First home buyer terms explained

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Buying your first home can feel like everyone around you has suddenly switched languages. LVRs. BAL ratings. Covenants. Progress payments. You are expected to understand them all while working out what you can afford, choosing a block of land and planning your new home. That is not especially helpful. So, here is the plain-English version. We have explained the finance, property, building and land terms you are most likely to hear when buying or building your first home in Victoria. No dictionary required.

Finance and home loan terms

Assets

Assets are things you own that have financial value. They can include money in your bank account, shares, vehicles and other property. A lender may ask about your assets when reviewing your home loan application. They will look at these alongside your income, expenses and debts to understand your overall financial position.

Borrowing capacity

Your borrowing capacity is the amount a lender may be willing to lend you. It is based on factors such as your income, regular expenses, existing debts, number of dependants and the lender’s own assessment rules. Your borrowing capacity is not necessarily the same as your budget. A lender may approve you for more than you would feel comfortable repaying each month.

Comparison rate

A comparison rate combines a home loan’s interest rate with most of its standard fees and charges. It is designed to make comparing loans a little easier. However, it may not include every cost or reflect exactly how you intend to use the loan, so it should not be the only number you consider.

Conditional approval

Conditional approval means a lender is prepared to approve your loan once certain conditions have been met. They may still need to complete a property valuation, review your building contract or receive updated financial documents. Pre-approval is usually conditional, so it should not be treated as a guarantee that your final loan will be approved.

Construction loan

A construction loan is a home loan designed for people building a new home. Instead of providing all the money at once, the lender releases funds in stages as construction progresses. These releases are commonly called drawdowns or progress payments. During construction, you will generally pay interest only on the amount that has already been released, rather than the entire approved loan amount.

Credit score

Your credit score is a number based on information in your credit report. It gives lenders an indication of how you have managed credit and repayments in the past. Missed payments, unpaid debts and frequent credit applications can affect your score. A higher score does not automatically guarantee approval, but it may help your application.

Deposit

Your deposit is the money you contribute towards buying your home or land. The amount you need will depend on the property, your lender and whether you qualify for a first home buyer scheme or guarantee. You may also need money for other upfront costs, so it is worth keeping some breathing room rather than putting every dollar into the deposit.

Equity

Equity is the difference between a property’s current value and the amount still owing on its home loan. For example, if a home is worth $600,000 and the owner owes $450,000, they have approximately $150,000 in equity. First home buyers may hear about equity when discussing family guarantors, particularly if a parent is using equity in their home to help secure the loan.

Finance broker or mortgage broker

A finance broker, usually called a mortgage broker, helps you compare home loans from different lenders. They can explain loan options, help prepare your application and communicate with the lender. Brokers are generally paid a commission by the lender, although fees and arrangements can vary. A broker can save you from approaching every bank yourself, but you should still ask which lenders they work with and why they are recommending a particular loan.

First Home Guarantee

The First Home Guarantee is an Australian Government scheme that can help eligible first home buyers purchase a home with a deposit from 5 per cent without paying Lenders Mortgage Insurance. The government does not provide your deposit or make your repayments. Instead, it guarantees part of the loan for the participating lender. Eligibility rules and property price limits can change, so check the current requirements before relying on the scheme.

First Home Owner Grant

The First Home Owner Grant, often shortened to FHOG, is a payment for eligible first home buyers purchasing or building a new home. In Victoria, the current grant is $10,000 for an eligible new home valued up to $750,000. The home must be new and must become your principal place of residence. Other eligibility and residency requirements also apply. The grant is different from a stamp duty exemption or concession. Depending on your circumstances, you may be able to qualify for more than one form of first home buyer support.

Fixed interest rate

A fixed interest rate stays the same for an agreed period, such as one, two or three years. This can make repayments easier to plan because the interest rate will not change during that period. However, fixed loans may have limits on extra repayments, redraws or other features. At the end of the fixed period, the loan will usually move to a variable rate unless you make another arrangement with the lender.

Formal or unconditional approval

Formal approval means the lender has completed its assessment and approved your home loan. It is sometimes called unconditional approval, although you should still read the loan documents carefully. There may be steps that need to happen before settlement or before construction funds can be released.

