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Glossary
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Additional payments You may wish to make extra payments on your home loan account which will result in your loan being paid off sooner.
Agent An agent is someone who acts on behalf of another person or business. A real estate agent will act on behalf of a landlord or an owner when selling or renting a property.
Allotment An allotment is a section of land that has been created for the purpose of a residence.
Amortisation period The length of time a borrower has to repay the loan in accordance with the arranged terms (otherwise known as the loan term).
Annual fee This is an administration fee which may be charged monthly, quarterly or half yearly every year on home loans and reverse mortgages.
Application fees These are lenders fees charged for the set up of your loan.
Appraised value This is an estimated value of the property that will be used as security for a loan.
Appreciation The property value rises due to inflation and market conditions.
Arrears When overdue monies have not been paid.
Assets Property, Cars, Boats, Shares, Money or other goods owned.
Auction A property sale that is sold to the highest bidder.
B.
Basic loans
Basic Rate
Body corporate A group of owners of units or houses within a strata building or complex. The owners elect a responsible council for the management of the building and common areas.
Boundary A line separating neighbouring properties.
Breach of contract Breaking a contracts conditions.
Break costs Penalty fees charged for breaking an agreed fixed term of a loan.
Bridging finance Finance obtained for short period of time. Higher interest rates are usually charged, and this money has to be paid back after an agreed time. This type of loan is most commonly used by borrwers if they need money to buy a new house while they are waiting for their existing house to sell.
Building inspection This inspection is generally carried out to ensure the safety of the property, professionals such as pest inspectors will determine whether the property requires any structural repairs. Contracts of sale can be made subject to the satisfactory building inspection.
Building regulations Local councils control the quality of buildings with rules of a legal or statutory nature. The rules are designed to ensure public safety, health and acceptable standards of construction.
Building society Institutions similar to banks. Building societies will take deposits and provide loans. Customers are known as members.
C.
Capital gains The financial gain to you when an asset is sold for more than you paid for it.
Capital gain tax A federal tax on the monies made on the sale of an asset (excluding your own residence) bought and sold after September 1985.
Capped loan A loan where the interest rate cannot increase above a certain level for a period of time but can decrease.
Caveat The word caveat means beware, a purchaser of real estate, will acquire what is known as an "interest" in the property purchased. However, a purchaser will not be the legal owner of the property until their interest is registered with the Land Titles Office. This means that there is a risk that someone else could register their own interest in the property before the purchaser registers theirs. By lodging a caveat a purchaser can prevent others from registering interests ahead of theirs.
Certificate of Title This is a document identifying the ownership of land. It shows who owns the land and whether there are any mortgages. This document is usually held by the lender as security for a loan.
Chattels Personal movable items which may be included in the sale such as furniture and appliances.
Clear title A clear title is when a seller has no restrictions such as an outstanding mortgage preventing the sale of a property.
Commission The fee charged by a real estate agent for services.
Comparison rate
Consumer Credit Code An Act of Parliament governing the relationship between borrowers and lenders.
Contract of Sale A written agreement explaining the terms and conditions for the sale or purchase of a property.
Conveyance The transfer of ownership of a property from the seller’s name to the buyer’s name.
Conveyancing The legal process for the transfer of ownership of a property.
Cover note A temporary guarantee of property insurance before the commencement of a formal policy.
Credit Borrowed money or a hire purchase which is to be paid back under an agreed arrangement with a lender.
Credit union A cooperative which is owned and controlled by people who use its services and operates similar to a bank.
Creditor A person or party to whom money is owed.
D.
Debtor Someone who owes money to someone else.
Deed A legal document that states an agreement or obligation regarding a property.
Default Failure to abide by the terms of a mortgage or loan agreement. A failure to make loan payments (defaulting on the loan) may result in the mortgage holder taking legal action to repossess the mortgaged property.
Deposit A deposit is normally paid by the buyer at the time of exchanging contracts. Normally a minimum o 5-10% of the total purchase price is required.
Deposit bonds Guarantees that the purchaser of a property will pay the full deposit by the due date. Institutions providing deposit bonds act as a guarantor that payment will be made.
Direct debit Regular electronic debiting of funds from a customer’s nominated bank/building society cheque or savings statement account (or some credit union accounts).
Disbursements Miscellaneous fees and charges incurred during the conveyancing process, including search fees and charges paid to Government authorities.
