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Key Real Estate Terms That All Buyers Should Know

28 Jan, 2022

Key Real Estate Terms That All Buyers Should Know

Property terms can be quite confusing, especially when you are just starting your property-buying journey. In fact, the majority of hopeful homeowners admit that they don’t fully understand real estate concepts and terminology

According to UBank’s Know Your Numbers survey, 84% of Australians who haven’t yet entered the property market admit they don’t know much about how home loans, mortgage rates and deposits work.

In addition, 3 in 10 of the surveyed admitted to knowing nothing at all and do not know where to start.

At St Trinity, we understand that owning a property is the ultimate Australian dream, and it also can be one of the biggest decisions that you have in life.

So, to make your property-buying journey as simple as possible, here are some of the most important terms that you will need to know. This way, you can be extra confident when you find & secure your dream property.

real estate terms

Most Common Real Estate Terms

#1 Appreciation

The increase in value over time of a property is known as appreciation. If you have an investment property, you might be familiar with this term.

There are many reasons why your property will rise in value. In general, this can simply be because there is a scarcity of real estate and high demand. However, some of these factors can determine the exact pace of appreciation such as location, community, home size and usable space, age and condition, and general economic factors.

Vice versa, if your property reduces in value over time, it calls depreciation.

#2 Capital gain

When you make a profit out of a property or any other type of asset, you will need to report your capital gain in your income tax return.

If you are an individual, the Capital gains Tax (CGT) is the same as your income tax rate for that year and you will need to pay at the end of the same financial year, together with your other income taxes.

If you want to know more about capital gains tax and how it could benefit you, check out this link here.

personal property

#3 Deposit

The initial contribution to the purchase price of a property. The agreement to buy a property is usually not binding until the contracts have been exchanged by both parties and a deposit has been made by the buyer.

You can secure most properties with as little as a 5% deposit in today’s market.

#4 Due Diligence

Refers to the period of time when buyers have the opportunity to fully examine the property, including every aspect that might affect the property value.

There are several ways to conduct due diligence. You can either hire experts to inspect the property or perform tests yourself to decide on whether to purchase the property.

Here are several aspects you should check when conducting due diligence:

  • Location: the surrounding community, amenities, developments and growth of the area.
  • Property: type of property ownership, number of rooms, renovations and easements.
  • Finance: mortgage, market value, pricing and demand

real estate terms you should know

#5 Equity

The phrase “equity” refers to how much of your property you really own—that is, the worth of your asset above the amount you owe on it. As you can refinance against the equity you’ve built, the less mortgage you have the more equity you own.

Your home’s equity is calculated by subtracting your unpaid balance of the mortgage from the current fair market value of your property.

So if you have a $500,000 home, and you still owe $350,000 on it, you have $150,000 in equity.

real estate agent

#6 Interest rate

The interest rate is the percentage of a loaned amount that a lender charges the borrower as interest. This rate might be fixed, variable, or a mix of both (a “split loan”).

The cash rate, determined by Reserve Bank of Australia (RBA), is the interest rate on unsecured overnight loans between banks. The current cash rate is at a record low of 0.10% for the 13th consecutive month.

cash rate target graph

#7 Lenders Mortgage Insurance (LMI)

A fee charged by home loan lenders. It protects the loan lender if the property buyer defaults and is unable to meet their loan repayment obligations.

LMI is typically required by a lender if someone is borrowing more than 80% of the property purchase price ( LVR is above 80%) as it is considered to be a higher risk to the lender.

It is non-refundable and non-transferrable but it can be added to your home loan when you purchase your property, meaning it will be worked into your weekly/monthly repayment.

However, not all lenders require borrowers to pay LMI when borrowing more than 80% of their property purchase price. Some lenders will let you borrow up to 90%, or even 95% of the cost of the property before charging an LMI fee.

This could save you thousands!

#8 Loan to Value Ratio (LVR)

The Loan to Value Ratio (LVR) is the percentage of a property’s total value that you are borrowing. A high LVR means you owe a larger amount of money compared to the amount you put down for a deposit.

E.g. If you buy a property worth $400,000 with a $20,000 deposit, then your LVR is 95% because you borrowed 95% of the property’s value.

real estate agent can help you with confusing real estate terms

#9 Loan Contingency

Loan contingency (also known as a mortgage contingency) is a clause in a real estate contract that is designed to protect both sellers and buyers in a mortgage payment.

It lets the buyer keep their deposit and back out of the purchase if they cannot get the final approval on the loan by a stated deadline.