Genuine savings

Genuine savings are funds you have saved or held over a period of time. Some lenders ask for genuine savings when you are applying with a smaller deposit. This helps show that you can regularly put money aside and manage your finances. What counts as genuine savings differs between lenders, so your broker or lender should explain their requirements.

Guarantor

A guarantor is someone who agrees to provide additional security for part of your home loan. This is often a parent or close family member using equity in their own property. A guarantor does not usually give you the deposit as cash. Instead, their property helps support the loan. It is a serious financial commitment. The guarantor may be responsible if you cannot repay the loan, so everyone involved should get independent financial and legal advice.

Interest rate

The interest rate is the percentage your lender charges you for borrowing money. Even a small change in the rate can affect your monthly repayments and the total amount you pay over the life of the loan. When comparing loans, look at the interest rate, comparison rate, fees and included features rather than focusing on one number alone.

Lender

A lender is the bank, credit union or financial institution providing your home loan. Different lenders have different interest rates, application rules, deposit requirements and ways of assessing your financial position. Being declined by one lender does not always mean every lender will reach the same decision.

Lenders Mortgage Insurance

Lenders Mortgage Insurance, better known as LMI, is insurance that protects the lender if you cannot repay your home loan and the property sale does not cover what is still owing. It protects the lender, not you.LMI is commonly required when you borrow more than 80 per cent of a property’s value, although lender policies vary. It may be paid upfront or added to your loan, which means you could also pay interest on it. Eligible buyers may be able to avoid LMI through the First Home Guarantee or certain guarantor arrangements.

Loan repayment

A loan repayment is the amount you pay your lender, usually weekly, fortnightly or monthly. Your repayment amount depends on how much you borrow, your interest rate, your loan term and whether the loan is principal and interest or interest only. When working out what you can afford, leave room for rates, insurance, utilities, maintenance and normal life expenses too.

Loan term

Your loan term is the length of time set for repaying the home loan. A common home loan term is 25 or 30 years. A longer term can reduce your regular repayments, but it usually means paying more interest overall. Making additional repayments may reduce the time and interest needed to repay the loan, depending on its conditions.

Loan-to-value ratio

The loan-to-value ratio, or LVR, compares the amount you are borrowing with the lender’s value of the property. For example, borrowing $540,000 for a property valued at $600,000 would give you an LVR of 90 per cent. A higher LVR generally means you are contributing a smaller deposit. It can affect your loan options, interest rate and whether you need to pay LMI.

Mortgage or home loan

A mortgage is the legal arrangement that lets a lender use the property as security for your loan. In everyday conversation, people often use “mortgage” and “home loan” to mean the same thing. Technically, the home loan is the money you borrow and the mortgage is the lender’s security over the property.

Offset account

An offset account is a transaction account connected to your home loan. The balance in the account is offset against your loan when interest is calculated. If you have a $500,000 loan and $20,000 in your offset account, interest may be calculated on $480,000.Offset accounts can be useful, but they may come with higher fees or interest rates. Compare the costs with the amount you realistically expect to keep in the account.

Pre-approval

Pre-approval is an indication of how much a lender may be prepared to lend you based on the information available at the time. It can help you set a price range and search for land or a home with a clearer budget. It is not final approval. Changes to your income, spending, debts, interest rates or the property itself can affect the lender’s final decision.

Principal

The principal is the amount you borrow, before interest and most other loan costs. When you make principal and interest repayments, part of each payment reduces the amount you owe and another part covers interest.

Principal and interest repayments

Principal and interest repayments cover both the amount you borrowed and the interest charged by your lender. This is the most common repayment type for owner-occupier home loans. As the principal reduces, the amount of interest charged will also generally reduce.

Redraw facility

A redraw facility may allow you to access extra repayments you have previously made towards your loan. It can look similar to an offset account, but the money has already been paid into the loan. Access rules, minimum redraw amounts and fees can vary between lenders.

Variable interest rate

A variable interest rate can move up or down during your loan. If the rate increases, your repayments may rise. If it decreases, your repayments may fall, although lenders do not always pass on every rate change in full. Variable loans often offer more flexibility for extra repayments, redraw facilities and offset accounts than fixed loans.

