Every industry has its share of technical jargon which can be quite dumbfounding. Whether it is the banking and finance sector or law, consumer goods or real estate, you have to get accustomed with the relevant terminology before you dabble in any investments or encounters in a specific industry.
Here is a brief A – Z guide of real estate terminology in Australia.
- ‘Amortisation period’ is the total number of years you need to pay back the entire home loan.
- ‘Appreciation’ is the increase of a property’s value over time.
- ‘Bank valuation’ is an estimate of the value of a property, which is usually less than the market value.
- ‘Bridging finance’ is a loan against the sale of an existing property whose proceeds have not yet been credited to the property seller at the time of buying a new property.
- ‘Capital gains’ is the profit incurred from the sale of a property, or any capital asset.
- ‘Caveat’ is a declaration that someone other than the owner of a property might have interest in the asset.
- ‘Caveat emptor’ is a warning of sorts that encourages caution for purchasers before investing the money due to the risks involved.
- ‘Depreciation’ is the reduction of the property value over time.
- ‘Equity’ is the property owner’s share of the asset, sans the debt that he or she has with the bank.
- ‘Guarantor’ is a person or entity agreeing to fulfil the terms of the contract should the primary borrower fail to repay the loan.
- ‘Interest-only loan’ is a home loan or commercial property loan wherein only the interest gets repaid through the term and then the principal gets repaid after the pre-set term.
- ‘LMI’ is lenders mortgage insurance, which is a failsafe policy protecting the interests of the lenders should the borrower fail to repay the loan or be unable to make a substantial down payment.
- ‘LVR’ is loan to value ratio. The ratio pegs the loan amount against the value of the property and this influences eligibility.
- ‘Mortgage protection insurance’ is a policy that allows the borrower to keep repaying the home loan despite being financially incapable of doing so, which could be due to injury or illness or even unemployment.
- ‘Reverse mortgage’ is a home loan that gets repaid only when the property is sold or changes ownership after the demise of the original owner.
