In the world of real estate there are often words and terms that come up in the process of buying or selling property that may seem unintelligible to the average person. Here is a list of common terminology you will come across as well as the simplest explanations and definitions.
- Amortising loan:
This is the formal term for a standard principle and interest loan.
- Bridging finance:
This is a temporary loan taken out against the profits of a property transaction.
- Capital gains tax:
This is the government tax payable on the profit that is made when selling an investment or property.
- Comparison rate:
This is a rate that is used to compare loans that includes fees and charges to enable level comparison. For instance one loan may have low rates but high fees and another may have higher rates but lower fees.
This is the legal work and procedures carried out by an attorney to transfer the ownership of a property from one entity to another.
- Daily interest:
Most variable rate mortgage loans calculate interest on a daily basis which is then called daily interest.
- Debt consolidation:
This is the combining of numerous debts that have been previously held separately into one amalgamated account.
- Debt Servicing Ratio (DSR)
The Debt Servicing Ratio measures whether a borrower can afford the mortgage payments. To calculate the DSR the lender will use a number of factors to work out how much of your income will be available to repay your debt.
- Deferred payment:
When there is an agreement between two parties and the date of payment of the agreed amount is postponed to a later date that is said to be a deferred payment.
A deposit is the down-payment on the purchase price of a property.
This is the amount claimed on an investment property for the reduction in the value of an item.
This is the difference between your mortgage value and your property’s value.
- Fixed interest:
An interest rate that is set for a fixed term allows the borrower to be protected against interest rate fluctuations for that ‘fixed’ period.
Investment property is negatively geared when expenses exceed rental income. Investment property is thus positively geared when the rental income received is greater than the total amount of expenses.