Learn all of the property terms and mortgage jargon to make the buying process easier.
We have collected and listed some standard terms you should know when buying a property, so that you can talk the talk. You will find everyone else will use ‘property speak’. It can be annoying when in a conversation with your agent, lawyer and broker you feel out of the loop. You know they are talking about the $500k you are about to spend and what is going to happen down the track – yet you feel like an outsider, avoid that feeling with our updated property terms list:
- Adjustments: Adjustments are a part of the settlement process where either any unpaid rates owing are included in the final settlement amount in addition to the balance of the purchase price OR any rates that have already been paid will be partially refunded to the vendor
- Appraisal: An estimate of the market value of your home.
- Body Corporate: A body corporate exists where there are multiple titles on a single piece of land and where there is common ground, shared structures or shared areas on the property.
- Body corporate levy: The body corporate levy is the fees and charges the body corporate is authorised to charge for expense items such as insurance, fire services, maintenance and other special items.
- Building inspection: A pre-purchase inspection of the property by a qualified building inspector to identify any possible defects. Common problems identified include low water pressure, termites and other pests, cracking and land subsiding, unauthorised building work, worn out stumps and electrical defects.
- Caveat: A legal document that a person who claims an interest in a land title is able to lodge at the Land Titles office. A caveat acts as a statutory notice to anyone who tries to deal with that title that someone else is claiming an interest in it.
- Clear title: Land that does not have any registered charges, mortgages, debts or other claims against it is called clear title.
- Contract of sale: The document required to create a legally enforceable agreement between the vendor and the purchaser for the sale of the property. The laws in each Australian state and territory relating to the sale of land may differ slightly.
- Conveyancing: If you want to buy or sell a property you’ll have to sign a contract. The legal work involved in preparing the sale contract and supporting statutory documentation, mortgage and other related documents, is called conveyancing.
- Conveyancer: A conveyancer is someone who is licensed to undertake all of the paperwork associated with the property sale and purchase process. Conveyancers are trained in the conveyancing process however they are not legally trained to the same level as a solicitor.
- Covenant: An agreement by one party to adhere to certain terms, conditions or restrictions. A covenant is not usually valid unless noted on the title to the land.
- Deposit: A portion of the agreed purchase price paid by the purchaser of the property at the time of signing the contract to close the sale and to prevent the vendor from selling the property to any other person. The deposit is often paid into the vendor’s representative’s trust account pending completion by the purchaser of the remaining due diligence on the property.
- Easement: A right to use all or part of the land owned by another for a specific purpose. For example your property may have a water or sewerage pipeline running across part of it which requires the relevant water authority to have access to the pipes for repairs. These rights are called an easement. An easement will be noted on the title.
- Exchange of contracts: Both the buyer and the seller sign the contract of sale and give each other a copy. This is when the buyer usually pays 10 per cent of the sale price as a deposit. The exchange of contracts commits both buyer and seller to the transaction. Prior to an exchange of contracts any verbal agreement you have reached is not binding on either party.
- Fixture and fittings: Items such as hot water systems, built-in cupboards, bath, stove, etc. that cannot be removed from a property without causing damage are called fixtures and fittings.
- FHOG: First Home Owners Grant. A government scheme for first home owners that provides cash assistance with the purchase. Some Australian states also have complimentary schemes that provide matching or additional payments.
- Land tax: Land tax is a state-based tax calculated on property value. It does not generally apply to your home or principle place of residence. There are different exemptions and exclusions between different states.
- Lenders Mortgage Insurance: Mortgage insurance is often a requirement of a mortgage loan from a bank if the LVR is over 80%. It covers any shortfall between the value of the property and the debt owing in the event that the person who borrowed the money is unable to make their loan repayments.
- LVR: Loan to value, this is the term used to describe the % ratio between the amounts of money a lender is willing to loan against a property as compared to the property’s value.
- Mortgage: A mortgage is what happens when someone borrows money from someone else (usually a bank) to assist in the purchase of a property. The person who borrows the money (the ‘mortgagor’) signs over their legal rights in relation to the property to the person they borrowed the money from (the ‘mortgagee’).
- Mortgagee: The lender of money for a mortgage. To provide security for the loan the purchaser of the property ‘mortgages’ their legal rights in the property back to the lender as security for repayment of the money borrowed.
- Negative gearing: Where a property is purchased for investment purposes and the amount of interest paid on the mortgage is greater than any rent received from the property the difference can potentially be claimed as a tax deduction. This is called negative gearing.
- Settlement: is where the buyer pays the balance of the purchase price and becomes the legal owner of the property. The settlement period is usually around six weeks after exchange. However, this can be changed to meet individual situations.
- Stamp duty: Money that the State Government requires to be paid at the point of registration of the Transfer of Land document when settlement is completed. The amount of stamp duty is calculated by reference to the sale value of the property and will vary from state to state.
- Rate Lock: Interest rates can change from the time you apply for a loan to when it’s funded. Rate Lock guarantees your chosen fixed rate for up to 90 days. Fees apply.
- Title: A person legally registered as the owner is said to have title to the property. Only someone who has the legal title to the property is able to enter into a contract to sell it.