It also helps protect the seller in case the buyer can’t get a home loan, so they can back out of the home purchase agreement and make different deals with a different buyer.

#10 Negative Gearing

Negative gearing allows income from the rent you receive to be offset, or deducted, against other forms of taxable income such as employment and business income.

This reduces your overall tax bill and also helps to increase cash flow if your rental property is cash-flow negative (ie it costs more to own than you’re getting in rent). It’s worth noting that there are some restrictions on how much you can deduct – generally no more than $20,000 per annum if single or $30,000 for those who are married or de facto.

In short, negative gearing allows property buyers to make financial losses if certain criteria are met relating to their rental income and mortgage repayments.

#11 Pre-Approval

An indication that a lender is likely to approve a home buyer for a loan. It is an offer from the lender for a specific home loan, for a fixed amount, based on the home buyer’s current financial situation.

Pre-approval is not binding for the home buyer, or the lender; it just lets the home buyer know how much they could borrow.

It is always a good idea to get pre-approved before you exchange on a property.

  • There is no cost to getting pre-approved by your lender
  • The offer is valid for up to 3-6 months
  • Gives you confidence in what you can borrow before you exchange contracts
  • Sellers can sometimes favour buyers who are pre-approved and ready to purchase because they can potentially settle faster

real estate agents

#12 Holding Deposit

A holding deposit is a sum of money that buyers pay to a vendor, as proof of intention in real estate transactions. It’s normally 0.25 per cent of the purchase price but is negotiable. In off the plan purchases, this can be a set dollar amount by the developer, for example, $2,000 holding deposit.

The holding deposit is paid before any paperwork is signed and signifies how serious a buyer is about purchasing a property.

#13 Stamp duty

Stamp duty is a state-based tax that is levied at the time of a property transaction and is based on the purchase price.

The rates of stamp duty may vary between state and property types and are affected by a number of factors. These include:

  • If it is your primary residence or an investment property
  • If it is an existing property, newly constructed or vacant land
  • If you are a first home buyer

Your stamp duty is used to support a variety of state-funded public services, including education, health, roads, transportation, and emergency services.

For more information about Stamp duty, check out this link.

 real estate terminology

#14 Settlement date

The day on which a real estate transaction is completed. At this point, the buyer pays the vendor and takes possession of the house.

#15 Yield

A real estate yield is a calculation of an investment’s future earnings. It’s usually computed annually as a percentage based on the asset’s cost or market value.

A high rental yield is beneficial for your cash flow, but it doesn’t always mean the property will provide you with a good long-term capital return — that is decided by a variety of criteria. So, although the rental yield is a helpful measure, it shouldn’t be the only factor you should consider when trying to pick out an investment property.

Do you have any other real estate terms that you’d like explained?

Buying your first home can already be a big challenge, let alone familiarising yourself with the baffling real estate terminology. Never fear, St Trinity is here to help you simplify the whole process.

If you’re eager to learn more about property language and are after assistance on your property buying journey, please reach out to us today.

We will be delighted to explain the ins and outs of the property buying process for you to move into your dream home with confidence. Call us on 02 9099 3412 or Contact us below!

AUSTRALIA PRIVACY STATEMENT

Last updated: August 2020

INTRODUCTION

St Trinity Property Group and its affiliated entities, representatives, agents and related companies (collectively referred to as ST TRINITY PROPERTY GROUP) respect the privacy and security of your Personal Information, as defined below, and comply with the requirements of the Australian Privacy Principles under the Privacy Act 1988 (Cth).

This Privacy Policy explains in general terms how St Trinity Property Group handles your Personal Information. However, it does not apply to St Trinity Property Group’s employee records to the extent they are handled by any of our companies that is or was the employer of that employee in relation to the employee’s current or former employment. Such employee records are generally exempt from the Act and will be dealt with as permitted by law.

You may be able to deal with us without identifying yourself (i.e. anonymously or by using a pseudonym) in certain circumstances. If you wish to do so, please contact us to find out if this is practicable in your circumstances. However, if you do not provide us with the Personal Information we have requested, we may not be able to complete or fulfil the purpose for which we collect the information, including providing our services. By visiting our websites, using any of our services or otherwise providing us with your Personal Information (or authorising it to be provided to us by someone else), you agree to your Personal Information being collected and handled as set out in this Privacy Policy.

WHAT PERSONAL INFORMATION DO WE COLLECT AND HOLD?

