Home Buying Glossary
Buying a home can get confusing. With all the terms and numbers thrown around, it’s hard to figure out what you need. Our glossary below outlines the top terms you may encounter and should understand before seeking financing or looking at homes.
Updated 9 August 2023
Our glossary is constantly updated. If there's something you would like to see included, please email our research team.
Appreciation
Appreciation is the increase in your home’s value. If you buy a home for $800,000, in a few years it may be worth $1,000,000 depending on a variety of factors. These can include supply and demand, an increase in the price of comparable sales, a strong job market, population growth, and home improvements/renovations.
Asking Price
The Asking Price is the price the seller asks for the property. This is the price on the home listing and the price the seller wants you to start at, but you don’t have to bid this amount – it’s just a starting point, but you can bid lower and negotiate with the seller.
Auction
An Auction is a public sale of a property bidding style. Anyone can bid on the home, and the seller has a reserve or minimum price the bids must hit before he/she can accept the sale. Once bidding hits the reserve, the seller must sell the property for the highest bid. Our guide to buying at an auction has more details.
Appraisal
An appraisal is a property’s value as determined by a professional appraiser. The appraiser determines the value based on an objective strategy, including comparing the home to other recently sold homes in the area. The appraisal determines the property’s fair market value or the amount you can sell for, and buyers will be able to secure financing.
BEO (Buyer Enquiry Over)
BEO stands for Buyer Enquiry Over and means the seller wants offers over its BEO. If a BEO is set at $450,000, sellers will likely only entertain offers over $450,000. You can try a lower bid, but if other bids come in over the BEO, the seller will prioritize those bids.
Body Corporate
A Body Corporate is a group of owners of units within the same building. All owners have an ownership interest in their property and the common areas of flats, townhomes, or apartments, including maintenance and management. Each owner has individual ownership of his/her unit, including owning title, which they can keep or sell.
Capital Gain
The Capital Gain is the amount you earn when you sell your property. If you buy a property for $700,000 and sell it for $900,000, you have a $200,000 capital gain. It is calculated as the difference between the sales price and the original purchase price of the property.
Certificate of Title
A Certificate of Title is a document containing all information anyone needs about a home’s ownership including a property description, ownership information, and the entity holding mortgage over the property.
Conditional Approval
Conditional Approval is approval from a lender with conditions. If you can clear the conditions, you’ll get financing, but if you can’t clear the conditions, the approval doesn’t stand. Conditions can relate to your employment, income, credit history, assets, or the property itself.
Conditional Offer
You can make an offer on a property subject to conditions. The conditions have an expiration date, and if the property or you don’t meet the conditions before said date, you can cancel the contract without penalty. A few examples include getting an appraisal, selling your current property, or securing financing.
Credit Report
A Credit Report is a listing of your credit history, accounts opened or closed, payment history, loan balances, and use of revolving credit. If you defaulted on your debts, it may also include public record information or information on collection accounts. Our guide to credit reports and credit scores has more details.
Cross Lease
When you own a property with a cross lease, you own your unit, but you’re also part owner in every unit in the property, as are all other owners of the building. All changes, including simple changes like changing the building’s paint colour, must be approved by all owners before work can begin. Our property types guide explains Cross Leases in detail.
Equity
Equity is the money you’ve earned in a property by paying the mortgage down or making an initial down payment. It’s your investment in the property that if you sold the property, you’d walk away with that amount in hand. For example, if a property is worth $900,000, but your mortgage is for $400,000, you have $500,000 in equity.
Fixed interest rate
A fixed interest rate means your interest rate remains unchanged for the specified period. Fixed interest loans usually have a fee if you break the contract early. Our guide to the best home loans covers all the latest fixed interest rate mortgage offers.
Freehold
Freehold means your homeownership is yours alone – you don’t share it with anyone else. Freehold ownership includes both the building and the land, which is different (and more valuable) than leasehold. Our property types guide explains Freehold in detail.
House Deposit
Most lenders require you to put money down or invest in the home yourself before they lend you money. Ideally, you’d put down 20% of the home’s purchase price, but there are loans for lower house deposits too (as our guide to low-deposit mortgages outlines).
Leasehold
Your ownership only applies to the building; someone else owns the land. You may pay rent for the building that occupies the land. As long as you have a leasehold arrangement, you have exclusive rights to the building on the land.
LIM Report
A LIM report is a report the council has about the property. It includes all hazards, flooding issues, erosion information, stormwater issues, and sewage drain issues. It also includes all rates, and any overdue rates for the property.
Loan to Value Ratio
The Loan to Value Ratio (LVR) is the comparison of how much money you borrow to the home’s value. The lower your LVR, the better rate and terms lenders can provide. In other words, the more money you put down on the home, the less you borrow and the less risk the lender takes. If you buy a home for $300,000 and borrow $250,000, you have an LVR of 83%.
Low Equity Fee
If you put down less than 20% on a home, the lender may charge you a fee called the Low Equity Fee. They assess this fee at the start of the loan to assess for the risk incurred by putting down less than 20% on the home.
