From saving enough money to cover your deposit to finding your dream property - buying your first home can be a challenging process.
Throw into the mix the confusing language used by mortgage brokers, banks and real estate agents, and it becomes even more bamboozling.
But never fear; we are here to help with a term buster guide to the most common words you will come across when buying your first home.
The number of years it will take to pay off your home loan.
The increase in the property’s value over time, while depreciation is the reduction in value.
The amount of money you are able to borrow based on your income and expenditure.
An examination of the home you’re considering to buy to evaluate the plumbing, electrical, air-conditioning systems, appliances, roof, foundation and structural stability. The inspection should be completed before you purchase the home.
This is where land is divided into lots, as opposed to Strata Titles where the land is defined by structural divisions (your unit or apartment). However, common property is held similarly in Community and Strata titles. A Community Title Corporation is founded including registered lot owners, who are responsible for the administration of the groups By-Laws, maintenance and insurance of the common property. Owners remain responsible for the maintenance and insurance of any structures on their own lot.
A figure to help home buyers compare various loans on an ‘apples with apples’ basis. It factors in the interest rate, fees and charges, and displays it as a single percentage rate that can be compared across lenders.
Contract of sale:
The contract between you and the seller of property to transfer the title after conditions have been met and payments are made.
A licensed and qualified professional who provides advice and information on the sale of a property, prepares the documentation and conducts the settlement process. A good conveyancer explains the meaning and importance of each process, to help you understand what's involved and what documents you are signing.
Cooling off period:
A short legal period after the contract of sale is signed, which allows the buyer to cancel the contract unconditionally. In most cases the cooling off period in South Australia is two business days and does not apply if the home is bought at auction.
A portion of your home’s purchase price, which you pay when you exchange contracts on the purchase of a property. Many home buyers believe you need 20% deposit, however this is not always the case
. In fact, there are several ways to bypass a huge deposit, including low deposit loans from HomeStart.
Fixed interest rate:
A fixed interest rate will not change over the fixed interest period. For example, if you have a fixed rate for a five-year period, you will pay the same interest rate for that entire period.
Items that are fixed to the property including built-in shelving, carpets or light fittings.
Lenders mortgage insurance (LMI):
If you do not have a 20% deposit, the majority of lenders will insist you pay LMI. This fee can be paid upfront or added to your mortgage. LMI is in place to protect your lender in the scenario you can’t meet your repayments. HomeStart Finance is one of a few lenders in Australia that doesn’t require LMI.
Loan-to-value ratio (LVR):
The proportion of money borrowed versus the value of a property. When the LVR is over 80 per cent, a lender is more likely to charge LMI.
A tax imposed by the state government on purchases including real estate. The amount of stamp duty varies between states and must be paid within 30 days of purchasing your property. This cost is determined by the purchase price of the property.
Properties that are adjoining in some way – like apartments, units or townhouses – are normally bought under Strata Title. All owners must maintain common areas, such as roofs, lifts, gardens and driveways collectively. To cover the ongoing maintenance expenses they are required to pay a levy.
The term used to explain the property market where an under-supply of properties and a high number of potential buyers result in relatively high housing prices. Sellers have an advantage during this market condition. In comparison, when home prices are low and there is an over supply in the market, it is referred to a ‘buyer’s market’.
The lowest price a vendor will accept.
Torrens Title property:
Where the owner of the property owns the land and the building on it. This means you are the sole owner of the property and responsible for the property's upkeep - both inside the property and outside on the block of land.
A conditional approval from a lender to grant a home loan subject to certain conditions. The pre-approval amount is based on the lender’s evaluation of your income, credit history, employment history, personal assets and debts. Pre-approval assures the vendor that your offer is valid and can also speed up the buying process, as you have already found a loan.