Under the Act Personal Information is defined as information or an opinion about an identified individual, or an individual that is reasonably identifiable, in whatever form and regardless of whether it is true or not (Personal Information). The Act also defines a subset of Personal Information as sensitive information (for example health records, racial or ethnic origin, religious beliefs, criminal records).

The types of Personal Information we collect and hold will depend on the circumstances of collection and on the type of service we are providing. For example, when we are engaged to sell a property, we may collect and hold Personal Information from both the seller and potential buyers such as name, address, email address, telephone numbers, employment details and details about their business.

We may also collect and hold certain sensitive information that is reasonably necessary for the provision of our services, including health and criminal records. If you provide us with any sensitive information, you consent to us collecting that information and handling it in accordance with this Privacy Policy.

HOW WE COLLECT PERSONAL INFORMATION

We may collect Personal Information about you directly when you deal with us over the telephone, send us correspondence (whether by letter, fax or email), have contact with us in person, visit our websites or complete hard copy or online forms.

There are also circumstances where we may collect Personal Information about you from someone else. For example, from:
• Market research companies contracted by us to obtain information so that we may improve and market our services;
• Your employer;
• Other agents and valuers who may be involved in the services we provide;
• Property developers who contract us to market properties;
• Publicly available information and databases;
• Any of the companies within the St Trinity Property Group (both local and overseas);
• and Anyone you have authorised to deal with us on your behalf.

We also automatically collect certain information when you visit our websites or our subscribers receive promotional emails from us via cookies and other tracking technology (such as web beacons), some of which may be capable of personally identifying you. Such information includes the type of browser and operating system you are using, your IP address and how you use our websites.
Depending on the type of service you or our customers have requested, we may also seek to collect information about someone else from you (for example, contact details of your solicitor, emergency contact person or tenant). However, you must not provide us with Personal Information about another person unless you have clear consent from that person to do so, told them that their Personal Information will be handled in accordance with this Privacy Policy and directed them to where they can find it.
Regardless of how it is collected, we handle Personal Information in accordance with this Privacy Policy.

WHY WE COLLECT, HOLD AND USE PERSONAL INFORMATION

We generally collect, hold and use your Personal Information for the purposes for which it is provided to us (which will usually be obvious at the time of collection), related purposes or as permitted or required by law. Such purposes may include:
• Acting as agent for vendors or purchasers in relation to the sale of a property;
• Acting as agent for owners or tenants in relation to the leasing and or valuation of a property;
• Project management services;
• Structured advisory services;
• Town planning services;
• Capital allowances services and other consulting services in relation to the property market;
• Administration of our business, such as collection of overdue commissions or outstanding fees;
• Responding to client enquiries and communicating with you from time to time to maintain contact and keep you updated on the services you have requested;
• Forecasting future needs of our services and general quality assurance and training purposes;
• Engaging in legal proceedings and/or enforcing judgments and/or orders;
• Complying with the applicable legal or regulatory requirements and/or orders of competent authorities;
• Providing you with promotional and marketing information, including market research reports, newsletters, event invitations and/or property market information relating to our products and services which we think may be of interest to you; and Any other purpose identified at the time of collecting your Personal Information.

We generally use information automatically collected by cookies and other tracking technology to identify you as a valid user, ensure that no one else can sign on simultaneously with your account from another computer and help us serve you better based on your registration preferences. We may also use cookies to help us facilitate any promotions or surveys that we provide. Third parties whose products or services are accessible on our websites may also use cookies, and we advise you to check their privacy policies for information about their cookies and other privacy practices.

DISCLOSURE OF PERSONAL INFORMATION

We may disclose your Personal Information to third parties as may be necessary for any of the purposes stated in the above section. Such third parties generally include:
Our third party providers, contractors, consultants, agents and/or representatives (such as law firms, banks, financial institutions, insurers, IT providers, mortgage referral services providers and/or wealth management services providers) who provide services to us or on our behalf, including to:
• Conduct valuations;
• Assist with obtaining payment from creditors;
• Operate data centres;
• Conduct market research;
• Provide advice;
• Potential buyers, tenants, conjunctional real estate agents and brokers for the purpose for which the information was collected or for related purposes (for example to complete a transaction on your behalf or provide you with a service that you requested); Anyone you have authorised to deal with us on your behalf;
• Any of the companies within the St Trinity Property Group and their related companies; Government authorities, regulatory bodies, law enforcement agencies, courts, tribunals and/or parties to the legal proceedings where you have consented to this or we are required or authorised to do so by law;
• Debt collection agencies; and/or Any other third parties identified at the time of collection of your Personal Information.

