Confused About Real Estate Jargon? Here’s What You Should Know

Real estate concepts and terminology can be confusing for many. If you’ve ever been in a conversation with one or two real estate agents, you’d know that they have their own lingo which can be difficult to comprehend by the general public. Are you also one who is unable to understand the terms and definitions used by real estate agents? If you feel confused by real estate jargon, worry not. Here we have made it a little easier for you by listing down some of the most commonly used real estate terms that will help you give a better understanding. If you are planning a buy a new property or sell the one you are living in, we would recommend you build your vocabulary first and then go ahead with the procedure.

1.Acceleration clause: Also referred to as acceleration covenant, acceleration clause is a contract provision under which the borrower is required to repay the entire outstanding loan to the lender. This generally happens when the borrower is unable to meet certain requirements that were outlined by the lender.

2.Appraisal: Appraisal refers to the valuation of the property. It is like an unbiased estimate from an authorized person about how much is the worth of the property. For instance, if you are buying a luxurious apartment in Goregaon’s precinct or in any nearby location in the western suburbs of Mumbai, you would need an appraisal by an appraiser to confirm whether the amount of loan requested is accurate or not. If the appraised value of the property is less than what you as a buyer offered, you may have to pay the difference in cost.

3.Buydown: This is a technique used in mortgage financing. In this, the buyer’s interest rate is lowered down, from a few years to a lifetime of the loan. To understand this in a simple way, the contractor or the property seller makes payments to the lender, which lowers the monthly interest rates and hence the monthly payments.

4.Repo rate: Repo rate is the rate at which the Reserve Bank of India lends money to commercial banks. When the Reserve Bank of India increases the repo rate, it becomes expensive for commercial banks to borrow money. It is at this time that the home loan interest rates become very high. On the other hand, when the RBI cuts down the repo rate, the home loan interest rates also fall.

 5.Reverse Repo Rate: This is the rate that banks charge on all the funds that they invest with the RBI in government securities. When the reverse repo rate increases, banks may also increase the home loan interest rate because then it is more profitable for them to invest in government securities rather than lending it to the general public who is investing in property.

6.Cash Reserve Ratio (CRR): Cash reserve ratio refers to the percentage of deposits commercial banks need to keep with the Reserve Bank of India. It is a powerful instrument that the Reserve Bank of India uses to control liquidity. Remember, the higher the CRR, the lower will be the liquidity.

7.Loan-to-Value Ratio (LTV): The loan-to-value ratio refers to the ratio of the amount of the loan to the appraised value of the property. If you are buying a 2 BHK flat in Thane, the loan-to-value ratio will affect the loan programs that are available to you. In general, the lower the loan-to-value ratio is, the more favorable will be the terms of the loan programs.

Hope this information helps you whenever you buy or sell property next.

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