Jargon busting for first home buyers
Master the language that could make buying your first home a little bit easier.
Starting out on the home buying journey can be daunting. There’s lots of information out there, as well as tools that can help you find your way, like our Property Guide app.
However, when you are new to something such as the property market, it can take a while to learn the ‘language’.
To make the informed decisions, you need to understand the conversations. That’s why we’ve put together this quick guide to some of the common jargon you might hear but may not be familiar with, and what it means in plain English.
It’s important to understand all the costs involved in buying a home, compared to how much you earn, to work out what you can realistically borrow and repay. Tools are available to help you work out how much you can borrow, how much repayments will factor into your budget and what the total cost of purchase will be, including stamp duty, legal costs and so on.
Conveyancing is the legal transfer of property from one person to another. Usually this would be done by a solicitor or a licensed conveyancer.
First home owner grants and schemes offer concessions for first home buyers. They vary from state to state.
Gazumping describes what can happen in a private treaty sale when an owner verbally agrees to a price from one buyer, then decides to sell to another buyer instead. The first buyer is said to have been ‘gazumped’.
Loan to value ratio (LVR)
This describes the size of your loan compared to the value of your property. A $500,000 property with a $400,000 mortgage has an LVR of 80%. If you want to buy a property on which the LVR is more than 80% (i.e. your deposit is less than 20%), you may need to take out lenders’ mortgage insurance. This insurance protects the lender in case you default on your loan.
Off the plan
Buying off the plan means buying a property such as a unit, before it has been built.
Previously known as body corporates, owners corporations are the administrative bodies in strata schemes (see below), such as apartment blocks. The owners of all the block’s units are members of the owners corporation and make joint decisions on issues such as maintaining the property and resolving disputes.
Before you start looking for your property, your lender can give you conditional pre-approval for a home loan. This means you’ll be ready to take action as soon as the right home comes up. Once you’ve found your home, your lender will verify your financial position and make you a final loan offer.
Most buyers have a pre-purchase property inspection undertaken by professionals so they find out about any structural or pest problems before a sale goes through. It’s also known as a pest and/or building inspection.
Settlement usually takes place about six weeks after you sign a contract to buy a property (also known as ‘exchanging contracts’), though this time period can vary. On settlement day, the balance of the property price is paid to the seller. Government taxes and other fees are paid, the title deeds are given to your lender and registered at the lands office, and you get the keys to your new home.
A state tax that you must pay when you buy a property. Concessions are sometimes available for first home buyers as part of first home owner schemes. See your state government website for more information.
Units are typically in strata schemes, which combine individual ownership of a property (such as a unit) with group ownership of “common property” such as driveways and gardens. They are managed by owners corporations (see above).
Thinking of buying your first property? Speak to one of our Home Lending Specialists today.
This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Commonwealth Bank of Australia ABN 48 123 123 124.