Buying a home can sometimes be like learning another language! Below we’ve put together a an extensive list of common terms you will encounter when going through the process of arranging a home loan.
The advertised price for a property, which is not always the price you pay.
A public sale of property where potential buyers bid for a property until the highest price is reached. Commonly there is a reserve (minimum price) price set by the seller, and once this reserve is met the seller must accept the highest bid.
A group made up of owners (on the title of the property) in a block of flats or apartments, who are responsible for the running of the building and its shared spaces.
A loan designed to bridge the gap between the purchase of your new home and the sale of your current home. Bridging loans are short–term loans.
Buyer Budget Over (or BBO)
Similar to BEO, but there’s no obligation on the seller to consider offers.
Buyer Enquiry Over (or BEO)
Potential buyers can often expect to pay above this price. If you offer over this amount the seller has to consider your offer.
The difference between the amount you paid for something and the amount you could sell it for. For example, If you purchased a home for $300,00 and it goes up in value to $350,000. You made a capital gain of $50,000. (New Zealand currently doesn’t tax capital gain).
Capped interest rate
A variable interest rate that can move up and down, but can’t go over a certain level in the time it’s set for.
Certificate of title
A document containing the legal description of the property, who owns it and who has a mortgage over it.
Items in a property that are usually movable but are considered as included in the sale of the property. Chattels are often listed in the sale and purchase agreement, and can include curtains, carpets, light fittings, ovens and TV aerials.
Code of Compliance Certificate
A certificate in the Land Information Memorandum (LIM) that says the building complies with the Building Act.
An offer in principle from the bank of how much they could lend you, with final acceptance subject to the confirmation of certain criteria, like the value of the house you want to buy.
An offer that depends on other factors, e.g. getting a home loan approved (conditional on finance), a satisfactory builder’s report or getting a satisfactory valuation. You or the seller can list as many conditions as you want.
The process of transferring legal ownership of a property from one person to another. This will be handled by your lawyer.
A legal restriction on the property that you must obey - for example, restrictions on the type of structures you can build, or a native tree you must protect.
This is where a number of people share the ownership of a piece of land. Cross leases might be used for flats or townhouses, or for two properties with a shared right of way (e.g a driveway).
Date of drawdown
The date your home loan begins (drawn down) and the date your interest and repayments are calculated from.
After your offer on a property has been accepted, you might be asked to pay a deposit - often 5-10% of the purchase price. If you’re dealing with a real estate agent, the deposit goes into a trust account operated by the agent. It’s counted as part of your overall payment to the seller. A deposit isn’t compulsory but in most cases is expected.
Discharge of mortgage
When you’ve paid your mortgage back to the bank and the bank’s name is taken off the title.
An order on the title of the property that allows someone to use it in a certain way. For example, run pipes or cables under your land.
Take away the amount still owing on your home loan – and any other debts you may have secured against it - from the property’s current market value. This is your equity - the amount you actually own of your house.
Fixed interest period or fixed term
How long a certain fixed interest rate applies to a loan. Can be between six months and five years.
Fixed interest rate
Means the interest rate won’t change for a set period of time.
Describes the form of ownership. Owning a freehold property means you own the building and the land it sits on absolutely - as opposed to a leaseholder (see Leasehold).
Government Valuation. The value placed on a property by the local council for rating purposes (also known as the Rateable Valuation or RV).
See rateable valuation.
Home Loan Insurance
Insurance that protects your home loan repayments if you can’t pay them. This insurance usually covers death, sickness or redundancy.
What the bank charges you on the money you borrow. Expressed as an annual percentage of the amount you borrow.
The payments you make to your loan either weekly, fortnightly or monthly.
You own the building or house but the land is owned by someone else, who may charge you rent to occupy the land. As long as your lease payments are up-to-date, you have the right to exclusive possession of the building or house for the duration of the lease term.
Lender’s Mortgage Insurance (LMI)
A one-off payment to a third party insurer. This insurance usually applies to customers who have less than 20% deposit.
Land Information Memorandum report on the property, prepared by the local council. It should include and show alterations that have been permitted. For example decks, renovations and so on.
Loan repayment term
How many years it’ll take to pay off your home loan. You can choose a loan repayment term between one and 30 years when you apply for your loan.
Loan to Value (LVR)
The amount you wish to borrow as a percentage of the property’s market value.
Low Equity Fee (LEF)
A one off fee at the start of your loan that usually applies to customers who have less than 20% deposit.
An estimate of the property value right now – that is, what a buyer would be prepared to pay and what a seller would accept for the property at a point in time.
Marketed without price (MWP)
Similar to Price by Negotiation. It’s uncertain what the demand for a property is, so there’s no ideal price set.
Sometimes used to describe a home loan. The mortgage is the pledging of a property to a lender/bank as a security for a loan.
The bank or company that loans the money and holds the mortgage.
If the borrower can’t pay their mortgage and the mortgagee has to sell the property to get their money back.
The Member Real Estate Institute of New Zealand.
The amount that the loan contract specifies must be paid at an agreed frequency (e.g. weekly, fortnightly or monthly).
Price by negotiation (PBN)
The buyer and seller negotiate until they reach an agreed price. The real estate agent usually acts as a go-between.
Price on application (POA)
The agent will only disclose the seller’s ideal price if the buyer is serious.
The total amount you borrow. The amounts you repay regularly are usually made up of both principal and interest, and as you make more payments the amount of principal you’re paying increases and your interest decreases.
How much you end up paying for the property (including chattels).
The person/s buying the house.
Rateable Value (RV)
The value placed on a property by the local council for rating purposes (also known as the Government Valuation or GV).
Sale and purchase agreement
The written contract for a property - usually handled by a real estate agent and a lawyer. The agreement usually outlines your offer, the settlement date and any conditions that must be met before the sale goes ahead.
The value of the property that the Bank will be prepared to lend against, usually the same as the market value or the agreed purchase price.
The date you pay the seller and legally own the property.
With a table loan, the amount you have to repay stays the same each time (except for changes in interest rate). The payments go firstly to pay interest accrued on the loan, and anything left over goes toward the principal amount. At first, you’ll mostly be paying the interest on your loan, but as time goes on you’ll repay more and more of the principal.
Tenancy in common
A way for friends or relatives to own a property together. Each party has a share in the property, and when they die it’s passed on to whoever it’s left to in their will (rather than going to the other party as it would within a couple).
Buyers submit formal offers (or tenders) by a set date. The highest tender amount usually wins. There are several versions of tenders and you should ask your agent about these. For example, a "tender with reserve" means that once an offer is received above its reserve, it must be accepted.
Another word for 'period' or 'duration'. This word is used to describe the length of time an interest rate or loan will apply for.
A “Certificate of Title’ is a document containing the legal description of the property, who owns it and who has a mortgage over it.
An outright offer to buy with no conditions attached. An offer also becomes unconditional once any conditions have been met, e.g. getting a valuation report from a registered independent valuer. See "Conditional offer".
Allows people to individually own an apartment, unit or flat in a building, with multiple ownership of the common spaces and facilities like driveways and elevators.
A written report of the current market value of a property, prepared by a registered independent valuer.
Variable interest rate
Also known as floating interest rate. It’s an interest rate that can go up or down with the market.
The person selling the property.
It’s always easier when you know the lingo.
Talk to us today, we speak loans like its our native tongue!