Buying a home is an exciting step, but it can sometimes feel like you’re learning a whole new language. To make the process smoother, we’ve put together a guide to some of the most common homebuying terms you’ll encounter.
Whether you're a first home buyer or looking to upgrade, understanding these key terms will help you feel more confident as you navigate the property market.
Getting pre-approval from a lender is an essential first step in the homebuying journey. Pre-approval gives you a clear idea of how much you can borrow based on your financial situation, so you know your budget before you start house hunting. It also shows sellers that you’re serious and ready to make an offer.
In Western Australia, stamp duty (also known as transfer duty) is a tax charged by the state government on property purchases, with the amount depending on the property's value.
First home buyers may be eligible for concessions or exemptions; for instance, purchasing a property valued under $430,000 can exempt you from stamp duty. For properties valued between $430,000 and $530,000, a concessional rate applies, so it's worth checking your eligibility for any exemptions if buying your first home in WA.
When taking out a home loan, you’ll need to decide between a fixed or variable interest rate. A fixed interest rate stays the same for a set period, offering predictability with your repayments. A variable interest rate, on the other hand, can fluctuate with the market, meaning your repayments can go up or down. Some buyers opt for a split loan, which combines both fixed and variable rates for more flexibility.
The Loan-to-Value Ratio, or LVR, refers to the percentage of the property’s value that you’re borrowing. For example, if you’re buying a home worth $500,000 and you’re borrowing $400,000, your LVR would be 80%. Most lenders prefer an LVR of 80% or lower, with some offering a lower deposit option available if necessary.
Lenders Mortgage Insurance is a one-off insurance payment you might need to pay if your deposit is less than 20% of the property’s value. LMI protects the lender in case you’re unable to repay your loan. It can be added to your loan amount, but it’s a cost to be aware of if you’re not putting down a large deposit.
Settlement is the final step in the homebuying process. It’s when the ownership of the property is legally transferred from the seller to you, the buyer. On settlement day, your lender will pay the seller the agreed amount, and you’ll officially receive the keys to your new home or block of land.
The typical timeframe for settlement is 21+ days after finance approval, but this can vary depending on whether the land you’re purchasing is titled. If the land is yet to be titled, settlement may be delayed until the titles are issued.
Conveyancing is the legal process of transferring ownership of a property from the seller to the buyer after you have settled. A Settlement Agent will handle this process, ensuring that all contracts are properly prepared, signed, and lodged with the relevant authorities. They’ll also conduct searches to check for any issues with the property, like zoning restrictions or unpaid rates.
An offset account is a transaction account linked to your home loan. The balance in the account is offset against your loan balance, reducing the amount of interest you pay.
For example, if you have $20,000 in your offset account and a loan balance of $400,000, you’ll only pay interest on $380,000. It’s a great way to reduce your interest payments while still having access to your savings.
Understanding these key terms can help simplify the homebuying process, making it less daunting and more manageable.
If you’re ready to take the next step in your property journey, the team at Ariella Private Estate is here to guide you through every stage, ensuring you feel confident and informed.