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Become ‘Home Buyer Lingo’ Savvy

[vc_row full_width=”” parallax=”” parallax_image=””][vc_column width=”1/1″][vc_column_text]When you are new to the Home Buyer game, words and abbreviations are often thrown around and you may have no idea what they all mean. Our friends at Mortgage House have explained everything for you, so now you will be able to understand all the Home Buyer mumbo jumbo.

Fixed Rate Home Loan

A fixed interest rate home loan is usually taken out for an agreed period of time between 1 and 5 years. When this ends, you have the choice of fixing the rate again or switching to a variable interest rate. Your repayments will remain constant during the fixed term, regardless of any interest rate changes.

Progressive Fixed Rate Home Loan

This loan is similar to a standard Fixed rate home loan, with the exception that it has the ability to make extra mortgage repayments without incurring a penalty fee. Progressive Fixed rate loans generally offer more flexibility and include additional features such as a redraw facility and an offset account.

Offset Account

Using an offset account allows you to potentially save time and money off your mortgage simply by using your regular income. By placing any income you receive into the offset account you only pay interest on the balance of your home loan account minus that of your offset account. For example if you have a $150,000 mortgage and there is $5,000 in your offset account you will pay interest on $145,000, meaning the more in your offset account the more you save.

Variable Rate Home Loan

A Variable interest rate home loan is subject to changes in interest rates. If the interest rate rises, so will your repayments. However, if the interest rates decline, your repayments will also be reduced. Where as with a Fixed rate loan, if interest rates fall, the home loan repayment will not reduce as your repayment amount always stays the same.

Loan to Value Ratio (LVR)

The loan to value ratio refers to the proportion of money you borrow compared to the value of the property. Eg. Purchase Price $600,000 with a loan of $570,000 would be a LVR of 95%.

Lenders Mortgage Insurance (LMI)

Generally if you borrow more than 80% of the property’s value, you will have to pay Lenders Mortgage Insurance (LMI) adding additional costs to the purchase of a home. This insurance benefits the lender and protects them in the event that you default on the loan.

Stamp Duty

Stamp Duty covers the cost of the legal documents for the transaction. it is a tax charged by the government on the sale of the property. The tax is different depending on which state you live in. In NSW Stamp Duty is required to be paid three months after the exchange of contracts or on settlement, whichever is earlier. Stamp Duty is calculated on the dutiable value of the property, which is the higher of the purchase price and the current market value. Stamp Duty in NSW is around:

  • $18,000 on a $500,000 purchase
  • $36,000 on a $900,000 purchase
  • $68,000 on a $1.5m purchase
  • $95,500 on a $2m purchase

Interest Rate

The interest rate is the rate charged by the lender to the borrower for the use of the money loaned. It is usually expressed as an annual percentage of the principal amount.

Comparison Rate

A comparison rate helps customers work out the true value of a loan. It is worked out by looking at the amount of the loan, the term of the loan, the repayment frequency, the interest rate and any fees and charges connected with the loan. It displays a single percentage rate that can be used to compare various loans from different lenders.

First Home Owners Grant (FHOG)

The First Home Owners Grant scheme was first established to offset the effect of the GST on home ownership. Under the scheme, a one-off grant is payable to first home owners that satisfy all the eligibility criteria. The grant varies from state to state similar to Stamp Duty. In NSW a $15,000 grant applies for new homes only & reduces to $10,000 on 1 January 2016. For a full list of grant information see our previous blog ‘Home Buyer Benefits’.

Borrowing Calculator

A Borrowing Calculator simply helps you calculate how much money you are able to borrow based on your income and assets. You will find a borrowing calculator on the Mortgage House website.

Positive Gearing

Positively geared properties are when the rental return is higher than your loan repayments and outgoings. Positive cash flow properties are self-funding and are considered to be a conservative investment strategy that provides an income with exposure to the prospect of capital growth. Keep in mind that with positive gearing there is the potential that tax will be payable on the net income (after the consideration of depreciation and other tax deductions).

