ownership

Fractional ownership is a common investment structure for an expensive item, in this case property. The fundamental difference between fractional ownership and timeshare is that, with fractional ownership, the investor owns part of the title, rather than units of time; with fractional ownership, if the asset increases in value, so does the value of the shares in the investment.

Gross Yield

The annual rate of rental income, before deductions, produced by a property as a percentage of its purchase price.

Hotspot

A popular place to buy where development struggles to keep up with demand
Interest rate
The rate of interest charged to borrow money. It is set by a central or national bank (in the Eurozone by the European Central Bank)

Key Ready

See the same description for Turnkey

Letting agent

A company that will arrange tenants and maintain your property for you. Usually they take a commission out of your rental income as a fee.

Leveraging

The process of using a loan - called a mortgage if its against a property - with a small amount of equity to potentially benefit from a high value investment. Also known as gearing.

Loan to Value ( LTV)

The amount of property┬┤s purchase price paid for by a mortgage, usually expressed as a percentage

Market value

A term for what a property is worth according to comparable properties in the surrounding area.

Net Yield

The annual rate of income produced by a property as a percentage of its purchase price once all costs are covered, excluding mortgage repayments. This refers to investment properties that are rented out.

Notary

A government certified legal clerk required by law to check formalities. This results in the stamp and approval of a property purchase

Off - plan

Property that is for sale before it is built, in effect you are buying the contract based on the architects plans. Buying this way is usually cheaper than purchasing an already completed or resale property.

Rental Yield

The amount of income a property produces in rent as a percentage of its purchase price. See also Gross Yield & Net yield

Repossessions

Properties that are reclaimed by the banks due to the borrowers not being able to meet the loan repayments that were agreed. This can include both private individuals and developers.

Reservation Agreement

The contract signed with a small deposit to reserve a property. The property is then held for an agreed period by both buyer & vendor, until you are in a position to sign a pre contract with a 10% deposit. This normally occurs when say a UK buyer has come to the Canaries on a viewing trip, seen a property they like wants it taken off the market, until they are back in their country to make a transfer for the full deposit.

Return on Investment ( ROI)

Simply how much your property investment generates

Self - Certified ( also non-status )

This is a type of mortgage suited to self employed people whose income is hard to assess. Borrowers declare their income to lenders without having to produce documentary evidence of accounts or pay slips. These self cert mortgages are very rare in the present climate.

Turnkey

A new property that comes ready for immediate use, already furnished & normally includes domestic appliances i.e. fridge, washing machine, oven. (also sometimes referred to as white goods)


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