Every type of business dealing has its own specific vocabulary, and this is no less true for buying a home. Of nearly 1,500 Australians surveyed, 43% considered themselves confident financially, but 70% did not know the meaning of comparison rates, 49% were unaware of the meaning of equity, and 41% were incapable of explaining the meaning of refinancing. For those about to buy a home, knowing the terms is essential.
An appraised value is an estimated value of a property when that property is being utilized for a loan as security. A property’s appraised value can be different from its market value; it can even differ from the home’s agreed-upon purchasing price.
Generally a short-term loan of twelve months or less, a bridging loan allows the seller to finance a new home’s purchase while the current property is being sold. This type of loan closes when the current property is sold. A bridging loan’s size is calculated based on the current home’s available equity.
Every comparison rate takes into account the loan’s amount, loan term, fees and charges, interest rate, and repayment frequency. They are crafted to help in the understanding of a loan’s overall cost based on these relevant factors that go beyond the simple interest rate.
Equity is the amount indicating one’s financial interest in a business or property. A house’s equity, for example, is found by looking at the difference between the house’s value and the monetary amount still owed on the house.
When a 100% offset is an available option on a home loan, it signifies that the amount of funds in the transaction account acts just as though it were in the mortgage account. This is a beneficial option because it reduces the loan’s balance for the calculation of interest; reduced interest payments permit a loan to be repaid more quickly.
The loan’s amount is the principal. It is upon this amount that interest is charged and calculated.
When a new mortgage is taken out for the repayment of a loan already in existence, this process is known as refinancing. Some of the reasons to do this include shortening loan terms and reducing repayments.