Discharge fees The discharge fee is a one-time payment charged on the final payout of loan.
Discharge of Mortgage A document signed by the lender and given to the borrower when a mortgage loan has been repaid in full.
Disposable income Any income left over after all known expenses have been met (eg. loan payments, bills).
Draw down To access available loan funds, usually referring to a staged loan for property constructions, or lines of credit where the limit is set and the borrower can use the funds as required.
Duty (or Stamp Duty) A State Government tax on financial transactions. For the purchase of real estate, it is calculated according to the property value. It also applies to the amount of the mortgage.
E.
Easement A right to use a part of land which is owned by another person or organisation (eg. for access to another property).
Encryption Encryption is a security measure used to protect customer's information when interacting with our web site. It is also used to protect customers passwords held in internal databases, thereby removing the possibility of staff knowing customer's passwords.
Encumbrance An outstanding liability or charge on a property.
Equity A home owner’s financial interest in a property. Equity is the difference between the price for which a home could be sold and the amount still owed on its mortgage. Equity usually increases as the outstanding principal of the mortgage is reduced through regular payments. Market values and improvements to the property also affect equity.
Establishment fees It covers basic costs in setting up loans from initial interview to loan drawdown.
Exit/prepayment fees This fee is imposed by some lenders when the borrower refinances with another lender within the first years of the loan. Some can get as high as a break fee for a fixed interest loan, so make sure to research whether there is an exit fee for your chosen home loan.
F.
First Home Owners Grant The First Home Owners Grant is a grant from the Federal Government which is available as compensation for the increased cost of housing after implementation of the Goods and Services Tax (GST) on 1 July 2000. The grant of $7,000 is available for first home buyers.
Fittings Items not intended to be removed from a property on sale (eg. fixed carpets, lights, curtains, stoves).
Fixed rate An interest rate that applies to a loan for a set term. Both the interest rate and loan repayments are fixed for the agreed term, regardless of any interest rate variations in the home loan market. The agree term is usually 1, 2 ,3, 4 or 5 years.
Freehold The dwelling and the land on which it stands is owned by the owner until they choose to sell it.
G.
Glossary Plain english definitions of home loan jargon
Guarantee A contract to pay someone else’s debt if they don’t pay it.
Guarantor A party who agrees to be responsible for the payment of another party’s debts should that party default.
H.
Home Equity A home equity account gives you a revolving line of credit secured by the value of your house. This allows you to use the funds for other purposes such as the purchase of a second property, shares or other investments. The interest rate is generally higher than a standard variable rate, and these loans should be treated with caution.
Home Loan A home loan requires you to pledge your home as the lender's security for repayment of your loan. The lender agrees to hold the title or deed to your property until you have paid back your loan plus interest.
'Honeymoon' Rates
I.
Instalment The regular periodic payment that a borrower agrees to make to the lender.
Interest The amount you are charged for the money advanced to you by a lender.
Interest only loan A loan where only the interest is paid for an agreed term (usually a short period of one to five years) or during a construction period. The principle is then repaid over the remaining term of the loan by the conversion of repayments to Principle & Interest.
Interest rate The rate at which interest is applied.
Introductory loan A loan is offered at a reduced rate for an introductory period (usually 6 to 12 months) to new borrowers. Also called a discounted or honeymoon rate.
Investment property A property purchased for the sole purpose of earning a return on the investment, either in the form of rent or capital gain. The owner does not live in the property.
J.
Joint tenants Equal holding of a property between two or more persons. If one party dies, their share passes to the survivor/s.
L.
Lease A document granting a period of tenancy of a property under specific terms and conditions.
Legal Fees
Line of credit loan A flexible loan arrangement with a specified limit to be used at a customer’s discretion.
Low doc loans
Lump sum repayments Additional ad hoc repayments, made over and above your minimum repayment requirement.
LVR LVR stands for ‘Loan to Value Ratio'. LVR refers to the maximum amount you can borrow against the value of the property used as security for your home loan. For example a lender may approve a loan for 85% of the property value, while you will be expected to provide the remaining 15% plus costs and insurance.
M.
Maturity The date at which a debt must be paid in full.
Maximum loan amount The maximum amount that can be borrowed based on an applicants’ disposable income, deposit, and the purchase price of the property.
