10 first home buyer terms you need to know
For most First Home Buyers, speaking with a property or mortgage professional can seem like speaking another language. Before you go into a meeting with your mortgage broker or real estate agent, understand the 10 common first home buyer terms that they may use.
1. APPRECIATION - An increase in value. Thereby, Depreciation is the decrease in value.
2. EQUITY - The interest or value that an owner has in an asset over and above the debt against it. For example, a home-owner has equity in that part of the value of his or her house above the amount borrowed from a lender.
3. GUARANTOR – A person or thing that gives or acts as a guarantee. The guarantor will provide a guarantee for your home loan which is secured on their property. This is often a popular alternative strategy for First Home Buyers with limited cash or deposit capabilities.
4. GEARING (LEVERAGE) - A measure of indebtedness i.e. the extent of borrowings as against the equity held by a person or company in an asset. Usually expressed as a ratio. Positive gearing refers to the magnification of financial gain resulting from borrowing when the cost of capital (borrowed) is less than the return on capital and leads to magnification of returns to equity. Negative gearing refers to the same relationships but where the cost of capital exceeds the return on capital. Persons would normally only negative gear in the expectation of positive returns in the future.
5. HOLDING DEPOSIT - An amount given by a buyer to the estate agent acting for the seller. It shows the buyer’s serious commitment to the property and is commonly 10% of the purchase price.
6. MARKET VALUE - Market value is the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion.
7. MEDIAN - The middle number when data is arranged from lowest to the highest in sequence. If there are two median scores, they are averaged to provide the true median.
8. STAMP DUTY - The tax imposed by state governments on certain contracts (e.g. Contracts of Sale and Registered Leases). The amount of tax payable is calculated as a percentage of the contract value. See also individual state legislation.
9. VACANCY RATE -The proportion of inhabitable rental premises which are vacant.
10. YIELD - The derived percentage return of a property assessed from the net income and the market value or price. It is calculated by dividing the net income by the opening market value or price.
Disclaimer: The information contained in this article is for information purposes only and cannot be relied upon. You should seek professional advice tailored to your specific personal and financial circumstances.