First Home Buyers Glossary
Confused by all the new terms you've been hearing lately?
Real estate agents assuming you know all their technical mumbo-jumbo without an explanation?
Well MoneyBuddy is here to help!
Prepare yourself by reading up on our definitions of the most commonly used home buying terms below.
A fee paid to a lender to cover costs of setting up the home loan. Sometimes free/waived.
The person borrowing money from a lender.
Certificate Of Title
The official legal document of title, showing who owns the land and describes the land. The Certificate of Title will describe the area and location of the land, it will list the registered landowner as well as any mortgages or other interests that are on the land, including any easements, or building restrictions.
Contract Of Sale
A contract between the seller and the purchaser, for the sale of the property. This contract must be in writing.
The legal process of transferring title/ownership of a property.
The maximum amount of funds you can borrow from the bank or lender.
Credit Report or Credit Reference
A report of your credit history, prepared by credit reporting agencies. A good credit history report is usually required before a lender will approve a loan.
When you fail to make loan repayments by a specified date.
The amount of money required to secure the purchase of a property. Sometimes non-refundable, but is taken off the purchase price when you eventually purchase the house/ at settlement.
Is registered on the certificate of title of the property, it grants someone else the right to use part of your land for a specific purpose (which will be set out in the easement). Easements do not get wiped when property is transferred, when you buy a property the easements are included. Common easements include things such as a pathway or walkway being open to public which may be on your property, or access roads on your property to another property. Easements can also restrict you from building on your land. The conveyancer will find out all this information for you.
The difference between the market value of your property and the amount you owe on the property. If the house is worth a lot more than the mortgage you still have on it, then your equity is larger. You can use the equity in your home as security for future loans.
There are grants available in each state and territory of Australia to help certain home buyers fund their purchase. They are one off payments mainly for first home buyers. Check out these grants in our First Home Buyers Grants Guide.
Interest Only Loan Repayments
When you only have to pay off the interest owing on your home loan for a set period of time, leaving the principal amount untouched.
A contract between the bank/lender and you as the borrower which sets out the terms and conditions of the loan.
LVR (Loan-To-Value Ratio)
The amount you can borrow compared to the value of the house. e.g. if the LVR is 80% and the house is worth $100,000 you can only borrow up to $80,000. The other $20,000 usually comes from a deposit.
Lo Doc Home Loan
For people who don't have the usual financial records, such as self-employed. Less documentation is required to apply for the loan, in exchange for the borrower taking out more security, usually mortgage insurance, higher deposits or even a higher interest rate.
The lender is given security over the property, by way of their name being registered on the Certificate of Title to that land. This stays on until the loan/mortgage is repaid.
The amount of money that has been borrowed, excluding the interest charged.
Finding a new loan from the existing lender or a different lender. It involves paying the existing loan in full by getting a new loan from another. Usually done when a better rate is being offered from another lender.
Some loans offer this service, it means that you can suspend the loan repayments for a period of time, if you are far enough ahead with your repayments. Interest still accrues during this period, and repayments after this period can be adjusted so you can stay on track to finish paying the loan on time.
The process of finalising the exchange of property. Usually carried out by lawyers or conveyancers. This is when you have to pay the settlement amount (The purchase price minus the deposit already paid), in exchange for the certificate of title to the property with all the necessary changes made, and the keys to the property.
A tax charged by the government you have to pay when you are purchasing a property. This is an additional cost to the price of the home and is usually in the tens of thousands, there are different rates for every state, and also concessions available for certain home buyers, see them in our Stamp Duty Guide.
Length of time in which the loan must be repaid.
The seller of the property.
First Home Buyers Tips
Now that you know all about the different terms used in the home buying process, you should make sure you purchase the right house and get the right loan.
Check out our guide What To Know Before Buying A Home.
And Compare home loan rates on our Compare Home Loans Page.
Happy House Hunting!
P.S. If there are any terms we haven't included in our glossary above, let us know on our MoneyBuddy Facebook page and we will get right on to it!