Don’t Get Lost in Translation: The Terms You Need to Know When Buying a Home
From amortization and escrow, to equity and condo pasalo.
(SPOT.ph) Whether you’re looking into getting a space of your own or you’re just browsing property listings, chances are, you’ve stumbled upon terms that sound a little foreign to you. Have you found yourself opening a new tab just to look up what "equity," "escrow," or "fixed-rate mortgage" means?
Just thinking about buying a home can be too much to process as it is, and if you add a ton of terms to the mix, it can be really overwhelming. Before you schedule a meeting with a sales agent or broker, make sure you read up on common home-buying terms first so nothing gets lost in translation. Understanding terms better can also help you make a smart real estate purchase!
Planning to buy a home? Check out these real estate terms so you don't get lost in convos:
One of the most important terms you need to take to heart, it refers to the repayment schedule of your loan which includes the principal amount (amount you borrowed) and the interest. When you meet with an agent, he or she will present an amortization schedule detailing the monthly payments you need to make depending on the price of the property you’re eyeing.
Refers to an estimated value of a property based on an appraiser’s analysis. According to the National Association of Realtors, banks request appraisals to make sure the value of the property exceeds the amount borrowed.
As the word balloon implies, it means a payment that’s bigger than previously made payments to make the monthly dues easier on the pocket. Some buyers usually make this as their last payment, but there are sellers who offer this option on a bi-annual or quarterly basis.
It means applying for a home loan from a reputable bank to finance 70 to 80% of the value of the property you wish to buy. This involves strict processes and filing of necessary documents. Some property developers offer assistance in applying for bank financing, especially if you’re looking to apply for a loan in one of their partner-banks.
Think of a broker as a matchmaker that can pair you with the property that meets your needs. He or she can prepare a shortlist of properties you can check out and help you secure the home you want—guiding you every step of the way until turnover date. Make sure you’re working with a licensed and experienced broker to guarantee transparency in every deal.
As the word pasalo implies, it refers to the practice of taking on the remaining balance for a property, or a type of purchase in which you, as a buyer, will assume the loan of the seller agreed upon with a bank. Simply put, it means “bearing someone’s debt” because you will be the one who will be continuing the payments.
Contract of sale
A contract between a buyer and a seller which signifies that the buyer is paying for the seller’s property. This will then lead to transfer of ownership once payment is complete.
Contract to sell
Compared to contract of sale, contract to sell covers a piece of property that’s not yet ready or being built yet. It’s an agreement that states the seller’s commitment to sell and the buyer’s commitment to pay, with ownership to be transferred once the property is finished and payments are complete.
The first and partial payment you will make when buying a house which will be followed by monthly payments. The amount of down payment varies and will depend on the agreement you have with the seller or the payment term you will choose upon purchase.
Also called owner’s interest, it refers to the difference between the value of the property and how much you owe on mortgage. According to The Balance, to build equity, you may choose to make a big down payment then pay off the monthly mortgage consistently.
Incharge.org explains that escrow refers to money held by a third party for safekeeping. In some real estate purchases, the buyer is required to put a percentage of the down payment in escrow until settlement.
This is a typical loan wherein there’s a locked in interest rate for the duration of the loan period. When applying for bank financing, make sure you ask about the interest rate and are clear about the duration of the repayment period.
This is a legal process where the creditor or lender such as the bank can take possession of the property if you fail to make mortgage payments. They can then resell the property to pay off the mortgage and it will be listed as a foreclosed property.
It involves meticulous examination of a property at the expense of the buyer to check if a property is structurally sound and is in good condition. Plumbing, foundation, roofing, and electrical systems are also checked.
A loan offered by the seller to the buyer who buys property from them so that there’s no need to wait for bank-financing approval. This is often used by buyers who do not have a good credit score and may not get approved by the bank.
License to sell
A property developer or seller cannot just sell a property once it’s built. After receiving a Certificate of Registration from the Housing and Land Use Regulatory Board (also known as HLURB), the developer needs to apply for a license to sell. Without it, they will incur penalties.
Also known as “Realty Installment Buyer Protection Act,” it gives buyers who have given at least two years of payment a grace period to pay their dues without incurring extra interest or late fees. This law doesn’t apply to those who use bank financing.
A loan in which a property serves as collateral to secure a loan, with the transfer of property becoming void upon payment of the loan amount.
One of the responsibilities of being a homeowner is regular payment of property tax. This is the amount of money you pay the local government because you own property in their area of jurisdiction. Failure to pay this on time may result in penalties.
Your most-awaited date, when the property—whether it’s a condo unit or a townhouse—is finally completed, inspected, and ready to be lived in. Developers often specify a turnover date, but due to delays in construction, this might be pushed back so manage your expectations and keep an open mind.
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this strange new world.