When purchasing property, especially for the first-time buyers, it is easy to be overwhelmed with the chunks of information and jargon you are bombarded with right away. This can be tackled by having a firm understanding of the terminology and acronyms that you will come across by reading contracts, in conversation with a real estate agent or even when discussing loans with the bank. We have provided a few key terms to get you up to speed and ensure a smoother investment process.
The Property
PPOR stands for the principal place of residence where you’ll be staying. This is used to clarify whether a property is going to be utilised as a home to live in or an investment to rent out.
Equity is essentially how much of the property you are able to claim ownership of. This can be calculated by deducting the amount left of your home loan from the market value of the property.
Body Corporate Levy are the payments you make towards the property costs of the building or apartment complex. This can include maintenance, insurance, security and general upkeep.
Stamp Duty is a term you’ll hear a lot of as it is the tax, carried out by the Australian Government, that comes along when purchasing real estate and in addition to the investment price. The tax paid will be based on the cost, location and the reason for buying the property.
Site Costs usually apply to items that are not included in the quoted base cost. They cover factors such as earthworks, site preparation and the engineering requirements for the foundation of the house. If you’re comparing site costs between builders, make sure you understand exactly what you’re being charged for!
Building Design Guidelines refers to what is permissible to build in the precinct with detailed guidelines that builders are required to follow through.
A Property Covenant can guide or restrain how you build or alter your property. It can be found on the contract of sale, but most commonly within a land’s certificate of title.
Home Inspection is a highly recommended step that refers to a thorough professional examination that evaluates the structural and mechanical conditions of a property. First home buyers are eligible for a discount on home and building inspections if they are also RACV members.
Contract Of Sale is a written agreement that outlines the terms and conditions, the purchase price, length of time until settlement and any other conditions.
Conveyancing is the legal process of transferring title/ ownership of a property…which takes us to our next term –
A Conveyancer is a licensed and qualified professional who gives you advice on your property, prepares documentation and conducts the settlement process.
Cooling-Off-Period generally applies to contracts for the sale of residential properties that were purchased outside of an auction.
Certificate Of Title is the official legal document of title, showing who owns the land. It will describe the area and location of the land, list the registered owner as well as any mortgages or interest that are on the land.
The Finance
Grants are available in each State and Territory of Australia to help certain first home buyers with funding their property purchase. The First Home Owners Grant is a one-off payment eligible for first home buyer’s who purchase or build a residential property to live in.
Borrowing Capacity is all about how much you are allowed to borrow and it revolves around your present financial status and current income.
Pre-Approval is one of the beginning stages of the loan process when a lender confirms how much you are able to borrow, under specific terms and conditions. This is thoroughly assessed on the basis of your income and other factors that can ensure your credibility as a borrower.
P & I means principal and interest. For homeowners, they can opt to take out an interest-only loan while others prefer to join the principal, also known as the home price, and interest loan together.
Interest Rate involves the payments that are required to be fulfilled in exchange for the bank or other financial institution providing you with a loan.
Default is the payment that is incurred when you are unable to make a repayment on the due date.
Switching Fee is what is paid in order to change the type of loan you take out.
Progress Payments are part payments that are made to your builder as the home progresses. Instead of paying it all upfront, you pay it in agreed instalments. However, before you pay, make sure the stage has been completed properly and to your satisfaction.
The Lender
Offset Account is one of the ways to reduce the interest costs as it is an account which is linked to your home loan. In addition to bringing down the amount of interest you pay back, you are able to put your savings to good use.
Comparison Rate is the interest rate combined with the loan’s additional fees and charges.
Honeymoon Rate is cheaper as it has a lower interest rate to get you started for the first 12 months and then it resumes to the normal rate.
Lender’s Mortgage Insurance (commonly known as LMI) is taken out by the lender to protect them in case you default on your mortgage. However, you are expected to pay this and can be avoided by being ready to deposit more than 20% of the total cost.
Loan-To-Value Ratio refers to the proportion of money borrowed versus the value of a property.
Are you a first-time buyer thinking of building your own home? iBuildNew can help you choose the perfect home design and builder to carry out the project. Get in touch on 1800 184 284 or book a call to get started today!
Let us do the legwork for you.
- We’ll ask the right questions to better understand your needs
- We’ll create a recommended shortlist ideally matched to you
- We’ll answer specific questions or concerns related to home building, land purchasing or financing
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