20 Terms You Will Encounter While Buying A Home
While buying a home, first time home buyers often come across terms that they have never heard before. If this happens to you, do not worry. Here are 20 terms you will come across in your home buying journey:
Fixed rate home loan: If you apply for a fixed rate home loan, the interest rate the bank charges you on your home loan will not change over the tenure. The interest rate will remain fixed even when economic growth, inflation, currency exchange ratios and other such parameters fluctuate.
Floating rate home loan: If you apply for a floating rate home loan or an adjustable-rate mortgage loan, the interest rate the bank charges you on your home loan will fluctuate over the tenure period. The interest rate would fluctuating according to broad macroeconomic parameters.
Compound interest: Compound interest rate is the interest rate levied on not just the principal but also on the interest accrued on the principal over a period.
Property tax: Property tax is the tax levied by urban local authorities, based on the value of the home, depending on where you live.
Home insurance: Insurance is a policy bought to cover loses in case of a crisis.
Tenure period: If the tenure period of your home loan is 30 years, this means that you have to pay back the principal along with the interest over a period of 30 years.
Appreciation: If the price appreciation of your home is 10 per cent per year, this means that the price of your home rose 10 per cent annually, on an average.
Carpet area: The area that is enclosed within the walls of a house. Carpet area is, literally, the space where you can lay a carpet.
Built-up area: Built up area includes carpet area, the balcony and the thickness of the outer walls.
Super built-up area: Super built-up area includes the built-up area and the common areas in a residential development like the lobby and the lifts.
Floor space index (FSI): FSI is the ratio between the built-up area and the area of the plot on which the building stands.
Builder: The company or person that builds your home.
Realtor: Real estate agent.
Contractor: The person who oversees the construction of a home, and managers everyone, including suppliers and subcontractors.
Sale deed: Sale deed is signed between the buyer and the seller when the sale of a home is finalised.
Title deed: Title deed is a document that shows details of a document, including ownership rights, mortgage and other obligations and rights.
Ready reckoner rate: Ready reckoner rates are the prices of real estate assets published by state governments.
Circle rate: Circle rate is the minimum rate at which the sale of a real estate asset can take place, according to authorities.
Market rate: Market rate, unlike the circle rate, is arrived at by paying closer attention to the value assigned to assets, while real estate transactions happen in a locality.
Escrow account: A temporary account in which builders are expected to deposit money collected from buyers while construction is in progress.