Appraisal

An appraisal is an estimate of a property’s likely market value, usually prepared by a real estate agent. It is not the same as a formal property valuation completed for a lender. An appraisal may help a seller decide how to price a property, but the lender will rely on its own assessment when reviewing your loan.

Contract of sale

The contract of sale is the legal agreement for purchasing land or a completed property. It includes information such as the price, deposit, settlement date and any special conditions. Once the buyer and seller have signed it, the contract is generally legally binding. With many house and land packages, you sign a contract of sale for the land and a separate building contract with the builder. Have your conveyancer or solicitor review the documents before you sign them.

Conveyancer

A conveyancer is a licensed professional who manages the legal work involved in transferring property ownership. They may review your contract of sale and Section 32 statement, prepare settlement documents, communicate with the seller’s representative and arrange the transfer of the title. A property solicitor can also perform this work and provide broader legal advice.

Cooling-off period

A cooling-off period gives some property buyers a limited amount of time to end a signed contract. For many private residential sales in Victoria, buyers have three clear business days from the day after signing. Restrictions and penalties apply, and cooling-off rights generally do not apply to properties bought at auction or within certain periods around an auction. A major domestic building contract has different cooling-off rules, so ask your conveyancer or solicitor which rules apply to the contract you are signing.

Off-the-plan

Buying off-the-plan means purchasing a property before construction is complete. In some cases, construction may not have started yet. You make your decision using plans, specifications, renders and other information provided by the seller or developer. Because time may pass between signing and settlement, the contract should be reviewed carefully.

Property valuation

A property valuation is an assessment of what a property is worth. Your lender may organise a valuation before formally approving your loan. The lender’s valuation can differ from the advertised price, contract price or an agent’s appraisal. For a house and land purchase, the lender may assess the combined value of the land and proposed home.

Section 32 statement

A Section 32 statement, also known as a vendor’s statement, is a legal document the seller must give you before you sign a contract of sale in Victoria. It contains important information about the property or land, including its title, easements, covenants, zoning, rates and whether it is in a bushfire-prone area. It does not tell you everything about the physical condition of the property or whether every measurement is correct. Have it reviewed by your conveyancer or solicitor before signing.

Settlement

Settlement is the point when the property purchase is completed. The remaining purchase price is paid, the title is transferred and you become the registered owner. For a block of land, settlement does not mean the home is complete. It simply means the land purchase has been finalised. Your lender, conveyancer and the seller’s representative will usually handle the settlement process.

Stamp duty

Stamp duty is the common name for land transfer duty. It is a Victorian Government tax that can apply when you purchase property or land. The amount is generally based on the property’s value and your circumstances. Eligible first home buyers may receive an exemption or concession. Stamp duty is separate from the First Home Owner Grant, although you may be eligible for both. Check the current State Revenue Office Victoria requirements before working it into your budget.

Subject to finance

A subject to finance clause makes a property purchase conditional on you receiving suitable finance by a particular date.If finance is not approved and you follow the process set out in the contract, the clause may allow you to end the purchase. The wording and deadlines matter. Have your conveyancer or solicitor explain the clause rather than assuming it automatically protects you.

Sunset clause

A sunset clause sets a date by which a particular event must happen. For untitled land or an off-the-plan property, this might be the date by which the plan of subdivision must be registered or the property completed. The contract will explain what happens if the deadline is missed and which party may end the agreement. Ask your conveyancer to review the clause before you sign.

Unconditional contract

An unconditional contract is a contract that is no longer dependent on conditions such as finance approval. Once a contract becomes unconditional, it can be difficult and expensive to withdraw. Make sure your finance and legal checks are in place before allowing important conditions to expire.

Building terms

Base price

A base price is the starting price for a home design before site-specific costs, upgrades and other additions are included. It may assume standard inclusions, a particular facade and straightforward land conditions. It usually does not represent the complete cost of building that home on every block. Ask what is included in the base price and what still needs to be allowed for.

Build stages

Build stages are the major parts of your home’s construction. The names can vary slightly, but common stages include base or slab, frame, lock-up, fixing and completion. These stages are important because your builder may issue a progress payment invoice when each contracted stage has been completed.

Building contract

A building contract is the legal agreement between you and your builder. It sets out the work being completed, the price, plans, specifications, payment schedule, construction period and responsibilities of each party. It is separate from the contract used to purchase your land. Read the full contract and have it independently reviewed before signing. Written domestic building contracts in Victoria are governed by specific consumer laws.

