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Terminology you need to know when purchasing your first home

Buying a property is exciting, but not knowing the terminology detracts from the excitement and turns it into a daunting experience. Below is a list of property terminology that clients often will most likely come across.

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Appreciation – the increase in the value of a property

Bank Valuation – The bank’s estimated value of a property

Bridging Finance – A bridging loan is a loan that links the finance gap while you await the proceeds of a sale. It allows borrowers to purchase a new property while they’re in the process of selling their existing property.

Capital Gains – the profit from the sale of your house.

Fittings – Items in a property that are included within the purchase of your property, such as dishwashers, tapware, etc..

Finishes – The end product. The carpets, wall colours, benchtops etc.

Lenders Mortgage Insurance (LMI) – Insurance that is often payable when the borrower doesn’t have a big deposit. It is put in place to defend the lender against default. 

Loan to Value Ratio (LVR) - An LVR stands for loan to value ratio. This ratio is determined with a formula that divides the loan amount by the value of the property, thus determining the ratio. Normally lenders will allow up to an 80% loan to value ratio without the need for Lenders Mortgage Insurance. 

Negative Gearing - borrow to invest and the property generates a negative income stream or a loss, which can then be claimed as a tax offset. Your property investment can also be neutrally geared, with the income and expenses breaking even.

Settlement - The settlement process is where all the monies are exchanged between the purchaser and seller. The buyer is now the owner of the property.

Capital Growth – Capital Growth represents the growth in price or value of the property.

Body Corporate – A group consisting of all the lot owners within the development that run the strata plan. All members are entitled to elect members to an Executive Committee which makes decisions about management of the property. 

Cooling-Off Period - In Queensland, there is a 5-day cooling off period after the contract is signed. Within these 5 days you can decide not to proceed with the contract should something unforeseen happen. 

Depreciation – The reduction in value of a property over time.

Refinancing - Refinancing essentially means restructuring your debt in an effort to benefit your financial situation. By moving to a new lending product you replace your current debt obligations with new ones, usually under terms that better suit your current financial position.


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First Home Owners Grant
Ends December 2017


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