Median The median is the value which divides the sequence in half, when a set of values are arranged in ascending order.
Minimum loan amount The minimum amount that can be borrowed.
Minimum repayment required The amount you are contractually obliged to repay each month, in order to repay your loan within the agreed term
Mortgage A form of security assigned to the mortgage for a loan, usually taken over real estate (such as your home).
Mortgage broker A person or organisation offering to organise or broker loans from a group of lenders.
Mortgage insurance Some lenders may provide a higher LVR for a loan if you take out mortgage insurance. This figure is a one off payment usually made at the time of settlement. The figure is calculated based on the loan amount, the value of your property and the LVR. The mortgage insurance protects the lender in the event of payment default when the borrower's debt is taken over by the insurer.
Mortgage manager A company responsible for managing every facet of a borrower’s loan. These often source loans from mortgage originators.
Mortgage offset account Offset accounts can help reduce your tax by offsetting taxable income from deposit accounts against interest paid in after tax dollars on mortgage repayments.
Mortgage originator A person or organisation who organises a loan from another source (eg. a mortgage trust fund).
Mortgage payment A regularly scheduled payment that usually includes both principal and interest.
Mortgage protection insurance This type of insurance is taken out by a borrower to cover the borrowers’ loan repayments in the event that they are not able to meet them through specific events such as serious illness or redundancy. It is also sometimes called income protection insurance.
Mortgage registration fee State Government charge for the registration of a loan.
Mortgagee The lender of the funds.
Mortgagor The person(s) who owns the property offered in support of the loan.
N.
No
frills loans
Non-conforming loans
P.
Passed in A property is ‘passed in’ at auction if the highest bid fails to meet the reserve price set by the vendor (seller).
Portable Loans
Prepayment Any amount paid to reduce the principal balance of the loan before the due date or any amount in addition to the minimum repayment.
Principle The capital sum borrowed, upon which interest is payable.
Principle & interest loan A loan in which both the principle and interest are repaid, during the agreed term of the loan.
R.
Real property Land, with or without improvements (eg. a house).
Redraw facility A redraw facility allows you to make additional repayments on your mortgage; the redraw facility can include a minimum amount and a transaction fee.
Refinance To pay off a mortgage and arrange for a new mortgage, sometimes with a different lender.
Reserve price Specified minimum price acceptable to a seller at auction.
Reverse mortgage
S.
Searches Examinations or research tasks usually carried out by solicitors on the purchaser’s and lender’s behalf to confirm information about the property or the purchaser, prior to settlement.
Security Documentation held by the lender (or mortgagee) regarding property supporting the loan.
Service Fee
Settlement The date on which loans funds are advanced to you or your legal representative.
Solicitors' mortgages Mortgages offered through solicitors’ firms.
Split loan A combination of loan types forming one loan, such as a partial fixed/variable interest rate loan.
Stamp Duty This is a State Government tax assessed on the selling price of the property. Each state has different rules and calculations. To estimate the amount of stamp duty you may have to pay.
Standard Variable Rate
Strata title A strata title is the most common title associated with town houses and home units and is evidence of ownership of a unit, which is called a 'lot', in a strata plan. Individuals each own a small portion (such as a unit or townhouse) but where there is common property (external walls, windows, roof, driveways, foyers, fences, lawns and gardens) which all owners share.
Sub-prime lending
Survey A plan that shows the boundaries of a block of land and the positioning of any building/s on that land.
Switching Fee
T.
Tenants in common The equal or unequal holding of property by two or more persons. If one party dies, their share passes according to their Will or the law (not necessarily to the owner of the other share).
Term The duration of a loan, or a specific period within that loan. This is usually written in months, eg 360, which is 30 years.
Title deed Document disclosing the legal description and ownership of a property.
Title fees Payable to the State’s Titles Office for title search, transfer or property ownership, registration of the new mortgage and discharge of the old one.
Transfer A document registered with the Titles Office that confirms the change of ownership as noted on the Title.
U.
Unencumbered A property free of liabilities, encumbrances or restrictions.
Uniform Consumer Credit Code (UCCC)
V.
Valuation A report detailing a professional opinion of a property’s value.
Variable rate A rate that goes up or down depending on money market interest rates.
Variation A change to any part of a loan contract.
Z.
Zoning Statutory descriptions of the allowable uses of land as set out by local councils or planning authorities.
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