DISCLOSURE OF PERSONAL INFORMATION OVERSEAS

Some of the third parties listed above to whom we may disclose your Personal Information are located overseas. For example:
Our information technology and business process service providers that are located in countries including (but not limited to) the Indonesia, India and Philippines; and Our overseas clients that are located in the same countries as the companies within the St Trinity Property Group.
Our contracts with these parties generally include an obligation for them to comply with Australian privacy law and this Privacy Policy.
However you acknowledge that, by agreeing to the disclosure of your Personal Information to these entities outside of Australia, we will no longer be required to take reasonable steps to ensure the overseas recipient’s compliance with the Australian privacy law in relation to your Personal Information and we will not be liable to you for any breach of the Australian privacy law by these overseas recipients. On this basis, you consent to such disclosure.

ACCESS, UPDATE AND CORRECTION OF PERSONAL INFORMATION

We take reasonable steps to ensure that the Personal Information we hold about you is accurate, complete and up-to-date. However, we also rely on you to advise us of any changes to your Personal Information. If you are able to access your Personal Information by logging on to an account you have with us, it is your responsibility to ensure your information is accurate, complete, relevant and up-to-date.
On request we will provide you with access to the Personal Information we hold about you, including for the purpose of correcting or updating that information, unless otherwise required or permitted by law.
There is no charge for making the request or giving the access to your Personal Information. We will deal with your request within a reasonable period after the request is made.
If we refuse to provide you with access we will provide you with a written notice that, at a minimum, outlines reasons for the refusal and the complaints mechanisms available to you.
If you wish to access the Personal Information we hold about you or to update or correct it, you can either do so by logging on to your account (if you have one) or contact us using the contact details provided below. We will require you to verify your identity and specify what information you require.

SECURITY OF PERSONAL INFORMATION

We take reasonable steps to protect any Personal Information that we hold from misuse, interference and loss and from unauthorised access, alteration and disclosure. For example, we implement IT security procedures including password protection, firewalls and site monitoring and we store your Personal Information on a secure server.we store your Personal Information on a secure server.
However, data protection measures are never completely secure and, despite the measures we have put in place, we cannot guarantee the security of your Personal Information. You must take care to protect your Personal Information (for example, by protecting any usernames and passwords). You should notify us as soon as possible if you become aware of any security breaches.

DIRECT MARKETING

When you register as a member on our websites, you will be given a choice as to whether you want to receive e-mail messages from us, including newsletters, announcements and e-mail communications about our latest news, products or services. To the extent the relevant local law requires us to seek your consent, we will only send such messages to you if you opt-in. If you do not wish to receive direct marketing calls or materials, you may use the unsubscribe facility in the marketing communication or contact our Chief Privacy Officer using the channels prescribed below. Further, as a registered member with us, you can modify your choice at any time by accessing your registered account with us. We will stop using your Personal Information for direct marketing if you so request.

PRIVACY ON OUR WEBSITES

Our websites may contain links to the websites of other entities. If you click on such links, you will be transferred to the websites of these entities. We have no control over, and are not responsible for, the privacy practices of these entities. You should read the privacy policy of these entities to find out how they handle your Personal Information when you visit their websites.

WHAT IF YOU HAVE A COMPLAINT?

If you wish to make a complaint about a breach of this Privacy Policy or the Australian Privacy Principles of the Act you can contact us using the contact details below. You will need to provide us with sufficient details regarding your complaint together with any supporting evidence. Our Chief Privacy Officer will investigate the issue and determine the steps that we will undertake to resolve your complaint. We will contact you if we require any additional information from you and will notify you in writing of the outcome of the investigation. If you are not satisfied with our determination, you can contact us to discuss your concerns or contact the Australian Privacy Commissioner via www.oaic.gov.au.

PRIVACY & SITE CHANGES

St Trinity Property Group may update this Privacy Policy from time to time so please review it periodically for changes. If the changes are significant or substantive, they will either be advised to you in writing or posted on our websites at www.sttrinity.com.au. Your continued use of our websites or services, requesting our assistance or the provision of further Personal Information to us (directly or via an authorised person) after this Privacy Policy has been revised, indicates your acceptance of the revised Privacy Policy.

OUR CONTACT DETAILS

If you have a query relating to this Privacy Policy or wish to make a complaint, please contact us using the following contact details:
• St Trinity Property Group
• Chief Privacy Officer

• PO Box 1235
• Menai NSW 2234
[email protected]

MORE INFORMATION

For more information about the Privacy Act in Australia and protecting your privacy, visit the (external link) website below:
oaic.gov.au