subject: Common Terms Associated With Buying A Home [print this page] If you are in the market to buy a home in New Zealand, whether to live in or even as investment property, the process involves various legal terms. Understanding the language of real estate could make the buying process easier while protecting you from making wrong decisions. Many terms are used often while some terms are rarer. No matter, taking time to learn some of the more common terms associated with buying a home is to your benefit.
* Cash Flow - This term can be used positively or negatively for the net amount of money that would an investor would make or need to spend
* Conditional Offer - This offer is presented to a vendor that may be subject to one or more conditions that would need to be met prior to the offer being accepted. Unfortunately, conditional offers have a negative impact on the homebuyer?s power to negotiate, which might end up cost them more money before an agreement with the vendor would be finalized.
* Default - When a homeowner does not pay house payments on the mortgage loan for three to four months, the property goes into default
* Equity - This term represents the current value of the property minus the amount still owed on the mortgage loan. As an example, if a home were purchased in Herne Bay for $500,000 and current value is at $550,000 but the balance on the mortgage loan were $400,000, the equity in that property would be $150,000 ($550,000 value minus the loan balance of $400,000).
* Fixed Rate Mortgage - Also known as an FRM, this type of loan has interest that remains the same throughout the life of the mortgage loan
* Floating Rate Mortgage - For this mortgage loan, the interest rate would change in connection with market variables
* Foreclosure - When a homeowner falls behind in loan payments, after three to four months, depending on the lender, the property would go into default. At that time, the bank, Mortgage Company, or other lending institution would put the home into foreclosure as a means of gaining control so the home could be sold to reduce financial loss.
* Freehold - In this case, the title on the property is clean, meaning the person has complete ownership of the property to include the structure, land, and any outbuildings
* Interest Only Loan - This type of mortgage loan is set up so only the interest is paid down and the full amount would be paid by the owner when the loan date matures or chooses to refinance both principle and interest with a different type of loan.
* Leasehold - For this, you would buy right to occupy a specific home although ownership would be retained by another individual but for a specific amount of time. In New Zealand, some of the leaseholds for Auckland Property include Kohimaramara, One Tree Hill, and most of the Viaduct.
* Mortgage - A loan secured by a bank, mortgage company, or some other type of lending institution that finances real estate purchases
* Negative Gearing - With this, the investor?s position is described when incoming rent from an investment is not enough to cover the full amount of the payment for the mortgage interest payment, in addition to other expenses. For instance, if an investor has a rental home in Auckland with $400 a month coming in from renters and interest payments are $450 monthly, then the $50 is negatively geared.
* Passive Income - This is money an investor would receive from a renter occupying the home.
* Valuation - This term is the current market value of the property as deemed by a certified professional
* Yield - This is the amount of money earned on a specific piece of property, which would be referred to in the form of investment percentage (the equation involves interest earned and investment amount)
Again, each of these property terms is commonly used when buying home in New Zealand. When used by real estate agents or brokers, often buyers are too nervous or uncomfortable to ask the meaning. Therefore, this list could be used when buying a new home.
by: Oliver Darraugh
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