Real Estate Terminologies For First-Time Home Buyers
2021 Aug 27 | by Apple Barretto
What are some real estate terminologies for first-time home buyers?
- Mortgage payment
- Interest and interest rate
Buying a home can be an exciting and rewarding experience for first-time buyers. The property represents your success in life and your immense dedication to providing the best for your loved ones. However, there are numerous terms that you will come across throughout the buying process. Knowing the real estate terminologies for home buyers will help you feel confident when purchasing the property. It will also help you save more money in the future.
Here are six basic real estate terms used in the Philippines and their definitions to help you buy a home for the first time.
“Listings” is a term frequently used to refer to properties that are for sale. If you browse a real estate website and see the word “listing,” it will show all the information about the properties for sale. This includes details about the property’s location, price, lot area, floor area, number of bedrooms, and additional amenities in the community.
To have access to the most up-to-date listings, visit the websites of the real estate developers directly. You might also be able to score better property prices without additional brokerage fees.
A mortgage, also known as a mortgage loan, is used by home buyers to refinance a property. A mortgage is a way to raise funds for a home without having all the money upfront. This is usually done by putting a lien on the property. You can get a mortgage through banks or housing loan/house financing companies.
A legal agreement is put in place wherein the lender (bank, financing company) lends money at interest in exchange for taking the title of the borrower’s property. This means you do not own the home until the mortgage is fully paid. If the borrower fails to abide by the loan terms, the lender is allowed to void or sell the property through foreclosure or repossession to pay off the loan.
A good tip for first-time homebuyers is learning about the best ways to secure a home loan, as it is meticulous. In addition, make sure to ask around about which lenders have flexible terms and quickly approve home loans on the property you want.
A mortgage payment is the amount of money you pay every month for your home’s mortgage. The concept of mortgage payments is similar to monthly rental payments. However, the difference is that mortgage payments include the principal (the actual amount of money borrowed to purchase a home) and interest. Depending on the lender, the mortgage payment may also include monthly taxes and insurance.
Homebuyers who apply for a mortgage will be asked about the appraisal of the property they want to purchase. An appraisal refers to an estimate of the property’s current market value, which may be based on the similar properties sold in the area. As a homebuyer, you are responsible for finding a licensed real estate appraiser to schedule the appraisal of the property.
If the appraisal of the property you want to buy is less than it is being sold for, your mortgage may not be approved. Just like you, the lender would not want to invest in an overpriced home. Before deciding to buy a property, make sure to find a licensed real estate appraiser to know the property’s actual value first.
Amortization is a real estate terminology that refers to the process of paying a mortgage through installments that cover both the property’s principal value and its interest. When a home buyer pays amortization, the principal and interest will vary every month while the payment amount will be fixed.
The amortization term is the total length of time required to pay off the mortgage loan. It is typically expressed in months. For example, for a 5-year mortgage loan, the amortization term is 60 months.
On the other hand, an amortization schedule refers to a complete table of periodic mortgage payments. It will show the allocation of loan payments applied to the principal and interest for every month. The remaining balance up until the loan is fully paid will also be shown.
First-time homebuyers must always ask for the amortization term and schedule of the property they plan to purchase to have a clear understanding of how they can repay their mortgage. This is also an important deciding factor as you can ask yourself if you can commit to paying the amount every month until the loan is fully paid.
Interest and Interest Rate
The interest refers to the cost of borrowing money. It is combined with the principal to determine your mortgage payment. The interest rate is the percentage of the cost of borrowing money.
There are two types of interest rates for mortgages, namely fixed-interest rates and adjustable interest rates. Fixed-rate mortgages have interest rates that remain unchanged for the entire period of the loan. For example, if you have a 10-year fixed-rate mortgage with a 4% interest, you will pay 4% interest every month until the loan is fully paid. Alternatively, adjustable-rate mortgages have interest rates that changed based on the market.
If you understand the real estate terminologies for home buyers stated above, it will be easier for you to complete the purchasing process.
At Pueblo de Oro, we believe that buying your dream home shouldn’t be difficult. We would be more than happy to help make your home purchasing journey easier. Click here to inquire about our properties today!