Buying your first home is one of the biggest decisions you’ll make in your 20’s or 30’s. With so much information out there it’s not always easy to determine what’s right and what’s not. Here are the meanings of some common property terms that may help you to understand what’s really going on.
- Interest Rate – An interest rate is the rate of interest that a bank or other financial institution (the lender) sets on the cost of lending you money
- Principal and interest– the amount borrowed or still to be repaid, plus the interest on the mortgage. The principal is part of the repayment that reduces the balance of the mortgage.
- Comparison Rate – In order for consumers to be able to have a chance to identify the true cost of a loan, a comparison rate is often used by lenders. This rate includes the interest rate itself
- Fixed rates– where the home loan is locked in at a specific interest rate for a specified term, usually one to five years.
- LMI(lenders mortgage insurance) – usually required by lenders when you’re borrowing more than 80 per cent of the property’s value. It provides insurance to the lender in case the borrower defaults on the loan.
- Stamp duty– a state government tax on the transfer of property calculated on the value of the property.
- Tenants in common– two or more buyers own a property with unequal shares and rights.
- Joint tenants– each owner has equal shares and rights in the property.
- LVR(loan-to-value) ratio – to calculate it, divide the loan amount by the value of the property then multiply by 100 to get a percentage. Banks and financial institutions use this as a measure of whether you can afford the loan.
- Equity– the difference between your mortgage and your property’s value. If your home is worth $400,000 and you owe $150,000, then you have equity of $250,000.
Source: (http://www.apimagazine.com.au/api-online/glossary & www.Moneysmart.com.au)
