Information and FAQ's

Glossary

 

LVR

The term LVR is an acronym for “Loan to Value Ratio” and is also sometimes referred to as the LTV. The LVR is the amount you are borrowing, represented as a percentage of the value of the property being used as security for the loan. Lenders place a large emphasis on the LVR when assessing your loan application. The lower the LVR, the lower the risk is to the bank.

 

LMI

Lenders’ Mortgage Insurance (LMI) is a premium payable by the borrower that protects the bank against the potential loss we may incur if you are unable to repay your home loan.

 

Equity

Equity is the difference between what your home is worth and how much you owe on it. Over time the value of your property will grow and so too does the equity in your property, the key is knowing how to build or manufacture equity in your property and extract it!

 

Rental Yield

The rental yield is the return on investment as a percentage of the amount that you’ve invested. Gross rental yield = ((weekly rent x 52)/Property value)*100. So as an example here if your $200,000 property was getting $280 per week then the rental yield would be 7.28%.

 

Capital Gain 

Any gain realised from the sale of a capital asset.

 

Capital Gains Tax (CGT) 

The tax payable on the gain realised from the sale of an asset

 

Vendor

This is a  person who sells something, especially a property

 

Buyers Agent 

An Agent acting on behalf of the Buyer (ENCOMPASS of course!)

 

Real Estate Agent 

An Agent acting on behalf of the Seller

 

Positive Gearing 

Positive gearing occurs when a property yields an above average rental return for the purchase price and/or expenses are lower than average. This means that your return outweighs your expenses, tax is payable on this surplus as it is an income.

 

Negative Gearing

Negative gearing occurs when you borrow money to buy a property that has more expenses than income. This means you lose money every week. This loss can be partially offset by some of your income tax being returned to you, but there is still some money required from your pocket to make up the shortfall.

 

Appreciation The amount your investment property goes up in value.

 

Depreciation

You claim the depreciation of your investment property against your taxable income. There are two types of allowances available: depreciation on Plant and Equipment, and depreciation on the Building itself.

 

Depreciation Schedule

Used at tax time, A depreciation schedule prepared by a specialist Quantity Surveyor (QS) to ensure that you are maximising the cash return from your investment property.

 

Stamp duty

Stamp duty is a tax imposed on numerous acquisitions, including selling real estate, cars and assets belonging to a business. It can also be imposed on home loans, gifts and some insurance.

 

Body corporate

If you develop more than one home on one piece of land, such as units and townhouses then you almost certainly need a body corporate. It’s made up of all the owners within a group of units on a “strata title”. The owners elect a committee which handles administration and upkeep of the building and common areas. It’s also less well-known as an “owners’ corporation”.

 

Break costs

Sometimes if a loan is paid off early you may have to pay a fee or costs.

 

Interest only

You only repay the interest charged on your mortgage, not anything off the principal or amount owing.

 

Principal and interest (P&I)

The amount borrowed or still to be repaid, plus the interest still owing on the mortgage.

 

Inflation

Inflation is defined as a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every dollar you own buys a smaller percentage of a good or service.