Negative Gearing

Negatively geared properties are when the rental return is less than your loan repayments and outgoings (placing you in an income loss position). There is, however, the underlying expectation that the accumulated losses will be more than offset by the capital growth on the property. The key benefit associated with negative gearing is that the loss associated with the property ownership can be offset against other income earned, reducing your assessable tax income, thereby reducing your tax payable.

Legal Fees

First Home Buyers are often shocked at the number of expenses involved in buying a property, from legal and bank fees to government charges, the costs add up. As a general rule, you should budget for around 5-10% of the purchase price to be spent on acquisition expenses.

Mortgage Registration Fee

This is a government fee paid when a mortgage is established against a property. The Land Titles office in each state or territory collects the fee for registering the lenders mortgage on the title record for the property.

Searches

When you buy a property, you buy it within a Torrens title system. The Torrens title system guarantees you the title and ownership of your property and ensures that no one can displace you. During this phase, your solicitor needs to conduct a number of searches to ensure no one else owns the land or property so you can rightfully purchase and own it.

Note: Information courtesy of Mortgage House‘s booklet “Guide to Buying Your First Home”[/vc_column_text][/vc_column][/vc_row]

Testimonials

Building a New Living Home has given me confidence that I can easily embark on building a home rather than buying a place, and get a better house/ home rather than a small flat. But you have to choose a builder that KNOWS how to build, that builds exactly how the design dictates. A builder who can deliver what they say, when they say. A house that won’t look daggy in years to come is important too, and New Living Homes did just that. The overall investment has worked out well too, growing in value is a short period of time.

G.Pace

”The idea of our brand new home is still really sinking in as we never dreamt of building or ever own. A VERY big thank you to New Living Homes for giving us a brand new home! You’ve made our dreams real!”- Grevillea 4.1, Elegance Facade

L & M King

We would just like to say a massive thank you once again for all your help with the house. We moved in on the weekend and we are loving it ! So thank you for being part of the team that made our dream come true.

Belinda, Jordan Springs, Acacia 4 Urban

I love that my new home is mine!!!! There is nothing I don't love about it. The finishes are great and it is just perfect! I love showing it off to people and all of my friends and family love it and always compliment the design and workmanship.

B.M - Spring Farm  

‘’From the very beginning, our experience with New Living Homes has been nothing but amazing. From our very first meeting at Spring Farm, to the accounts team, to the pre-construction team, and our Construction Manager on site, nothing was ever an issue, or a question too stupid’’.

Rebecca & Steve - Jordan Springs 

‘’I have been extremely happy with my experience with New Living Homes and have told anyone and everyone about our build. Everything went smoothly and yes there were a few problems but our site manager sorted them out as quickly as he could.. Throughout all the build, nothing was too much trouble for our site manager’’

Debbie & Brian - Jordan Springs 

After hearing some horror stories of people building their homes we were fairly nervous to see how it would all
unfold however from the very first dealing with New Living Homes we could not fault a single thing. I would like to
give special mention to Emma from the Brooks Reach Display who was very accommodating with us pestering her
with what seemed like every week as we would be checking different things in the display home.

Tim & Kara - Flinders

My experience was excellent. This was the second house I have built in 4 years and the whole experience was a pleasure from start to finish. All of the sales team were very helpful and very responsive to each and every enquiry I had.

Damian & Lauren - Spring Farm 

Building with New Living Homes has been a pleasant and enjoyable journey so far, and we know we have Sandra to thank for this. Her customer service is second to none, and has made all the difference in building this time round. My husband and I just wanted to make sure recognition and praise was given where it is due. Thanks again for everything Sandra! We are looking forward to more builds with NLH. 

D.E, Marsden Park 

I always thought that building a house in Australia would be a nightmare like everyone told me but it was more than a pleasure as I was never troubled about anything. The process was as smooth as a butter.

Thank you guys, its because of your amazing team work, good flow of communication and the zeal to work hard to let people achieve their dreams, has gotten us what we really wanted. -

Monika & Mayur, Elara 

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