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Decoding property language: 10 terms you should understand

By Rikki Cook

As if finding your dream home or that perfect Redlands investment property isn’t tricky enough already, the process can be further complicated by the jargon used by mortgage and property experts.

If you’re feeling confused or overwhelmed by words you don’t understand, you’re not alone. The number of Australians who don’t understand key terms is on the increase, according to Gateway Bank.

The problem is, you don’t want to be signing something you don’t understand when dealing with such a significant financial investment. If you’re about to embark on your next property search, or are ready to sign on the dotted line, here are 10 common property terms you should familiarise yourself with before starting the buying process.

The sale process

During the process of buying a property and securing a loan, you’ll find yourself going through a number of processes you’ve never heard of, and will be presented with documents you won’t have had before.

Conveyancing: It’s really just a longer word for the process of transferring legal ownership from one person to another.

Contract of sale: This agreement explains the terms and conditions that relate to the sale of a property. The term ‘Conditions of sale’ may be used here too, and that lists the conditions under which the buyer agrees to take the property.

Exchange of contracts: Each party will get a copy of the contract of sale, sign their copy, and the deal becomes legally binding. At this point, a deposit will usually be paid.

Redraw facility: If you make lump sum or extra payments on your mortgage loan, this facility allows you to access those payments. It’s not always available but it’s worth knowing if this option is available to you.

Disbursements: A catch-all term for charges which may be passed on by real estate agents or solicitors. These costs could be passed on to the buyer or seller.

Settlement: The point at which the sale is completed, and the property is considered sold. The full payment will be made at this stage and the buyer will be able to move into the property.

What you owe and what you own

The concepts aren’t too confusing when they’re explained clearly. What’s important to remember with some of these terms is that the value of a property can change over time and that will directly affect your sums.

Equity: The equity you hold in a property is the amount of money left over when you deduct what is owing on the mortgage from the value of the property. It’s really the owners share of the property.

Loan to value ratio (LVR): Usually expressed as a percentage figure, it signifies the proportion of the property value tied up in the loan. You may buy a property where you put down a deposit of 20 per cent of the property value for example. That means your loan is worth 80 per cent of the property value, at that moment in time. You’ll find knowing the LVR is important when it comes to getting a loan agreed by a lender.

Stamp duty: This is often a familiar phrase, but not always understood. Stamp duty is a form of tax due when buying a property and is a percentage of the value. The rates differ between states.

Interest rate: The additional charges the borrower will need to pay on top of the value of the loan. What’s important to find out here is whether the interest rate will be fixed or variable, or some combination of both. You can’t work out your repayments unless you know this.

Now that you know what these terms mean, let us help you find the perfect Redlands property for you. Contact Ray White Alexandra Hills today to begin your search.

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