Building permit

A building permit confirms that the proposed building work meets the relevant building regulations and can begin. It is generally issued by a registered building surveyor after reviewing the plans and required documentation. A building permit is different from a planning permit. Depending on the land and proposed home, you may need one or both.

Building surveyor

A building surveyor assesses building plans, issues the building permit and completes required inspections during construction. They check compliance with building regulations. They do not supervise every part of the build or guarantee that the home will be completely free of defects.

Colour selection

Colour selection is the stage when you choose the materials, finishes and colours for your home. This may include flooring, cabinetry, benchtops, tiles, tapware and external finishes. Your standard inclusions and chosen upgrades will guide what options are available. At Mayde, these appointments take place with support from the Elle Design Studio team, so you are not left trying to match an entire home from a pile of tiny samples.

Defects inspection

A defects inspection is a check for incomplete, damaged or incorrectly installed work. You can complete your own inspection and may also choose to engage an independent building inspector. Any issues identified are usually recorded in a defects list for the builder to review and address. An occupancy permit does not automatically mean that every minor defect has been fixed.

Facade

The facade is the front exterior appearance of your home. Different facades may use different rooflines, windows, colours and materials. A home design may have several facade options, and the price can vary depending on the one you choose. Your facade may also need to comply with estate design guidelines.

Fixed-price contract

A fixed-price building contract sets an agreed price for the work and inclusions described in the contract. It gives you more certainty than an open-ended estimate, but the final amount can still change if you request variations or if an issue falls outside the contract’s fixed-price conditions. The important part is understanding exactly what has been included, excluded or allowed for.

HIA contract

An HIA contract is a standard-form building contract developed by the Housing Industry Association. Many builders use HIA contracts as the basis of their agreement with customers. It is still a legally binding contract and should be read carefully and independently reviewed before you sign.

House and land package

A house and land package combines a block of land with a home design selected to suit it. It is marketed as one package, but you will commonly enter into two separate agreements. One is with the developer or landowner for the land, and the other is with the builder for the home. Check the package price, inclusions, site costs, land status and any conditions before committing.

Inclusions

Inclusions are the products, features and work covered by your building price. They can include items such as appliances, flooring, heating, cabinetry and bathroom fittings. Inclusions vary considerably between builders, so comparing the total specification is more useful than comparing the headline price alone.

Occupancy permit

An occupancy permit confirms that a new home is considered suitable to occupy under the relevant building requirements.It is issued by the building surveyor near the end of construction. You will generally need it before moving into the home. It does not replace your own final inspection or mean every small defect has been resolved.

Orientation

Orientation describes the direction your home and block face. It can affect natural light, afternoon heat, garden conditions and the placement of living areas and bedrooms. A home design may be flipped or adjusted to make better use of the block’s orientation, where the design and estate requirements allow it.

Planning permit

A planning permit gives permission to use or develop land in a particular way. Not every new home requires one. It may be needed when the land is affected by certain planning overlays, design controls or other local requirements. A planning permit deals with how land may be used or developed. A building permit deals with how the building work will meet construction regulations.

Practical completion

Practical completion is reached when the contracted building work is substantially complete and the home is ready for its final inspection. There may still be minor items that need fixing. These should be recorded and handled under the process set out in your building contract. Practical completion may also trigger the final progress payment, so inspect the work carefully before approving it.

Preliminary works contract

A preliminary works contract, sometimes called a PWC or preliminary agreement, covers work completed before the main building contract is finalised. This may include soil testing, site surveys, preliminary drawings, engineering or other investigations needed to prepare a site-specific price. Check what work is included, what you are paying and whether any part of the fee is refundable or credited towards the building contract.

Progress payments

Progress payments are payments made to your builder as agreed stages of construction are completed. Rather than paying for the entire home upfront, you pay according to the schedule in your building contract. Your lender may inspect the work before releasing funds from your construction loan. In Victoria, progress payments are generally linked to defined stages such as base, frame, lock-up, fixing and completion.

Render

The word render can mean two different things when you are building.A house render can be a computer-generated image showing how the completed home is expected to look. Render can also refer to the smooth or textured coating applied to exterior walls. Context usually makes it clear which one is being discussed, but it is worth checking.

