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Home Buyers Guide

Must-Know Jargon Before Investing In Residential Real Estate

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Planning on buying a home? Then get ready to be introduced to quite a few unique words whose meaning you might not be aware of.

RealtyNXT lists some of the top real estate jargon so that you have a complete understanding of these terms as and when you will come across them. Read on to get informed!

Appreciation

Appreciation is value of home that rises over time. This is calculated by adding one to the annual appreciation rate, increasing this to a power equal to the number of years one would estimate and multiplying that by the current value of the property.

Allotment Letter 

A letter which the developer gives to a buyer which allots a specific piece of land or apartment unit to the buyer during the time the home is under construction.

Assignment

The property seller signs over rights and obligations of the property to the buyer before the official closing.

Adjustable-rate mortgage (ARM)

In this mortgage, the interest rate for the pending balance is never constant. 

Annual percentage rate (APR)

The annual percentage rate (APR) is the amount of interest charged on your loan every year.

Built-up Area: Built-up area is the carpet area plus the thickness of the outer walls and the balcony. It is the actual area that will be used by the property buyer.

Bridge loan: A short-term loan taken by a buyer against a property they already own to buy another property. The time frame to repay this loan is generally a few months to maximum three years.

Carpet Area: The carpet area is the area that can be covered by a carpet. This area does not include the thickness of pillars and inner walls, balcony, terrace, common areas like lift, staircase, lobby area etc.

Deed: A deed is a document that legally transfers the ownership of property to a new holder.

Deed-in-lieu of foreclosure: A deed-in-lieu of foreclosure is a document transferring the title of a property from a homeowner to the bank that holds the mortgage. 

Default: If a homeowner defaults on their loan, it means they have not paid the sum they agreed to. Typically, a mortgage default means the homeowner hasn’t made a home loan payment in 90 days or more.

Down payment: The token cash a homebuyer pays at the time of closing of a deal. Typical home loans require a 20% down payment. 

Escrow: Escrow is part of the home buying process. Mostly a bank or lender holds something of value during the transaction. This is returned to the seller once the sale process is successfully over.

Foreclosure: If a homeowner doesn’t make a mortgage payment for more than three months, foreclosure is a legal process during which the owner gives up all his/her ownership rights. The last resort when payments are not made is the auction of the property.  

Fixed Interest Rate: This is the interest rate charged on home loans. The fixed interest rate means that home loan has to be paid in fixed and equal installments as per the tenure of the loan. The advantage of this rate is that it would not change even if there are changes or fluctuations in Indian financial market conditions.

Floating Interest Rate: The floating interest rate is volatile and keeps on changing according to the market scenario. As compared to fixed interest rates, floating rates are comparatively cheaper.

Freehold Property: Freehold property is the one that is legally ‘free from hold’ of any entity other than the owner. It gives complete ownership to the owner of the house. The owner can use the land for any purposes but following local laws. He is free to pass on this property without any prior approval from anyone else.

iBuyer: This is a relatively new term and it refers to a company which specialises in the use of technology to make an instant offer on your home instantly. It is responsible for owning, marketing, and reselling your home. 

Occupancy Certificate (OC): This is one document that every home buyer must be shown and given while buying a home. An occupancy certificate is a document that is issued by a local government agency or planning authority when the construction work of a new project is over. An OC validates that the project has been built by following the legal building codes, relevant regulations and laws.

Per Square Foot Rate: It is a calculation of the value of each square foot of area of a building, house or any property. The condition of the property, size, area, etc. are among few factors that can affect the price per square foot.

RERA: RERA is an act of the Parliament of India which aims to protect home buyers as well as boost investments in the real estate industry.

Real estate broker: A real estate broker works as an intermediary between the seller and the buyer. They usually charge a fee for their service which is called brokerage.

Rateable Value: It is the value upon which property tax is charged in India. The amount is determined by the tax authorities and thereafter the tax liability is charged to the owner(s) based on certain predetermined tax slab rates.

Stamp Duty: It is a tax that needs to be paid to the government on legal documents, usually in the transfer of assets or property. It acts as legal evidence of the ownership of the property.

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