38 NZ real estate terms you should know

Buying, selling or financing real estate can be confusing, but it doesn’t need to be. Next time your real estate or mortgage broker comes out with an acronym or property jargon, you’ll know exactly what they’re talking about thanks to this comprehensive glossary of real estate terms. 

An auction is a property sale process where buyers put forward the price they’re happy to pay in bids. Each bid is known to the other bidders and the highest bidder wins. The auctioneer will conduct the auction, and work with the seller to get the highest possible price. 

Read more about selling at auction. 

2. Appraisal

An appraisal is a process a real estate agent undertakes to provide an estimate of what your home could sell for. To decide on a value they’ll view the property and look at recent comparable sales in your suburb. 

3. Body corporate

If you buy a unit title property, which includes most apartments and many townhouses, chances are you’ll have a body corporate. This organisation charges property owners body corporate fees which they put towards maintaining and insuring the property’s common areas.

Read more about body corporate. 

4. Capital gains

When you purchase a property and it increases in value, that is a capital gain. For example, if you bought a house worth $500,000 and five years later it was worth $600,000, you’d have a capital gain of $500,000. 

Read more about capital gains. 

5. CCCFA

The Credit Contracts and Consumer Finance Act or CCCFA is a law that requires lenders to always act responsibly and that you can make informed decisions about borrowing. This governs what lenders must tell you, what they can charge, what your lender must do if you’re experiencing financial hardship and more. 

6. Certificate of title

A title or certificate of title is a legal document held by Land Information New Zealand that shows a property’s legal owners, legal descriptions and any rights or restrictions registered against it. Your lawyer should search and check this when you buy. 

7. Chattels

Chattels are anything sold with a property that is not fixed to the land or screwed down. For example, curtains, spa pools, furniture and ovens are chattels - but walls, carpets and heat pumps are not. The chattels included should be listed in the sale and purchase agreement when you buy or sell any property. 

8. Conditional

When you make an offer on a property you’ll get to choose whether it's conditional or unconditional. A conditional offer indicates that you’ll pay a given price if certain specified conditions are met - whereas an unconditional offer has no conditions (just a price).

In other words, a conditional offer may mean you’ll pay a certain price if you’re happy with a building report, finance approval or a LIM check. 

Read more about making offers. 

9. Conveyancing

Conveyancing is the transfer of ownership of a property from one person to another - it’s what happens whenever you buy or sell real estate. There’s quite a bit of paperwork involved and the stakes are high so you’ll need a solicitor or specialist conveyancer (property lawyer) to help. 

10. Commission

When a real estate agent sells a property they’ll get a percentage of the sale proceeds as payment. This is generally around 2.95% to 3.95% of the total sale price up to $500,000 then 2% to 2.5% for the rest. 

Read more about real estate agent commissions. 

11. Cross lease

Cross leases are a type of property ownership where you jointly own a section of land with other owners, then rent or lease your portion of the land back. You’ll generally own any buildings on your land. These types of properties can cause problems for owners so make sure you know what you’re getting into before you buy one. 

Read more about cross lease properties.

12. Deadline sale

A deadline sale is a type of sale method where a property is marketed for a set amount of time, with a publicly known end date and no fixed price. Buyers make their best offers and the vendor can choose to accept one, reject all, or negotiate with one or all buyers. 

Read more about deadline sales. 

13. Debt to income ratio

Debt to income ratio or DTI are a measure of the amount of debt you have relative to your annual income. For example, if you earn $100,000 and your debt is $400,000 your DTI is 4.  The Reserve Bank has passed new laws requiring banks to do no more than 20% of their total lending to investors with a DTI higher than 7 and owner occupiers higher than six. 

14. Drawdown

When funds are released by your bank to the seller when you buy a property this is called the drawdown. 

15. Easements

An easement is a right granted to another party by a landowner to grant access to land for a particular purpose, for example for water to be drained across a neighbour's property. Easements should be recorded on a property’s title. 

16. Equity

Equity is the value of your home, minus the debt held against it, or in other words the amount you’d get in the bank after you sold it and paid off your mortgage. 

17. Extra for experts: Useable equity 

Usable equity is the amount of equity you have in your home that you can borrow against. The amount of equity you can use will depend on the size of your loan, the value of your house and whether or not you’re an owner occupier or an investor. Generally, owner occupiers can borrow up to 80% of the value of their home, whereas investors can borrow up to 30%. 

For example, if your main home was worth $500,000 and you had a $300,000 mortgage you’d have $200,000 equity. You could be able to borrow an extra $100,000 against your home. 

18. Floating interest rate

Generally there are two types of interest rate to choose from, floating or fixed. Floating rates go up and down with the market - meaning your repayments could be different week to week. If market interest rates go down you’ll benefit. If they go up, you’ll pay more. 

19. Fixed interest rate

Most Kiwis choose fixed interest rates because they tend to be lower than floating ones. These rates are set for a period of time, usually six months to five years. They’ll stay the same during that period, providing extra security and certainty - meaning your repayments will stay the same during your entire fixed period. 

Read more about floating and fixed interest rates. 

20. Freehold or fee simple

Freehold or fee simple is the simplest and many would say best way to own property. With fee simple property you’ll get the right to do whatever you want with your property as long as its within the law. That includes using it, selling it, or registering a mortgage against it. 

21. Interest only loan

An interest only loan is a mortgage that does not require you to make principal payments. These can be handy for property investors who want to increase cash flow, or temporarily for homeowners facing big challenges or financial difficulties. 

Read more about interest only home loans. 

22. Joint tenancy and tenants in common 

There are two ways to divide ownership of property, joint tenancy or tenants in common. With tenants in common you each own a portion of the property - for example two friends may own half each, or one may own a bigger share. With joint tenants you each own the property and do not have a divisible share. 

23. Leasehold

Leasehold is a type of property ownership where you don’t actually own the land. Instead you’ll pay ground rent to the owner for a set period of time, which buys you exclusive use of the land. You may also own the buildings on the land. 

24. LIM (land information memorandum)

A LIM is a report that tells you everything the council knows about a property, which might include rates owing, heritage protection, stormwater drains on the land, permits, or zoning information. It’s a good idea to have your lawyer view a property’s LIM before buying. 

25. Loan to value ratio (LVR)

Your loan to value ratio or LVR is a measure of the size of your loan VS the amount of your mortgage. To work yours out simply divide the amount of your loan by the value of your property. 

For example: Loan amount $400,000 / property value $500,000 = 0.8 (an LVR of 80%). 

Banks are generally only allowed to lend to owner occupiers with an LVR of 80% or lower.

26. Market value

The market value of your property is what people are willing to pay for it. You can get an idea of what it may be by analysing comparable sales in your area, but the only way to truly know is to sell your property. 

27. Offset account

An offset account is a mortgage feature that acts a bit like a savings account. The difference is, it's attached to your mortgage and you’ll only pay interest on the balance of your mortgage minus whatever’s in your offset account. 

28. Official cash rate (OCR)

The official cash rate or OCR is an interest rate set by the Reserve Bank of New Zealand (RBNZ), who are in charge of regulating banks and our financial system. It’s essentially the rate at which the RBNZ lends to retail banks.

The RBNZ uses this rate to influence inflation by either increasing or decreasing the supply of money. When the rate is low, borrowing is cheaper so people have more money, demand is higher and therefore inflation increases. When the rate is high, the opposite happens. 

Read our OCR predictions for 2024. 

29. Off the plans

When you buy ‘off the plans’ you’re buying a newbuild that has yet to be constructed based on designs or concepts. These are often apartments or townhouses, but can also be stand alone homes. 

Read 15 things you need to know about buying off the plans.