The Home Buyer's Glassary

Let's talk terminology used in borrowing...

If you're new to property purchasing, this may help navigate through the terms and phrases frequently used during the home lending process.


Capital Gains Tax (CGT)

When selling a capital asset such as a house, you will either make a capital loss or capital gain.  The difference is calculated using what you paid, subtracted by what you sold it for.  You're required to pay tax on the gain made for the financial year.


Comparison Rate

To assist consumers identify the true cost of a loan, lenders are required to include a comparison rate when advertising a loan interest rate.  The comparison rate percentage factors in costs such as interest rate, as well as loan fees and charges , and can be used to compare loans across lenders.


Equity

Equity is the difference between the value of an asset and the amount owing against that asset; e.g. if your house is valued at $500k and you owe $400k on the loan, the equity available is $100k.


Fixed Interest Rate

A fixed interest rate is where the interest rate is locked in for a period of time, this provides consistency for repayments for that period.


Interest Only

Interest only repayments means payment is made on the interest only charged to the loan.  Repayments are reduced however, as no principal is being paid from the loan, the full loan amount will still be outstanding at the end of the interest only period.


Lenders Mortgage Insurance (LMI)

If more than 80% LVR is borrowed to purchase a property, it is likely LMI will be charged to the loan to protect the bank against loss of a forced sale.  This is generally added to the loan and therefore paid off over the period of the loan.


Loan to Value Ratio (LVR)

This measures the amount of the loan compared to the value of the property; e.g. a house purchased for $500k with a $50k deposit = LVR at 90% ($450,000/$500,000=90%).


Offset

Some lending providers allow a mortgage offset feature using a transaction/deposit account linked to the loan.  The transaction/deposit account balance will 'offset' daily against the loan balance, meaning only the interest difference, if any, will be charged; e.g. a mortgage of $500k with $50k in an offset account means that only interest would be charged on $450k.  (TIP: the more offset accounts available, the  more convenient the savings options - you could be saving for bills, holiday, car in separate accounts that are linked to the loan, all contributing to offset against the loan)


Principal

The principal of a loan is the amount that is borrowed, with interest usually being charged to this amount.


Redraw

Some home loan products allow a mortgage redraw (or cashback) facility, allowing a borrow to pay more off their home loan but have access to those funds if needed.


Stamp Duty

This is a tax levied by all Australian states and territories when a property is sold or transferred to a new owner.  The cost of stamp duty depends on the value of the property and any concessions that may be available (check with your state).  RealEstate.com.au have a useful stamp duty calculator to estimate this additional costs.


Any other suggestions to add to this list?

Check before you invest

by Dana Dobson • 4 January 2024
ASIC recently released an updated Investor Alert List , a useful resource for individuals considering investments, offering insights into the legitimacy of entities. This new list supersedes the former ‘companies you should not deal with’ and encompasses both national and international entities. ASIC flags concerns about these entities operating in Australia without proper authorisation or engaging in fraudulent activities, including ‘impostor’ entities, also known as impersonation scams. Additionally, ASIC has revised its investor checklist , offering guidance on pre-investment measures. However, it’s essential to note that the list is not exhaustive, the list may not cover all dubious sites/entities, as ASIC might not have detected them yet. ASIC urges industry participants to contribute to identifying suspicious investment platforms by reporting them to Scamwatch for further investigation and action. For further assistance in making informed investment choices, ASIC’s website provides several articles, starting with the check before you invest page .

How long to sell in the current market?