Setbacks

Setbacks are the minimum distances required between your home and parts of the block boundary. They can apply to the front, back and sides of the home. Setbacks can affect which home designs will fit on your land and whether changes to the floorplan or garage position are required.

Site start

Site start is the point when construction work begins on your block. Before reaching this stage, the builder will usually need the land to be titled and settled, finance confirmed, contracts signed, permits issued and site preparation requirements completed.

Specifications

The specifications describe the materials, products and construction details included in your home. They work alongside the plans and building contract. Specifications may cover everything from structural materials to appliances, tapware and door handles. Read them carefully. A display home or render may show upgrades that are not part of your specification.

Standard inclusions

Standard inclusions are the products and features included in the advertised or base price of a home design. Anything outside that standard range may be treated as an upgrade. Ask for the full inclusions document so you can see what is covered before comparing prices or choosing finishes.

Turnkey home

A turnkey home is intended to be ready for you to move into once construction and settlement are complete. However, “turnkey” does not always mean the same thing between builders. Check whether the package includes items such as flooring, driveway, fencing, landscaping, window coverings, letterbox and clothesline.

Upgrade

An upgrade is a product, material or design option that sits outside the standard inclusions. You might upgrade a benchtop, flooring, appliance, ceiling height or facade. Upgrades are optional, but they increase the contract price, so it helps to decide on your priorities before your colour selection appointment.

Variation

A variation is a change to the agreed building contract, plans, specifications or scope of work. It may be requested by you or required because of an issue discovered during the project. Variations can affect the price and timeline and should be recorded in writing. Changing your mind after signing can be costly, so make as many decisions as possible before the contract is finalised.

Land and site terms

Bushfire Attack Level

A Bushfire Attack Level, or BAL, measures a site’s potential exposure to embers, radiant heat and direct flame contact during a bushfire. The assessed BAL determines whether additional construction requirements apply. A higher BAL may require different windows, doors, materials or construction methods, which can affect the building cost.

Building envelope

A building envelope shows the part of a block where the home is allowed to be built. It may control the home’s position, height and distance from boundaries. Even when a block is large enough overall, the building envelope can limit which home designs will fit.

Contour survey

A contour survey records the shape, levels and slope of a block. Your builder uses this information to understand how the land falls and how the home may need to sit on it. The results can affect excavation, slab design, drainage and retaining wall requirements.

Crossover

A crossover is the section that connects your property’s driveway to the road. Its location can affect where the garage and home can be positioned. Existing trees, streetlights, drainage pits and services may also influence whether a crossover can be installed or moved.

Developer approval and design guidelines

Many new estates have design guidelines that set expectations for how homes should look and sit within the community. The guidelines may cover facade materials, colours, roof styles, landscaping, fencing and setbacks. Your plans may need developer approval before a building permit can be issued. Guidelines are not necessarily the same as registered covenants, although both can affect what you are allowed to build.

Easement

An easement is an area of land that another party has a legal right to access or use for a particular purpose. Common examples include drainage, sewerage or other services. You may not be able to build a home or permanent structure over an easement without approval. Easements are usually shown on the plan of subdivision and in the Section 32 statement.

Estate covenant

An estate covenant is a legal restriction affecting how land can be used or developed. It may control matters such as building materials, the number of homes allowed on a lot or particular design requirements. Covenants can be registered on the land title, so have your conveyancer explain any restrictions before you buy.

Fall

Fall refers to the change in ground level across a block. A relatively flat block has little fall. A sloping block has more fall and may require additional excavation, a different slab design or retaining walls. The amount and direction of fall can affect which home designs suit the land and how much the site preparation costs.

Fill and cut and fill

Fill is soil or other material added to raise or level part of a block. Cut and fill means removing soil from higher areas and using material to build up lower areas. The depth and type of fill can affect the slab design, engineering and site costs.

Frontage

The frontage is the width of the block along the street. Home designs usually have a minimum required lot width. The block may also need extra width for side setbacks, garage access or estate requirements. A home described as suitable for a 10.5-metre block still needs to be checked against the exact dimensions and restrictions of your particular lot.

