Understanding Real Estate Lingo

Understanding all the terminology when buying and selling property can be a little overwhelming. Experts such as agents, conveyancers and brokers have urged for these individuals to get a better understanding of the different terms that are used before pen is put to paper.

Gateway Bank undertook a study, quizzing 1000 mortgage holders and found that Australia’s financial literacy has dropped.

Gateway Bank’s Chief Executive Officer, Paul Thomas, said that borrowers must understand mortgage terms to ensure that they sign up to the best loan that suits their needs.

To ensure the risk overpaying and instead, keeping money in your pocket it’s important that these people are asking questions and getting over the fear of seeming silly or incompetent.

The following results were found in the study:

  • For offset accounts, it was down 3 per cent to 53 per cent.
  • Understanding of redraw facilities fell 4 per cent to 56 per cent.
  • The difference between a comparison rate and interest rate was understood by just 31 per cent, down 5 per cent.
  • Only 26 per cent knew what a loan-to-value ratio was.

But with a little research you can be in the know. We’ve rounded up some of the most common terms you’ll hear when buying a house and what they mean. Taking the time to understand the terms will help you through the process, eliminate the confusion and better prepare for a smooth transaction.

Certificate of title

This states that you are the sole owner of the property and notes any mortgages or other situations affecting the property and the land on which it stands.

Contract of sale

A legal contract that is vital for any real estate transaction. It sets out the terms and conditions agreed upon between the buyer and seller.


Process of transferring the ownership of property and land from one person to another. The documentation and settlement process is undertaken by a conveyancer.

Cooling off period

Depending on the state and territory, a cooling-off period is a set number of days after you purchase a home in which you can cancel the transaction.


Costs incurred by a real estate agent for marketing the property which can be passed on to the client, for example, signboard, photography and advertising costs.

Discharge of mortgage

The process of officially removing a home loan from the title of your property when you’ve paid the full amount off your home loan, or if selling, or refinancing.

Due diligence

Before signing into anything, researching and understanding the legal obligations are necessary. The due diligence period is the time negotiated in the purchase contract where the buyer examines the home, usually via an inspection.

Earnest money

Earnest money is a deposit a buyer pays after a seller has accepted his offer on a home. It’s typically between 1 to 3 percent of the contract price, and is held by the escrow company.

This is designed to protect the seller if the buyer walks away after both parties have gone into contract. However, buyers can get their earnest money back if a contingency allows them to cancel the contract. If the sale goes through, the earnest money is generally applied to the buyer’s down payment for the home.


The value that an owner of a property has in their house minus the amount of the mortgage owed to the bank.

Memorandum of transfer

A document to legally transfer the ownership of land at the agreed price.

Mortgage protection insurance

An insurance policy which covers a borrower’s mortgage repayments in the case of illness or injury.

Offer/counter offer

Buyers make a formal offer on the home they want to purchase. The offer can be the full list price, or what you and your agent deem a fair market value.

The buyer’s agent puts the offer in writing, asks you to sign it, and then submits it to the seller’s agent. The seller might immediately accept it, in which case it becomes the parties’ purchase contract, or may make what’s known as a counter offer. It’s the art of negotiation, recorded in paperwork.


A buyer generally takes possession of the property on the settlement date and after they have received the keys.


The principal balance of a mortgage loan is the amount of money owed to the lender, not including interest. Say you borrow $600,000. That’s the principal of the loan, or what you borrowed to buy the home. Buyers pay the principal plus interest each month. Payments nearly always go toward interest first, then toward paying down the principal. After all, the interest is the reason the bank agrees to make the loan.

Rates and taxes

Adjustable closing costs, such as council rates, water rates, strata rates and land tax, are paid by the buyer at or after the date of settlement. Up until the date of settlement the seller is liable to pay these.


Real estate agent and realtor are often used interchangeably. A Realtor with a capitalized “R” refers to an agent who is a member of the National Association of Realtors. A certified Realtor upholds the ethics of the association and keeps up with their membership and education.

Seller concession

Sellers may offer concessions to incentivise buyers to purchase the home, or sweeten the deal. This may include:

  • Loan discount points which are fees paid to the lender to decrease the mortgage interest rate.
  • Home warranties, or an insurance plan that covers home repairs for a length of time after the home purchase.
  • Closing cost assistance, where they provide a certain amount of cash to assist buyers in paying closing costs, which can be 2 to 5 percent of the purchase price.

Settlement date

The date when the buyer pays for the property, receives the title and takes possession.

Stamp duty

A government tax that varies between states and territories, which is levied on the sale price of the house and calculated as a percentage of the contract value.

Stamp duty concession

If a home buyer is eligible for the First Home Owner Grant, and the value of a property is below a certain threshold, a concessional rate of stamp duty will apply.

Title search

An electronic search carried out for the title to determine the details of the registered owner of the property, as well as any current registered dealings on title.


Find more real estate terms that you can brush up on here.


Callum Forbes

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