It’s not always easy understanding what your mortgage broker or banking representative is saying. It’s like you need to understand another language to get ahead in the property market. Here’s the second part of MyPropertyLife’s guide to explaining property investor terminology.

If you’ve come here from Part 1, welcome. Here are Property Investor Terms from H through to Z explained. If you haven’t yet seen our guide from A - G, click here.

H

Home Improvement Loan - A loan made to a homeowner where the property is used as collateral.

I

Insured Mortgage - A mortgage protected by a private insurer. If the borrower defaults on the loan, the insurer must pay the lender the rest of the insured amount.

Interest - The fee charged for borrowing money, which can make your mortgage bigger or smaller.

Interest Rate - Set by The Reserve Bank of New Zealand, which influences what other banks can charge. This determines how much the fee is for borrowing money.

Investment Property - A house or property not occupied by the owner. They can rent or lease it out and gain income from the rent.

L

Liabilities - A list of debts owed.

Lien - A legal claim against a property that must be paid when selling a property.

LIM Report – A Land Information Memorandum (LIM) report is prepared by your local council and provides a summary of your property including rates owing, resource planning permits, potential for flooding, subsidence or erosion.

Liquid Asset – An asset that can be converted into cash.

Listing - A written contract between a property owner and real estate agent, authorising the agent to market and sell the property.

Loan - An amount of borrowed money that is generally repaid.

M

Market Value – Assuming there is enough market activity to satisfy both buyers and sellers, this is the appraised price at which buyers are happy to buy and sellers are happy to sell.

Mortgage - A legal agreement where a property is pledged to the lender, normally a bank, as security for a debt.

Mortgage Broker - A person or company that can assist you with securing a loan. They may negotiate with banks on your behalf or help you put your loan application together. They’re typically paid a commission by the lender.

Mortgagee - Person or organisation lending money in a mortgage agreement.

Mortgagor - Person or organisation borrowing money in a mortgage agreement.

N

Negative Gearing – Where a return on investment won’t cover the costs of the investment.

Negotiation - Where an offer is made on a property and discussions are held to arrive at a price both parties agree on.

Net Income - Your total income after taxes have been deducted.

Net Worth - The total value of someone’s assets minus their liabilities.

O

Offer - Intent by one party to purchase a property. Usually a sum of money which might have additional conditions.

Offset Account - A bank account usually linked to a mortgage account, where the interest earned is used to reduce the interest on the mortgage.

Ombudsman – The Banking Industry Ombudsman is an independent arbiter, who you can complain to if you feel your bank has treated you unfairly.

P

Passed In - The highest bid at auction doesn’t meet the reserve price and so the property doesn’t sell.

PIM Report - Project Information Memorandum gives you an idea about potential erosion, subsidence, contaminants, or stormwater dangers on or around a property.

POA - Price On Application, a method used by some real estate companies to determine interest in a property.

Pre-qualification – A process that determines how much money you can borrow before applying for a loan.

Prime Rate - An interest rate, usually favouring the borrower that banks charge their preferred customers.

Principal - The amount borrowed or still to be repaid on a loan.

Private Sale – Where the owner sells their property without the services of a real estate agent.

Private Treaty Sale – Using a real estate agent to sell a property by negotiation.

Q

Qualified Buyer - As part of the loan process, the lender must be satisfied the borrower has the ability to repay the loan.

R

Refinance - Paying off one loan with another loan while using the same property as security.

Resource Consent – Different to a building consent, resource consents measure the impact an activity or development will have on the environment.

S

Seller’s Market – When demand for property outweighs the supply. Owners may find buyers willing to pay the asking price or more.

Settlement – When a property sale is finalised by legal representatives for the purchaser and vendor, and the new owner takes possession of their property.

Special Conditions in a Sale & Purchase Agreement - Where the sale and purchase of a property relies on certain conditions being met. For example:

• Cash Out Clause: Allows the vendor to accept an offer from another party while waiting for other conditions to be met.
  
  
• Conditional on Specialist Report: The purchaser has 10 days to obtain a report from a suitably qualified inspector. Eg, Builder’s report, Geotech report, or Engineer’s Report.
  
  
• Conditional on the Sale of Purchaser’s Property: If the buyer is also selling their own home at the same time, they need it to sell before they can purchase another.
  
  
• Expiry of an Existing Agreement: Essentially a backup plan, if you’re making an offer on a property already being sold subject to a conditional agreement. If the first offer doesn’t go ahead, that buyer can’t get an extension and your offer will come into effect.
  
  
• Conditional upon LIM Report: A Land Information Memorandum report should highlight any issues with the property, and is available from your local council.
  
  
• Conditional upon Finance: Even a pre-approved mortgage might have some strings attached. You might need some time to satisfy the bank or your mortgage broker before the sale can go through.

T

Tender – Process for property sales asking for buyers to make their best offer before a set date.

U

Unconditional Agreement – A legal contract binding the buyer and seller to settle on an agreed date for an agreed price. You must be confident there are no issues or requirements, you have the cash or are pre-approved for a loan and are absolutely certain you wish to purchase the property.

Y

Yield – The return or interest earned by an investor on an investment.

Z

Zoning – Guidelines by your local council about how land can be used.

From A - Z you’re now caught up on property investor terms and will be able to negotiate with the best of them. This glossary of handy property investment terms will help you navigate the property investment world, and make buying, leasing, and selling homes that much easier.

Landlords – keen to know how to get the very best tenants for your investment property? Check out our FREE guide…