It’s not uncommon to get a little overwhelmed when looking for a property loan. With so much jargon and technical language flying around, confusion is never far away. Take a look at our guide to some of the most common words and phrases you may encounter during your search, each accompanied with a handy definition to help you build your knowledge and confidence.
Appreciation
Appreciation simply means an increase in value. If the property you purchase appreciates over time, it means its price has increased and you should make a profit when you choose to sell. The opposite of this is depreciation — a reduction in value.
Bridging Finance
Bridging finance includes loans that are used to “bridge the gap” in order to purchase an asset, usually a property. For example, if you want to buy a property but have not yet sold your current property, bridging finance can provide you with the short-term funds needed to complete the transaction. In this case, you would pay back the loan once the property is sold.
Comparison Rate
The comparison rate is the true cost of the loan once all fees and charges have been added. This is the cost you will use to compare the loan with other possible loan candidates. As loan providers may advertise their funding products in different ways, the comparison rate is useful for standardising the different cost totals. Gaining the full picture is a crucial tip for investing in property, and the comparison rate helps you achieve this.
Conveyancing
Conveyancing refers to the process that follows the acceptance of an offer on a property. Once the offer is accepted, trained professionals will need to ensure that everything is in order so that the actual purchase and transfer of funds can take place. This professional is called a conveyancer, although the role may be fulfilled by a solicitor.
Drawdown
Drawdown can mean a number of different things depending on what area of finance you are talking about. In the case of purchasing a property, drawdown simply means the process of accessing the funds that the lender provides to the borrower.
Equity
Equity refers to the amount of the total property value you have already paid for. When you put down a deposit, this will add to your equity. Each repayment on your mortgage — minus any fees, charges or interest — will contribute towards the equity you own in the property.
Freehold
Freehold means the property — and the land it is built upon — is owned by the property buyer forever. This buyer retains ownership rights indefinitely and passes these rights on to their descendants as part of their estate.
Guarantor
A guarantor is a third party who signs a legal document to take responsibility for a home loan or mortgage in the event that the applicant cannot keep up with payments. This may be a requirement for first home buyers or for people with bad credit, as it provides the lender with more security.
Land Tax
Land tax is a levy collected by the government of most states and territories in Australia. Property owners pay this tax annually on any land that legally belongs to them. Different states and territories apply their own payment thresholds and tax rates.
Reserve Price
The reserve price is the minimum price that must be paid to initiate the property transaction. In many cases, the buyer will pay more than the reserve price for the property if there is significant competition or demand in the market, for example. However, they will not usually be able to pay below the reserve price.
Stamp Duty
Stamp duty is a one-off tax that property buyers need to pay when they purchase a property in Australia.
Title Deeds
Title deeds are official legal documents that outline the legal owner of a particular property as well as the history of ownership (i.e. all the previous owners).
Find the Right Mortgage for Your Needs with Sydney Brokers
Here at Sydney Brokers, we work to find you the mortgage options you need to complete your property purchase. Whether you are a first home buyer or are looking for a property investment loan, we can help you make that happen. Reach out to our team today and let us know what you need.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.