Here are some Realty terms home buyers should know, we will start with A & B.
Addendum Yes, it certainly does sound like a made up word but an Addendum is actually an important document that describes changes to an initial purchasing agreement, so you should think of the word as a rough translation to “something added or something additional”. These addendums are separate documents and highlight additions or amendments to many items during the sale process such as date, conditions, or price changes.
Adjustable Rate Mortgage (ARM) Known as ARM, these mortgages have a fluctuating interest rate that can change over the life of the loan. Typically, ARMs start with lower monthly repayments, and are most suitable for short-term loans.
Amenities Amenities are things available in, on, or around a property. Things like having a pool, community playground, or close to entertainment are all types of real estate amenities. Real estate amenities often help increase the value of the property.
Amortization It is the balancing of your monthly loan payment, ensuring the right amount of interest is paid in relation to the principal amount being deducted from your mortgage balance.
Amortization Schedule A regular mortgage repayment schedule of both principal and interest. Over a sustained period (often 15 or 30 years) the result is typically loan payoff.
Annual Percentage Rate (APR) You will have heard about this before as it appears on personal loans and payday loans, but for those who are not sure on the terminology, the APR is a percentage representation of the interest rate that is put on your mortgage each year, compounded over the length of the loan. The APR can vary between lenders, the higher the percentage the more you are paying back in interest.
Typically a higher APR is given to home buyers who have blemishes on their credit history, so in order to get the best deals with the most attractive APR rates, it is important to maintain a good or excellent credit profile. Also, shop around as you may be able to get a better rate which could save you thousands over the life of your loan.
Appraisal One of the first steps after contracting a home is to get a home appraisal completed. An appraisal is an estimated value of the property, after analysis by a professional appraiser, based on the previous sale of similar properties. No mortgage can be granted to the buyer until a price has been established for the property.
You can quite easily compare the costs of conveyancing agents in order to help get the best deal. The homes appraised value must be equal to or higher than the mortgage applied for, otherwise the buyer and seller will need to negotiate to determine if the buyer will pay beyond (out of pocket) what the home’s assessed worth is or whether the seller will lower the price to the appraised value.
Appreciation An increase in a home’s value that can be the result of property upgrades, home additions, economic factors, as well as market demand. Appreciation over time often means you will be able to sell your new home for more than you paid for it.
Assumable Mortgage If you are looking to buy a property directly from a seller then this service will allow you to take over the seller’s mortgage. Essentially, you swap positions with the seller and abide by their existing mortgage terms and conditions. The lender of that mortgage will have to approve this “take-over” in order for you to successfully complete an assumable mortgage.
Sometimes you will find that the interest rate is much lower on these mortgages and certain fees such as settlement costs on new mortgages are avoided. Many lenders will require the buyer to be able to qualify for the mortgage in order to assume the sellers loan.
Balloon mortgage A short-term mortgage (typically 10 years or less) with equal payments that leaves a loan balance (often substantial) at the end of the loan period. The homeowner then either needs to pay off the lump sum loan balance or attempt to refinance the loan.
Bridge Loan A bridge loan is a short-term loan (6 months to 1 year) often used by a buyer to purchase one property with the equity built up in another yet unsold property. When the home the equity was borrowed against is sold, the bridge loan is paid off.
Broker A licensed individual who can either negotiate a home purchase or sale or can designate agents (on a commission basis) to facilitate negotiating contracts between buyers and sellers with the intent on closing on a home. Additional real estate education, beyond what is required to become an agent, is necessary to become a broker. The term has a slightly different interpretation across the U.S. with some areas referring to a designated broker as an agent and a managing broker as someone who supervises agents.
Buy Down Buy down is when a seller or builder pays a set amount upfront on the buyers behalf to reduce the mortgage interest for a specific period (often 1 to 3 years) to give the buyer an extra incentive to purchase the home. After the specific period ends, the loan reverts to the original interest rate for the buyer.
Buyers Agent A buyers agent represents the buyer (through a signed agreement) and is their advocate, adviser, and real estate counsel as the buyer seeks to find a home to purchase. Typically, the buyers agent and sellers agent (representing the seller) share a portion of the real estate commission received when a home closes.