Lot

A lot is an individual block of land within a subdivision. Each lot has its own number, dimensions and title once registration is complete. When buying in a new estate, the lot number is often used before the property receives a normal street address.

Retaining wall

A retaining wall holds soil in place where there is a change in ground level. Retaining walls may be needed on sloping land, near boundaries or where an estate has been levelled. Responsibility for existing or proposed retaining walls should be checked before you purchase the block.

Services and connections

Services are the utilities available to the block, such as water, sewerage, electricity, gas and telecommunications. The land contract and building price should explain which services are available and which connection costs are included. Having services near the block does not always mean every connection cost has been covered.

Site classification

A site classification describes how the soil is expected to move as moisture levels change. It is determined using site and soil information and helps the engineer design a suitable footing or slab system. More reactive or difficult soil conditions can require additional engineering and may increase construction costs.

Site costs

Site costs are the expenses involved in preparing your particular block for construction. They may include excavation, soil-related engineering, rock removal, retaining walls, drainage, service connections and additional requirements caused by slope or access. Because every block is different, site costs can vary even when two people choose the same home design.

Site coverage

Site coverage is the proportion of a block occupied by buildings. Planning controls, building regulations and estate requirements may limit how much of the land can be covered. This can affect the size and position of the home, garage and other roofed structures.

Soil test

A soil test examines the ground conditions on your block. The results help determine the site classification and the type of footing or slab your home may require. Soil conditions can have a significant effect on engineering and site costs, which is why testing is usually completed before the final building price is confirmed.

Titled land

Titled land has completed the subdivision and registration process and has its own registered land title. This generally means the land can proceed towards settlement. Once you have settled, and the other building requirements are ready, construction can move closer to starting. A title is the official record of who owns the land and can also contain information about mortgages, covenants and other restrictions.

Untitled land

Untitled land is part of a subdivision that has not completed registration yet. You can usually sign a contract to purchase the lot, but you cannot settle until the title has been registered. The expected title date may move as development work and approvals progress. If you are buying untitled land, ask how possible delays could affect your finance approval, building price and planned construction timeline.

Which first home buyer terms should you learn first?

You do not need to memorise the entire glossary before speaking to a lender or builder. Start with the terms that can affect your budget and commitments:

  • – borrowing capacity
  • – pre-approval
  • – deposit
  • – LVR and LMI
  • – house and land package
  • – inclusions
  • – site costs
  • – titled and untitled land
  • – contract of sale
  • – building contract
  • – progress payments

Understanding these will make it easier to ask questions and see which costs or conditions need a closer look.

First home buyer terms FAQs

Is pre-approval the same as home loan approval?

No. Pre-approval is an early indication of how much a lender may be prepared to lend. Final approval generally happens after the lender has assessed the property, contracts and your updated financial position.

Is a house and land package one contract?

Usually not. Many house and land packages involve one contract to purchase the land and a separate building contract for the home. Have both contracts reviewed before signing.

Does fixed price mean the price can never change?

Not necessarily. A fixed-price contract covers the work and conditions described in the agreement. Variations, upgrades or issues excluded from the fixed-price terms can still change the final cost.

Can I build as soon as I buy untitled land?

No. Untitled land must complete registration and then settle before construction can begin. Your builder will also need to complete the required plans, approvals, finance steps and permits.

Is the First Home Owner Grant the same as the First Home Guarantee?

No. The First Home Owner Grant is a Victorian Government payment for eligible buyers of new homes. The First Home Guarantee is an Australian Government scheme that helps eligible buyers purchase with a smaller deposit without paying LMI.

Do I need a conveyancer when buying land?

It is strongly recommended. A conveyancer or property solicitor can review the contract of sale, Section 32 statement, title information, easements, covenants and settlement requirements before you make a legal commitment.

The jargon ends here

There is a lot to take in when you are buying or building for the first time, but you are not expected to work it all out alone.

At Mayde, we make the process clear from the start. We can help you understand your options, find land that suits your chosen home and explain what is included before you commit.

Because your first home should feel exciting. Not like you are studying for an exam.

Explore our first home buyer resources or speak with the Mayde team to start working out your next step.

This article provides general information only and does not constitute financial, credit or legal advice. Lending requirements, government assistance and property laws can change. Speak with an appropriately qualified adviser about your circumstances before making a financial or contractual decision.

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