January 28, 2022

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


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.


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.


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.


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


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


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


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!


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


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.


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.


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 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


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.


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


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


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!

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