Struggling to decipher emails from your agent? Wondering if there’s a Duolingo app for property? Look no further, we’ve collected some key terms you may be confused by for you to brush up on before your lender or buyers advocate calls!
A is for Amortisation period
Your loan term or the time agreed upon for you to repay your loan set during your application and approval process.
B is for Buyers market
When competitive conditions make for an advantageous time to buy. For example, an over supply of properties for sale push the prices down.
C is for Cooling off period
Not just the time you need after a phone call with that particular family member. This is a stated period after the contract is made or property is sold, when the purchaser may cancel the contract.
D is for Disbursements
Another expense to prepare for in the road to selling your home. These are costs your real estate agent may incur that can be passed on to you. Think photography or advertising expenses.
E is for Eleph…we mean Equity
The value a property owner has in the asset above the debt owed. Consider this the difference between the home’s fair market value and the outstanding balance of any costs owed on the property.
F is for Fixed Interest Rate
Your interest rate remains unchanged for a decided period of time. This could be the whole term of the loan or just the first year. In contrast, a variable interest rate is designed to fluctuate in line with the RBA changes.
G is for Guarantor
Someone who agrees to fulfil a contract (aka pay your mortgage) if the main party to the loan defaults. You should give this person a very big hug. Send flowers while you’re at it.
H is for Holding deposit
An amount given by a buyer to the estate agent acting for the seller. Kind of like an engagement ring, it shows the buyer’s serious commitment to the property. You want to move in so you decide it’s time to get serious. It’s not compulsory and is refundable if the offer is rejected.
I is for Insurance
Your life jacket. For the payment of an agreed premium, your insurer issues a policy that gives financial protection for a stated period of time. Your life and house saver.
J is for Joint account
Often the first step when saving as a couple. Considering your finances as a team and working out your expectations is a big part of making your first and subsequent homes happen. Don’t make us add C for communication…
K is for Knock down
When a property is in such poor condition it can’t be restored so you…yep you guessed it…Knock it down. Often mortgage agreements do not allow you to demolish a mortgaged home because you’d be destroying the only security for that loan.
L is for LMI and LVR
Lenders mortgage insurance (LMI) is often payable if you don’t have a big deposit. It’s their insurance against a repayment default. A loan-to-value ratio (LMR) is the proportion of money borrowed versus the value of a property.
M is for Mortgage Broker
The coolest guy you know. More formally described as the intermediary who brokers or negotiates mortgage loans on behalf of individuals or businesses.
N is for Negative gearing
This is when the income received from an investment property is less than the cost of the investment, so you can deduct this amount from your taxable income and reduce your total tax bill. Cha-ching!
O is for Occupancy permit
A document, issued by a private or council building surveyor, to show that the building is suitable for you to live in. However, this is not evidence that the building complies with the Building Act or the Building Regulations, so you’ll need to get that checked too.
P is for Pre-approval
This is not a commitment to lend you money or a guarantee from the lender. It’s simply the lender’s way of saying they are likely to approve you for a certain amount. Think of it as your first foot in the door; a nod from a lender to say you’ve got the backing you need to buy.
Q is for Qualification
How eligible are you for a loan. Prequalification often involves you providing an overview of your finances, income, and debts to a mortgage lender who then gives you an estimated loan amount.
R is for Refinancing
This is when you get a new mortgage (or loan), generally to obtain a better interest term or rate. There’s a lot of this happening in the current economic environment.
S is for Stamp duty
The tax man at the state government imposes a stamp duty tax on the purchase of property that only the buyer pays. The amount of tax payable is calculated as a percentage of the property’s purchase price.
T is for Trust account
A bank account to hold money received or held by an agent for things like rent or deposits for or on behalf of another person. While we’re talking accounts, an offset account is simply an account that is linked to your home loan in such a way that it reduces the amount of interest you have to pay.
U is for Unencumbered property
Property free and clear of mortgages, restrictive covenants, leases, and assessments of any kind.
V is for Valuation
A written assessment of how much a property is worth, by a registered valuer. You can’t fake your mum’s signature on this one.
W is for Wear and tear
The depreciation of an asset due to ordinary usage that you’ll need to consider as a cost when weighing up your purchase. For example, an older house by the beach may be more subject to wear and tear expenses that a brand new apartment may not.
X is for eXpense
The cost incurred or acquired for something. There’s a long list when it comes to owning a home which people like us are there to help you weigh up.
Y is for Yield
No, not a large silver plate designed to protect you from battle. Yield is the annual rental income of an investment property, expressed as a proportion of the property’s value.
Z is for Zoning
…out by this point in the blog? Wrong again. Zoning is an urban planning tool used by local governments to determined how land is to be used. You’ll hear examples like low density residential, high density residential, mixed use and metropolitan centre.
Still need a wise elephant to explain these to you? Get in touch here.
