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Home / Property

The terms of owning your own home

Diana Clement
By Diana Clement
Your Money and careers writer for the NZ Herald·NZ Herald·
14 Oct, 2016 01:48 AM3 mins to read

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When it comes to buying your first home, the jargon can be pretty daunting. You'll need to know your LIMs from your LVRs and your building code from your body corporate.

The better educated you can become, the easier and safer your purchase will be.

Some of the most basic terms to know include:

• Agent. The real estate salesperson. Usually an agency will have an exclusive deal, which means only they can sell the property.

• LIM. A land information memorandum or LIM is a report from the local council that includes a summary of all information held about that property.

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• Valuations. There are registered valuations, from professional valuers that will tell you the property's current market value, government valuations, which are used for rates purposes, and insurance valuations for cost of rebuilding. Real estate agents are required to provide comparative sales in the area, says Steve Nichols a buyer's agent at City Sales.

• Unitary plan. This is the council's rules around what can be built and where.

• Building Code. Sets out standards for building and covers factors such as structural stability, fire safety, access, moisture control, durability, services and facilities, and energy efficiency. New homes must meet the Code.

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You might also find it useful to know about:

• Fee simple. Where you own the home and the land outright.

• Cross lease. When there is more than one building on a block of land it may be cross-leased. In this case the owners have a lease in each other's land and a say about what the other owner can do to their property.

• Strata title. This is the ownership title to a flat or apartment.

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• Leasehold. With a leasehold property you're only buying the house or apartment, not the land beneath. You'll pay ground rent to the land owner, says Nichols.

• Lien. A legal claim against a property that must be paid off when the property is sold.

When it comes to getting a mortgage there are other terms you need to know:

• LVR. This is the loan to value ratio. If, for example, you have a 20 per cent deposit, the LVR is 20/80.

• Low equity premium. A type of insurance the buyer must pay when they have a very small deposit. The insurance protects the lender from default, not the homeowner.

• Guarantor. This is a person who guarantees your mortgage if you can't pay.

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• Fixed rate mortgage. The interest rate doesn't change for a certain number of years.

• Principal. The amount you have borrowed. Your mortgage payments cover interest charged on the outstanding principal as well as a portion of the principal, which gradually reduces.

If you're buying an apartment you'll also need to know what the following mean:

• Off the plan. Buying before the building is built. Typically the developer needs to sell a certain number of apartments "off the plan" before s/he can borrow the money to build.

• Body corporate. An administrative body made up of all the owners of an apartment block or multi-unit development.

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