Home deposit, Rent-to-own, Mortgage, Lease… The vocabulary of the real estate world is infinite! And there are very technical and specific words that we may not know the meaning of until we have to rent or purchase a property by ourselves, with a potential disastrous result! Let’s be honest: we all are going to face this moment at some point in our lives, so grab a pen and start studying them! And iff you’re already thinking about finding a home, you may be already familiar to these words. But, do you know exactly what they mean?
1. Lessor and Lessee
It is more common than we think to mix up these two concepts. They may be similar but it is important to know the difference:
A Lessor is the landlord, the legal owner of the property. He is the responsible to make sure that the house is free of legal obligations and that the lease agreement follows all the laws.
A Lessee is the tenant, the person who pays the landlord in order to make use of the property.
And, finally, a Lease is the legal document that collects the details, terms and conditions of the agreement between the lessor and the lessee.
2. Home Deposit
It is the amount of money that covers the possible damages that the tenant may produce in the property. Once the tenant leaves the house, the landlord reviews it and if everything is okay and all the payments have been done, he gives it back. Its value usually corresponds to a monthly payment but it doesn’t substitute any of them.
3. Down payment
Careful! It is not the same as the home deposit! A down payment is the amount of money that guarantees the seller of a home the execution of the contract. This means that, when you sign a contract to buy a home you need to give the former owner a small portion of the total amount to close the deal.
Also known as lease option, it is a contract composed by two subcontracts: one for the rent and one for sale. The tenant can live in the rented property for an specific period (usually from 1 to 3 years) and then he has the right to buy the house for an established price. This price discounts totally or partially the payments that have been already done as monthly rent. This option allows potential buyers to have time to improve their credit score. Although the rent is the same as in normal contracts, the lease option implies a down payment, which is higher than the home deposit.
5. Certificate of habitability
This is a document that confirms that a property follows the minimum requirements of health, hygiene, safety and structural stability regulations for people to live there. It also verifies that the building complies with planning permission.
It also regulates the useful minimum surface and the basic equipment (toilet, kitchen, hot water…). Unfortunately, the requirements are not very exigent so it is uncommon not to get it. Make sure that the house has this document updated before signing a rent or purchase agreement!
6. Community fees
The community fees are all the necessary expenses for the maintenance and repairment of the building and common services like elevators, concierge, heating or cleaning. It also includes assurances and taxes like garage licenses or drinking water supply. They are independent of the private expenses, which are the ones each tenant has for his own house.
Tip! Remember to ask for the certificate that assures that the property is up-to-date with community payments and if there are other expenses that may need future payments independently of the owner of the property.
7. Property Registration
It is a public and official document that identifies the current owner of a property and if it is bounded to any mortgage, leases, purchase options and such. Before engaging on a contract, make sure that the house is free of burdens and that it is up-to-date with all legal requirements. For example, if the home is tied to a mortgage, the seller must cancel it economically and register it before the sign of the agreement.
8. Surface of the property
The size of the house is probably one of the aspects to consider when home-searching, but this information can be tricky sometimes. Even if it may sound as a general concept, there are the 3 types of surfaces you have to differentiate:
The constructed area includes all elements (walls, beams, partitions, terraces…) and it is reflected in the plans of the house.
The usable surface area excludes the thickness of the elements mentioned before. For example, in the case of open terraces, half of the surface is considered in the calculation of the useful floor area.
The total area is the constructed area plus the common elements shared with the neighbours, like the portal, stairs, gardens…
It is an agreement between a person and a financial entity that allows him to receive money in exchange of giving it back -plus the interests- through periodic payments and putting his home as a guarantee. This means that the moneylender has the right to take his property if he doesn’t pay this money. It is a middle/long term loan (usually between 15 and 30 years) and must be enrolled in the Property Registration, both its beginning and end.
Note: Before engaging on a mortgage, first you have to calculate how much you can pay. You will have to take a look at the family income, expenses and savings priorities so you can see what fits your budget better.
10. Real Estate Appraisal
A property valuation is a commercial appraisal of a real estate to determine its value. It is usually a document prepared by a professional agent or property broker and contains information on the tax valuation, title, contribution, location, size, quality of construction and useful life of the building. It also takes into consideration economic, environmental and social trends, and governmental controls.