Real Estate Vocabulary – Jargon You Need to Know in Property

In any other industry, there will be jargon that only people that work within particular industry would know. Here I would like to share the common jargon in real estate (property). Depending on where you are, real estate and property are interchangeable. So there you go, the very first jargon is property. It is technically the same meaning as real estate but the ‘real estate’ is more specific to land or building while property can be more than just land or buildings. Now, let’s look into the real estate vocabulary that you should know.

Amortization

Amortization can refer to the process of paying off debt over time in regular installments of interest and principal sufficient to repay the loan in full by its maturity.

Base Rate

The Base Rate was replacing the Base Lending Rate (BLR) as the main reference rate for new retail floating rate loans. BR aims to provide a more transparent reference rate to enable better decision by consumers in making choices among the many loan products offered by financial institutions. The new reference rate will also better reflect changes in cost arising from monetary policy and market funding conditions, while encouraging greater discipline and efficiency among financial institutions in the pricing of retail financing products. Read BNM publication here.

Booking Fee

A fee that you paid to vendor or seller to temporary reserve the unit that you are going to buy the property.

Cash Flow

The money that you have after deducting all your expenses.

Closing deal

Locking the buying price of the property with the seller.

Content Insurance

Home insurance is made of contents insurance, buildings insurance, or both. Contents insurance protects your possessions. It’ll pay out to replace your household items if they’re stolen, or damaged by an event like a fire or a flood. Contents insurance is different to buildings insurance, which only protects the structure of your home. Buildings insurance doesn’t cover the contents inside.

Defects Liab ility Period

A defects liability period is a set period of time after a construction project has been completed during which a contractor has the right to return to the site to remedy defects. A typical defects liability period lasts for 12 - 24 months

Down Payment

A down payment is a type of payment, often in cash, made in the early stages of property purchase. The payment represents a percentage of the full purchase price. In some cases, the down payment is not refundable if the deal failed to complete because of the purchaser. Typical down payment is range from 10% up to 30%. Earnest deposit is part of down payment.

Earnest Deposit

Earnest deposit is same as booking fee which is part of down payment. This is just another term for same meaning.

Equity

Your home equity is your home’s worth when not considering any debts against it. It is essentially the portion of your property that you truly “own”. Your equity is the difference between the fair market value of the property and the unpaid balance of the mortgage. If you have a RM500k property, and you still owe RM300k on it, you have RM200k in equity.

Fire insurance

Fire insurance is property insurance that provides additional coverage for loss or damage to a structure damaged or destroyed in a fire. Fire insurance does not cover any contents within the property.

Fixed-rate mortgage

A mortgage loan where the interest rate remains the same for the entire term of the mortgage. Because the interest rate remains the same, the monthly payments remain the same for the entire period of the loan. A fixed rate mortgage was the typical mortgage for many years, before the Adjustable Rate Mortgage and Variable Rate Mortgage gained popularity.

Flexi Loan

Flexi loan is just a product name usually referred to Adjustable Rate Mortgage or Variable Rate Mortgage.

Joint Inspection

When you take the vacant possession of your newly completed property, the developer will invite you for joint inspection in which you will then submit a form for any defects to the property.

Interest

A profit rate for any loans from the bank.

Legal Possession

When you buy a property with existing tenant typically in subsale property. When you take ownership of the property, you will still need to honour any previous agreement between the seller and the tenants.

Listing

Property listed by property agent on website or any similar platform.

Mortgage

A mortgage is the loan you take out to pay for a home or other piece of real estate. Given the high costs of buying property, almost every home buyer requires long-term financing in order to purchase a house.

Mortgage broker

An outsourced agency or consultant that helps home buyers to process loan application. The advantage of using mortgage broker is that they will know which banks to submit the loan application based on the buyer’s profile.

Mortgage Level Term Assurance (MLTA)

A mortgage protection for borrowers who prefers to buy a life insurance which offers both protection plus savings and maybe even returns on the premium. So, this can act like a personal life insurance designed to protect you and your dependents in the event of death or TPD which had befallen the borrower causing the insured the inability to continue repaying the home loan.

Mortgage Red ucing Term Assurance (MRTA)

Mortgage Reducing Term Assurance (MRTA) is a life insurance plan with decreasing sum assured over period of time and it helps to cover the remaining home loan. This is usually offered by banks when the borrower take loans from them. If something were to happen to the borrower during the mortgage loan period and he/she could no longer repay the loan, the MRTA kicks in and takes care of it.Whether you should get MLTA or MRTA and the differences between the two, watch my YouTube video here.

Offer to Purchase

This is where you sign the form to show your interest to buy the property. Offer to purchase is the same document as booking form from real estate agency.

Principal

Your mortgage principal refers to the outstanding balance of your mortgage. This excludes the interest owed for borrowing and is the original amount borrowed from a lender that needs to be paid back.

Real Estate Agent

A property agent. Obviously. But real estate agent is a professional with a real estate license who works under a broker and assists both buyers and sellers in the home-buying process.

Refinancing

Refinancing is when you restructure your home loan, replacing your old loan with an entirely new loan that has different rates and payment structures. The main reason people refinance their home loans is to get a lower interest rate on their mortgage, and therefore lower not only the monthly payment but also the overall debt owed.

REN Tag

Real Estate Negotiator number. To verify that the agent is a legitimate real estate agent registered to a licensed agency.

Vacant Possession

Vacant possession is a legal term that means the property is in a state fit to be occupied. In simpler words, this means the delivery of access keys and cards to your newly purchased property.

Valuation

Subsale property, the banks would require you to appoint a valuer to check the current value of the property. The valuer will determine the value of the property upon inspection, as well as the previous transacted prices of comparable similar property in an area.What is property valuation. Read more about property valuation here.

If you know any other jargon, do comments below and I shall include them in the list above. It would be beneficial for people to have a quick reference in the future.