Mortgagee
The entity you borrow the money from (bank or mortgage lender) is the mortgagee or the entity you pay each month.
Mortgage Broker
If you have a complicated situation or you want to shop around without completing applications with each lender, a mortgage broker is a good option. Mortgage brokers have relationships with hundreds of lenders and can help you see your options for a mortgage with one application.
Principal
This is the full amount of money you borrow. For example, if you need $200,000 to buy a home, your principal is $200,000. Your mortgage payment will include a portion of the principal plus interest (the fee lenders charge to lend you money).
Private Sale
If a property owner sells the property himself without using a real estate agent, it’s a private sale. The owner saves money on the transaction by not paying a real estate agent commission, but all responsibility for handling the money and the paperwork falls on the owner.
Rateable Value (RV)
The RV differs from the property value. The rateable value is set by the council and is the assessed value to calculate your property’s rates. It often includes land value, capital value, and improvement value and is less than the fair market value or the amount you can ask for the home if you sold it.
Refinance
If you want to change your loan’s structure, payment amount, or even to top it off, you may refinance or take out a new loan to pay off your existing mortgage. Watch the costs and compare them to the savings to make sure it makes sense. Our refinancing calculator for home loans has more details.
Repayments
Repayments are the payments you make on your mortgage. Most repayments are principal and interest payments, but some loans are interest-only for a specified period. If you have an interest-only repayment, you pay only the interest accrued but not any principal until the interest-only period expires.
Repayment Holiday
If you struggle to make your payments, your lender may offer a repayment holiday or time off (up to 3 months) to get your finances in order. Interest still accrues, but you don’t owe any payments.
Settlement Day
This is your closing day – the largest day of the entire process. On settlement day, the buyer secures financing, and you receive payment for the property. The property transfers ownership on this day.
Tender
Buyers can make offers on a property before the tender deadline. The offers are private and confidential and in writing. You can make a tender conditional, but most sellers prefer unconditional tender offers before opening it up to more offers.
Unconditional Offer
If you make an offer with no conditions (no way to back out of the sale), it’s unconditional. All sales become unconditional once you satisfy the conditions set or the expiration date ends, and you don’t exercise your right to cancel the contract.
Our glossary is constantly updated. If there's something you would like to see included, please email our research team.
Appreciation
Appreciation is the increase in your home’s value. If you buy a home for $800,000, in a few years it may be worth $1,000,000 depending on a variety of factors. These can include supply and demand, an increase in the price of comparable sales, a strong job market, population growth, and home improvements/renovations.
Asking Price
The Asking Price is the price the seller asks for the property. This is the price on the home listing and the price the seller wants you to start at, but you don’t have to bid this amount – it’s just a starting point, but you can bid lower and negotiate with the seller.
Auction
An Auction is a public sale of a property bidding style. Anyone can bid on the home, and the seller has a reserve or minimum price the bids must hit before he/she can accept the sale. Once bidding hits the reserve, the seller must sell the property for the highest bid. Our guide to buying at an auction has more details.
Appraisal
An appraisal is a property’s value as determined by a professional appraiser. The appraiser determines the value based on an objective strategy, including comparing the home to other recently sold homes in the area. The appraisal determines the property’s fair market value or the amount you can sell for, and buyers will be able to secure financing.
BEO (Buyer Enquiry Over)
BEO stands for Buyer Enquiry Over and means the seller wants offers over its BEO. If a BEO is set at $450,000, sellers will likely only entertain offers over $450,000. You can try a lower bid, but if other bids come in over the BEO, the seller will prioritize those bids.
Body Corporate
A Body Corporate is a group of owners of units within the same building. All owners have an ownership interest in their property and the common areas of flats, townhomes, or apartments, including maintenance and management. Each owner has individual ownership of his/her unit, including owning title, which they can keep or sell.
Capital Gain
The Capital Gain is the amount you earn when you sell your property. If you buy a property for $700,000 and sell it for $900,000, you have a $200,000 capital gain. It is calculated as the difference between the sales price and the original purchase price of the property.
Certificate of Title
A Certificate of Title is a document containing all information anyone needs about a home’s ownership including a property description, ownership information, and the entity holding mortgage over the property.
Conditional Approval
Conditional Approval is approval from a lender with conditions. If you can clear the conditions, you’ll get financing, but if you can’t clear the conditions, the approval doesn’t stand. Conditions can relate to your employment, income, credit history, assets, or the property itself.
Conditional Offer
You can make an offer on a property subject to conditions. The conditions have an expiration date, and if the property or you don’t meet the conditions before said date, you can cancel the contract without penalty. A few examples include getting an appraisal, selling your current property, or securing financing.
Credit Report
A Credit Report is a listing of your credit history, accounts opened or closed, payment history, loan balances, and use of revolving credit. If you defaulted on your debts, it may also include public record information or information on collection accounts. Our guide to credit reports and credit scores has more details.
