First homebuyers’ glossary – understanding the jargon
Building a new home can feel like you’re navigating a maze of jargon – from equity and offset accounts, to titled land and progress payments. At Homebuyers Centre, we’re passionate about simplifying the build process. We believe that speaking the language of building is the first step to feeling empowered in your dream home journey.
That’s why we have created a comprehensive building glossary that breaks down complex terms into easy-to-understand definitions. Use our glossary to confidently communicate with builders and banks, understand your contract, and make the most informed decisions possible.
Understand your home loan
Finance broker or Mortage broker: A person who helps you find and apply for a home loan. Brokers weigh up different lenders and products, and act as a middleman between you and the bank. A mortgage broker’s services are usually free, with their income drawing from commissions paid to them by the lender. Homebuyers Centre’s award-winning inhouse finance team Resolve Finance include mortgage brokers who specialise in construction loans.
Lenders Mortage Insurance (LMI): Insurance that protects the lender if you can’t repay your mortgage. You pay for this insurance if you borrow more than 80% of the property’s value i.e. you haven’t saved the full 20% deposit. How much LMI you pay will depend on your lender, your deposit amount and how much you want to borrow.
Pre-approval: A lender’s estimate of how much money they might loan you for a mortgage. Pre-approval helps you to understand what you can afford before you start exploring potential blocks and home designs.
Interest rate: The percentage of your loan amount that you pay back, in addition to the original amount borrowed or your ‘principal’ loan. Think of your interest rate as the cost or fee attached to borrowing money.
Equity: The value of your property minus the amount you still owe on your mortgage. For example, if your home is worth $500,000 and you owe $400,000, your equity is $100,000. This is the portion of your home that you truly own.
Offset account: A savings account linked to your mortgage. The balance of this account ‘offsets’ the total amount owing on your home loan, so you pay less interest. For example, if you have a home loan of $350,000 and you have $30,000 in your offset account, you would only pay interest on $320,000.
Credit score: A number that represents your creditworthiness or how likely you are to repay a loan. A higher credit score will mean you are considered a lower risk to lenders and you will be more likely to have your loan approved. You can access your free credit report through agencies such as Experian and Equifax.
Loan repayment: The amount of money you pay back on your mortgage each payment cycle – be it monthly, fortnightly or weekly. This payment usually includes a portion that pays down your principal loan, as well as interest.
First Home Owner Grant (FHOG): A one-off payment from the Government to eligible first home buyers. The grant aims to assist first homebuyers to buy or build their first home. You can check if you are eligible on the State Revenue Office’s website.
Stamp duty: A tax you pay when you buy a property. The amount of stamp duty you need to pay varies depending on the property price. However, the Victorian Government offers exceptions for First Homebuyers who purchase a property valued less than $600,000.
Deposit: The upfront payment you make towards the purchase price of a property. While most people aim to save a 20% deposit to avoid paying Lenders Mortgage Insurance, it’s also worth exploring low deposit home loan options. Resolve Finance can help you find the right loan product and lender for you.
Understanding common build terms
Titled vs untitled Land
- Titled land: Land that is registered and recognised with an official legal title. This means you can physically go and see the block as the roads and key utilities in the estate are ready to go. We can build on titled land faster which means you can move into your brand new home sooner.
- Untitled land: Land that has not been registered and may require further development and civil construction before the land can be registered and recognised. Construction will not be able to commence until the land converts from untitled to titled.
House and land package: A package put together by a builder that couples available land with a suitable home design. While you will still need to enter into two separate purchase contracts – one for the land and one for the design – house and land packages give you a good idea of what’s possible and what it’s likely to cost. Discover Homebuyers Centre’s expertly curated house and land packages in Victoria.
Fixed price contract: A building contract where the price is agreed upon upfront and won’t change unless you make variations. Homebuyers Centre provides fixed priced contracts for all designs, so you can be confident in how much you need to pay and when you need pay.
Upgrade: When you choose a higher quality fixture or fitting in your home than what’s included in the builder’s standard package price. Homebuyers Centre offers a wide variety of premium upgrades, including upgraded benchtops, kitchen appliances and higher ceilings.
Inclusions: The standard features that come with your new home and form part of your fixed, upfront price. At Homebuyers Centre, this includes Westinghouse stainless steel kitchen appliances, timber-look laminate flooring to living spaces and 2100mm high tiling to your shower. Explore the full range of Homebuyers Centre’s industry-leading inclusions.
Site costs: Costs associated with preparing the land for construction, such as excavation, soil testing, and connecting utilities. Site costs can vary greatly depending on the condition of your block.
Preliminary Works Contract (PWC): A contract you enter into with your builder before construction commences. This contract encompasses your building and engineering plans, home design and façade choices, and optional upgrades. This allows your builder to provide a fixed price before you sign your official build contract
Facade: The front exterior design of your house. Facades provide the first impression of your home, so form an important part of your design. Explore Homebuyers Centre’s range of design-centric coastal, contemporary, and traditional facades.
Turnkey home: A completed home that is ready to move into after handover. This means that all landscaping, fencing and painting are complete.
Progress payments: Payments made to the builder at different stages of construction as work is completed. Rather than making repayments on the entire loan amount immediately, you will ‘pull down’ on the loan and make additional payments at each stage of the build. For example, when the slab is laid, or the brickwork is complete.
Building permit: Approval from your local council to begin construction. Building permits are required for any type of construction project, be it a fresh build or a renovation. This can be a complicated process, so it’s important your builder is an expert in the area. Once your land is titled, Homebuyers Centre’s dedicated team will take care of these approvals for you.
Are you ready to delve into the world of building?
Homebuyers Centre’s friendly, expert team can step you through the process and all the jargon of building your first home. Reach out today for an obligation-free chat.