You’re stressed and concerned about buying or selling your property and now you’ve bumped head to head into a load of odd terms and phrases. Read on to avoid a muddy puddle of real estate confusion.
This is where sellers usually begin their potential property transaction. Usually available for free, house appraisals involve a real estate agent coming to your home and checking both its exterior and interior along with the local area. The agent can then give you an estimate of how much your house is worth on the market, which will, in turn, help you decide what your reserve and similar is.
This is one for both buyers and sellers to take note of. This phrase is essentially the difference between your property’s current market value and any cash you still owe your lender or bank. Depending on how much equity you have, it can greatly assist you in buying a second home. Bear in mind, there are two kinds of equity: accessible and useable.
Lender’s mortgage insurance (LMI)
Another tricky phrase to absorb and hopefully one you have no need to figure out. But if you borrow more than 80% of your home’s value, than you will! An LMI is a one-off fee for people with such very low deposits, paid to banks and other lenders by people who are considered high risk. The fee essentially protects the lender, not you, and the amount of your LMI depends on the lender itself, how much the house is worth, and how much you need to borrow.
Loan-to-value ratio (LVR)
Another figure to figure out, LVRs are the percentage of your dream home’s current value. As an example, if you borrow $80,000 from your lender to buy a $100,000 property, then this is an 80% LVR. In general, a high LVR such as this one means a high risk to your lender but either way, this percentage directly affects your chance of enjoying a loan.
Available as either an individual or company, mortgage brokers will take care of every aspect of contracts between you and your lender. A great go-between for the two groups, mortgage brokers can help you arrange, understand and apply for home loans, explain how much you need to borrow; discuss your different needs; find different options for you; and take you all the way from borrowing to settlement.
It’s a great idea before buying a property – either privately or by auction – to obtain pre-approval from a lender. This statement helps buyers know exactly what they can afford and how much the bank will lend them.
The most exciting and anticipated day for both buyers and sellers, settlement is when a property sale is finally official. The house title is transferred to the buyer; all financial details are finalised, including council rates and land tax; and the buyer is legitimately owner of their new house.