Purchasing a property is one of the biggest investments of our lives. It not only involves a lot of money but is also an investment that is more or less permanent. It is irreversible to a great extent. This is what makes the purchase very crucial and it is important to understand the nuances that are associated with buying the home. Here are the financial terms you should be acquainted with before you jump into the process.
- Carpet area
You will often come across the term carpet area, it is the area that you can use to lay carpet or move around. It will only include the area that is within the walls and consists of the space dedicated as a balcony or terrace. But it excludes the areas that cannot be used as open spaces like lift, lobby, or stairs.
- Super built-up area and built-up area
The super built-up area includes the entire house including other useable areas like stairs and lobbies. If it is an apartment building, the common spaces will be divided amongst flat owners proportionately. The built-up area is the entire periphery of the property and includes the inner and outer walls including the carpet area and the space covered by terrace and balcony. But it will exclude the stairs, lobby, lift, etc.
- Freehold property
When the owner of a property has unconditional and full ownership, it is known as a freehold property. It shows that the owner has complete rights to the land and the building in the area.
- Real estate broker
Real estate brokers are professionals who will help the seller find a potential buyer and vice versa. The broker will act as a mediator between the two parties and help with the purchase of a residential, commercial, or industrial property. He will take a percentage of the agreed price as a fee.
- Per Square Foot Rate
During the purchase of a property, the deciding unit for its price will be a square foot. This is why the term square foot rate is used often. A plot of land or a bungalow can be measured in the square feet area but the cost of a flat is usually determined on the basis of the super built-up area.
- Home loan
A loan offered by banks, housing finance corporations, and non-banking financial institutions to buyers for the purchase of a residential property is known as a home loan. This loan is to be repaid in equated monthly installments over the tenure.
- Mortgage and reverse mortgage
Another important term in the real estate industry, mortgage means an agreement where the bank will lend money in exchange for the title of your property, with the condition that the conveyance of title will become void once the entire debt is paid. A reverse mortgage is also a loan but it allows homeowners to borrow money using the home as a security for the loan. It is available for homeowners above the age of 62. It is a loan where the lender will convert a part of the equity on your home and will pay you. You must understand the different reverse-mortgage pros and cons before you proceed.
- Loan term
The loan term is the tenure over which you repay the loan in EMIs. If you opt for short-duration loans, you will have to pay higher EMIs but it will reduce the impact of interest rates and allow you to save a part of the hard-earned money. But if you choose a long-term loan, you will have to pay lower EMIs and it will increase the interest rate. Hence, you will end up paying more money over the tenure of the loan.
- Credit history
Those who regularly pay the loan, credit card bills, and other debt in time will see the same reflected on their credit history. All lenders take a look at your credit history before extending a loan. A high credit score above 650 will ensure a low interest rate and flexible repayment terms. It will also ensure quick approval of the loan. But if you have a poor credit score, it can lead to the rejection of your loan application.
If you have been thinking about buying a home, you need to thoroughly understand these terms and then choose a home loan that suits your needs. Do not choose the first house you see or the first lender you come across. Remember to scout the market and compare the terms of the loan before making any decision. Your home is your pride and you are spending a lot of money on it, so remain patient and take one step at a time.