by Dana Dobson • 6 October 2022
Houses are taking longer to sell, with the average number of days on market (sale by private treaty) now stretching to 29 days plus. Days on market often depends on vendors' expectations and, with price growth softening, some vendors are taking longer to adjust to the current market. The market has shifted to one for 'buyers', where purchasing decisions are no longer driven by FOMO (fear of missing out). In June this year the average days on market were at its lowest (31 days), compared to 41 days in August 2022. Other capital cities have also seen a rise - Sydney now 48 days, Melbourne 58 days, Perth 54 days, Hobart 46 days, and Canberra 49 days. Darwin has the highest days on market at 102 days, whilst Adelaide has remained relatively stable averaging 60 days since June. Yet, the rapid rise in interest rates, coupled with high inflation, has unsettled many buyers. Feeling uncertain and apprehensive, consumer confidence has dropped, with many waiting to see what's next before making purchasing decisions. Those that are still willing are finding adjusted lending criteria is making it more difficult to get a loan or more contribution is required in the deposit. On a brighter note, according to Domain, the fastest-selling suburbs in Australia in August 2022 were in Queensland (i.e. 9/10 houses and 7/10 units were Queensland suburbs). What are your thoughts on the property market leading up to Christmas?

Good news for Queensland home owners...

by Dana Dobson • 30 September 2022
In welcome news for property owners and investors across Australia, the Queensland government has today announced it will shelve the proposed changes to land tax. The planned changes were to come into effect from 1st July 2023, land tax would have been calculated using a formula taking into account the value of other land owned across states. Currently in Queensland, an individual who owns land is not taxed until the land value exceeds $600k, with exemptions for principal place of residence. The new rules would have calculated the amount of land tax based on the Queensland proportion of all total land value across Australia, which lead to many investors expressing concerns for annual land tax bills at an additional $15k-$30k. The complexity of the tax requirements and reliance on the self-disclosure of individuals and data-sharing across states, reinforces the plan should be completely scrapped, not just shelved. Thankfully common sense has prevailed! Investors can hold on to property, the rental market won't see an exodus of properties, we should see confidence restored in the Queensland investment market, which ultimately should help the housing crisis. This is great news for all Queensland property owners, and with current vacancy rates in Queensland at an all time low (~0.07 per cent), should be positive news for renters.

Property 2022

by Dana Dobson • 23 September 2022
Sydney and Melbourne are losing some value as property prices continue to slide however, Dr. Andrew Wilson from My Housing Market is forecasting only a 6% drop over 2022. He also predicts that Brisbane, Adelaide and Perth should finish the year with 11%, 12% and 9% growth respectively.

Brisbane Queensland

by Dana Dobson • 6 September 2022
Living in Brisbane...

What's your strategy?

by Dana Dobson • 22 August 2022
There are several property ownership strategies...what is yours?

The Benefits of Using a Buyer's Agent

by Dana Dobson • 19 August 2022
Your best interest at heart A traditional real estate agent will always work to get the best outcome for a vendor, as a buyer's agent we are always looking out for only you! We take the time to listen to your needs and goals to develop a purchasing plan to find the best property for you and at the best price. Save you money With extensive knowledge of the property market, a buyer's agent understands the latest trends and best opportunities. This market insight, combined with expert negotiation skills, means the best property for the best price and terms. Save you time A focus only on property purchasing, a buyer's agent knows where to look to find the best home or investment to meet your needs. An established network, and access to exclusive property buying opportunities, provides the formula to locate properties to meet your specifications, this can save you valuable time in finding the right property for you. Commitment to clients Our goal is to make your property buying experience as stress-free and enjoyable as possible. We coordinate all the supporting services that go into buying a property, including collaborating with solicitors, mortgage brokers, building and pest inspection, real estate agents and more. What are you looking for in a buyer's agent, comment below?

Is Toowoomba a good place to invest?

by Dana Dobson • 19 August 2022
According to Terry Ryder, Director of Hotspotting.com.au, The Garden City has one of Australia's strongest property markets, so what makes it so? Toowoomba region has a population of over 173k and growing and ABS statistics show an unemployment rate as low as 1.6%. Homes in Toowoomba are still affordable, offering a very attractive life style, and with rental yields at 5-6%, low vacancy rates, and billions of dollars being injected into the region for major projects including rail, hospital, airport and various energy projects, it ticks all boxes for property investors and potential for capital growth. What are your thoughts? Is Toowoomba one of the regional hotspots to invest and why? Place your comment below...

Make the most of the season by following these simple guidelines

by duda • 19 August 2022
The new season is a great reason to make and keep resolutions. Whether it’s eating well or cleaning out the garage, here are some tips for making and keeping resolutions.