Cross Lease
When you own a property with a cross lease, you own your unit, but you’re also part owner in every unit in the property, as are all other owners of the building. All changes, including simple changes like changing the building’s paint colour, must be approved by all owners before work can begin. Our property types guide explains Cross Leases in detail.
Equity
Equity is the money you’ve earned in a property by paying the mortgage down or making an initial down payment. It’s your investment in the property that if you sold the property, you’d walk away with that amount in hand. For example, if a property is worth $900,000, but your mortgage is for $400,000, you have $500,000 in equity.
Fixed interest rate
A fixed interest rate means your interest rate remains unchanged for the specified period. Fixed interest loans usually have a fee if you break the contract early. Our guide to the best home loans covers all the latest fixed interest rate mortgage offers.
Freehold
Freehold means your homeownership is yours alone – you don’t share it with anyone else. Freehold ownership includes both the building and the land, which is different (and more valuable) than leasehold. Our property types guide explains Freehold in detail.
House Deposit
Most lenders require you to put money down or invest in the home yourself before they lend you money. Ideally, you’d put down 20% of the home’s purchase price, but there are loans for lower house deposits too (as our guide to low-deposit mortgages outlines).
Leasehold
Your ownership only applies to the building; someone else owns the land. You may pay rent for the building that occupies the land. As long as you have a leasehold arrangement, you have exclusive rights to the building on the land.
LIM Report
A LIM report is a report the council has about the property. It includes all hazards, flooding issues, erosion information, stormwater issues, and sewage drain issues. It also includes all rates, and any overdue rates for the property.
Loan to Value Ratio
The Loan to Value Ratio (LVR) is the comparison of how much money you borrow to the home’s value. The lower your LVR, the better rate and terms lenders can provide. In other words, the more money you put down on the home, the less you borrow and the less risk the lender takes. If you buy a home for $300,000 and borrow $250,000, you have an LVR of 83%.
Low Equity Fee
If you put down less than 20% on a home, the lender may charge you a fee called the Low Equity Fee. They assess this fee at the start of the loan to assess for the risk incurred by putting down less than 20% on the home.
Mortgagee
The entity you borrow the money from (bank or mortgage lender) is the mortgagee or the entity you pay each month.
Mortgage Broker
If you have a complicated situation or you want to shop around without completing applications with each lender, a mortgage broker is a good option. Mortgage brokers have relationships with hundreds of lenders and can help you see your options for a mortgage with one application.
Principal
This is the full amount of money you borrow. For example, if you need $200,000 to buy a home, your principal is $200,000. Your mortgage payment will include a portion of the principal plus interest (the fee lenders charge to lend you money).
Private Sale
If a property owner sells the property himself without using a real estate agent, it’s a private sale. The owner saves money on the transaction by not paying a real estate agent commission, but all responsibility for handling the money and the paperwork falls on the owner.
Rateable Value (RV)
The RV differs from the property value. The rateable value is set by the council and is the assessed value to calculate your property’s rates. It often includes land value, capital value, and improvement value and is less than the fair market value or the amount you can ask for the home if you sold it.
Refinance
If you want to change your loan’s structure, payment amount, or even to top it off, you may refinance or take out a new loan to pay off your existing mortgage. Watch the costs and compare them to the savings to make sure it makes sense. Our refinancing calculator for home loans has more details.
Repayments
Repayments are the payments you make on your mortgage. Most repayments are principal and interest payments, but some loans are interest-only for a specified period. If you have an interest-only repayment, you pay only the interest accrued but not any principal until the interest-only period expires.
Repayment Holiday
If you struggle to make your payments, your lender may offer a repayment holiday or time off (up to 3 months) to get your finances in order. Interest still accrues, but you don’t owe any payments.
Settlement Day
This is your closing day – the largest day of the entire process. On settlement day, the buyer secures financing, and you receive payment for the property. The property transfers ownership on this day.
Tender
Buyers can make offers on a property before the tender deadline. The offers are private and confidential and in writing. You can make a tender conditional, but most sellers prefer unconditional tender offers before opening it up to more offers.
Unconditional Offer
If you make an offer with no conditions (no way to back out of the sale), it’s unconditional. All sales become unconditional once you satisfy the conditions set or the expiration date ends, and you don’t exercise your right to cancel the contract.
Related Guides and Tools:
Buying a Home Guides:
Selling a Home Guides:
- Best Home Loans
- Mortgage Brokers
- Mortgage Calculator
- How Much Can I Borrow Calculator
- Fixed vs Floating Calculator
- Loan Amortisation Calculator
- Mortgage Refinance Calculator
- Interest-Only Mortgage Calculator
Buying a Home Guides:
- Best House Price & Valuation Websites
- First Home Buyers Checklist
- New Zealand Property Types
- Rateable Value vs Market Value
- Leasehold Property Guide
- Conveyancing
- Buying an Apartment in New Zealand
- Tiny Homes in New Zealand
Selling a Home Guides:
