Your complete guide on how to talk real estate

Real estate agents use plenty of jargon. To a first home buyer, it can sound like a foreign language. Rather than just nodding and smiling, it’s a good idea to find out what it all means. We’ve broken down the common terms into a simple guide to help you become more fluent in real estate.

Amortisation Period - The number of years it will take you to fully pay off your home loan.

Appreciation - When the value of your property increases.

Appraisal - An estimate of a property’s value, which is written by a qualified appraiser.

APR (Annual Percentage Rate) - The most accurate indicator of the cost of a mortgage loan.

Assessment – An estimate of a property’s value based on your city or state’s opinion.

Bank Valuation - The bank’s estimate of a property’s value.

Bridging Loan - A short-term loan that allows a buyer to purchase a new property if the money for a property they recently sold hasn’t cleared yet.

Capital Gain - The profit you make on the sale of a house.

Cash-Out Loan – When you borrow money against the equity in a home.

Caveat - A notification on the certificate of title declaring a party other than the owner may have an interest in the property.

Caveat Emptor - This means ‘buyer beware’ and is a warning to do your research on the property.

CGT (Capital Gains Tax) - The tax on the profit made from the sale of an investment property.

Closing Costs - All of the additional costs associated with borrowing a mortgage and buying a home.

Contingency - When a buyer makes an offer to buy a property, they can make the offer ‘contingent upon’ a certain condition, like a loan approval. If the condition is not met then the offer can be withdrawn.

Counter offer - A new purchase offer made after a previous offer is rejected by the owner.

Depreciation - The reduction in the value of a home over time.

Equity - The difference between the value of the property and the amount owed.

Exchange of contracts - The legal process where a buyer and seller enter into a binding agreement for the sale of a property. The buyer usually pays a deposit at this time, but this can be forfeited if either party backs out of the agreement.

Exclusive listing - When an agent is given sole responsibility for the sale of a property during a specified period. If another agent sells the property during that time, the original agent is entitled to any commission.

Fittings - Any items that are not usually included in the sale of a property, such as washing machines, televisions, and refrigerators.

Fixed-Rate - A fixed-rate mortgage keeps the same interest rate over an agreed duration of the loan, regardless of what’s happening in the overall economy.

Fixtures - Any fixed items in the property such as built-in shelving or carpets. These are usually included in the sale of a property.

Guarantor - Anyone who agrees to take over repayments if you default on your loan.

Interest - The amount paid by a borrower to a lender on top of the main amount borrowed (the principal). The interest rate can be fixed, variable or a combination of the two (split loan).

Interest-Only Loan - When only the interest is repaid during the term of a loan. The principal is repaid after the loan term expires.

LMI (Lenders Mortgage Insurance) - This covers a lender against default if the borrower doesn’t have a big deposit. It is paid by the borrower.

LVR (Loan-To-Value Ratio) - The amount of money borrowed versus the value of a property. When the LVR is high (e.g. over 80 per cent), a lender is more likely to charge LMI.

Mortgage - This is what the borrower pays back to the lender with a predetermined set of payments (usually monthly).

Mortgage Protection Insurance - This covers a borrower’s mortgage repayments in case they get sick or injured and are unable to pay.

Negative Gearing - If a home owner is spending more on an investment property than it is earning, then this shortfall can be used to reduce the owner’s tax.

Offset Account - This is a type of account that uses its savings or credit to offset daily against the home loan balance, which can then reduce the interest you have to pay.

Reserve Price - This is the lowest price a vendor will agree to accept.

Reverse Mortgage - Where repayments don’t need to be made until after the property is sold, or the last homeowner dies.

Settlement Date - This is when the sale of the property is finalised. The buyer pays the vendor and takes possession of the home.

Stamp Duty - A tax the property buyer has to pay, the amount of which is a percentage of the contract value. This is different for each state.

Title - The type of property ownership.

Trust Account - A bank account that gets managed by a real estate agent where funds like rental income are paid and held on your behalf.

Variable-Rate - A type of mortgage where the interest rate owed can fluctuate based on changes to interest rates in the overall economy.

Vendor - The owner of the property for sale.

Yield - The annual rental income of an investment property, expressed as a proportion of the property’s value.

Zoning - Local governments use this for urban planning to work out how land will be used (e.g. low density residential, high density residential, and metropolitan).