Some of the Property Terms That You Should Know (Part 2)

Property Posted on May 2, 2016

Continuing what we left off from the previous post, here goes.

Please note that this is part 2 of 4 series of property terms.

Part 1 | Part 2 | Part 3 | Part 4

  • Income-weighted Average Age – Let’s just say that this is one of the ways to prevent an older borrower to use a younger people’s name (with little or no income) to get a longer term loan. How it works is that it will average both of your salary and age and match it to the bank’s system.
  • Legal Subsidy – Is a subsidy given to you if you refinance your home loan that usually cost around $2,000 to 3,000 by a bank. But now, it will be given only if it involves a large amount of money borrowed.
  • Letter of Intent (LOI) – It is a document that involves an agreement between you and the other party to proceed with the negotiations. This is not legally binding though.
  • Letter of Offer (LO) – When a bank offer you to to take out a loan.
  • Loan Tenure – The period of how long will it takes for you to repay your loan. (You better remember this one in your household budget).
  • Loan to Value (LTV) – It is the ratio of your loan vs the value of the property. If a property price is $500.000, 100% LTV means that the bank will pay the whole property for you ($500.000). But, most banks will offer a maximum of 80% LTV. And the other 20% will be coming from your end (You might be interested to know how to accumulate money by doing simple things to save up for this)
  • Lock-in Period – Let’s say you settle in one bank for a loan. If for any crazy reason you decide to change your bank during this period (lock-in), they will happily slap you with a penalty fee (a percentage of the outstanding loan).
  • Mortgage Servicing Ratio (MSR) – It is a proportion of your monthly gross income that you spend on mortgage payments.
  • Total Debt Servicing Ratio (TDSR) – It is a proportion of your monthly gross income that you spend in debt obligations.
  • Stress Test  Interest Rate – It is a rate that is applied by banks to make sure that the borrowers (you) can make your payments when the interest rates go up.
  • Valuation Fee – This is a payment when you want to have experts to determine the value of a property. It is usually will be conducted by banks to find out how much a buyer can borrow. (If you are going to sell you property, this is a must).
  • Valuation Limit – This refers to the purchase price or the current property value, whichever lower.

Continue to part 3