Mortgage & Property Glossary [ Blog ]
A
+ acceptance to agree to the terms of an offer or contract.
+ accrued interest interest you have earned or incurred that is yet to be paid or charged.
+ additional repayments extra funds paid into the loan over and above the minimum prescribed repayments.
+ adjustments the process of allocating expenses (Council, electricity, phone, water rates) has paid for but not used, and which the buyer has not used but will be billed.
+ agents person or body authorised to act on behalf of a client in the sale, purchase or management of property.
+ all-in-one loans a loan, generally variable, that allows you to deposit all your income into the loan account and then withdraw money from the loan account for all your day to day purchases and transactions. The longer spare funds stay in the account, the greater the interest savings.
+ allotment a block of land created out of larger area.
+ amortisation period the period of time one has to repay a loan at the arranged terms.
+ application fees fees charged to cover or partially cover the lender’s internal costs of setting up a loan approval for a home buyer.
+ appraised value an increase in the value of a property.
+ arrears an overdue account yet to be paid.
+ assets a list of what an individual currently owns, such as real estate, savings accounts, cars, home contents, superannuation, shares etc.
+ at call a bank account from which money can be withdrawn immediately.
+ auction a bank account from which money can be withdrawn immediately.
+ australian bankers association (aba) the ABA provides analysis, advice and advocacy for the banking industry and contributes to the development of public policy on banking and other financial services.
B
+ bad debt a debt with little chance of being recovered and written off as a loss.
+ balance sheet a statement of assets, liabilities and net equity for an enterprise at a point of time.
+ bank cheque a cheque that draws money specifically from funds you own held in a bank.
+ bankruptcy when a debtor has his/her estate placed into the hands of a receiver who has the responsibility for its distribution.
+ basic variable a variable home loan at a reduced rate but generally with fewer features than a standard variable.
+ bearer the person presenting a cheque to a bank.
+ body corporate a corporation of the owners of units within a building. They form a self-elected council for the management of the building and common areas.
+ break cost costs incurred when a loan is paid off before the end of its term. Generally applies to fixed loans.
+ bridging finance a loan that enables you to cover the purchase of a new property when you are yet to sell your existing property.
+ bridging regulations the standards formulated by local councils to control the quality of buildings.
+ buyer's agent an agent or broker who represents the buyer in a property purchase.
C
+ capiatlisation when interest payable is accrued and added to the total debt payable.
+ capital the current value of your long-term assets – house, property or business.
+ capital gains the monetary gain obtained when you sell an asset for more than you paid for it.
+ capital gains tax a Federal tax on the monetary gain made on the sale of an asset bought and sold after September 1985.
+ capped loan or rate a loan where the interest rate is not allowed to exceed a set level for a period of time but, unlike fixed rate loans, is allowed to drop.
+ caveat the Latin for ‘beware’. Usually it is in the form of a contract clauses that stipulates a particular requirement.
+ certificate of currency a certificate issued by an insurance company showing that a building is insured.
+ certificate of title this document details the land dimensions and ownership details, and whether there are any encumbrances on it.
+ chattels chattels are personal property. There are two types. Real chattels are buildings and fixtures. Personal chattels are clothes and furniture.
+ combination loans where various loans come under the same banner to form one loan. May have a portion variable, fixed or even a portion as a line of credit. Also known as split loans.
+ common property an area used by many, not an individual. Owned by the tenants in common.
+ company title a property title that applies when owners of units in a block form a company.
+ comparison rate used to compare the actual rate loan, taking into account nominal interest rate per annum, the compounding frequency and upfront and ongoing fees, as outlined in the Consumer Credit Code.
+ compound interest interest that is paid on both the accumulated interest as well as on the original principal.
+ construction loans a loan specifically granted for the purpose of funding the building of a new dwelling. You are generally able to draw down money as required, so you can pay as necessary.
+ consumer credit code an Act of Parliament governing the relationship between borrowers and lenders.
+ contract a legally enforceable agreement between individuals or entities. In real estate, contracts are exchanged when the deposit is paid.
+ contract of sale a written agreement outlining the terms and conditions for the purchase or sale of property.
+ conveyance the legal process for the transferal of ownership of real estate.
+ covenant terms and conditions that specify the usage of a block of land or the buildings on it.
+ cover note a note of temporary property insurance before the implementation of a formal policy.
+ credit borrowed money to be paid back under an arrangement with a lender. Also, a sum of money paid into an account.
+ credit limit maximum amount the borrower can use at any one time.
+ credit reference of australia (craa) the body which holds credit details on all of us!
+ creditor a party to whom money is owed.
D
+ daily interest calculated on a daily basis – therefore varies according to daily account balance.
+ debit an account entry to charge a withdrawal to a specified account.
+ debtor someone who owes money to someone else.
+ deed a legal document that states an agreement or obligation regarding a property.
+ default failure to meet debt payment on a due date.
+ default rate the rate a loan rolls/moves to automatically at the end of any fixed period.
+ deposit (on property) when you buy a home, you have to pay a deposit to the seller, to show you’re serious about purchasing the home.
+ 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. They are often used as surety when cash isn’t readily available at short notice.
+ deposite (on home loan) with a standard home loan, the most you can borrow is 95% of the value of the property. You have to come up with the rest yourself before you apply for the loan – preferably from genuine savings.
+ depreciation a decrease in the value of a property.
+ discharge fee a fee charged by some lenders when you pay off your home loan.
+ disposable income any income left over after all known expenses have been met e.g. mortgage payments, bills.
+ drawn down to access available loan funds, especially referring to lines of credit where the limit is set and you can use the funds as required.
E
+ easement a right to use a corridor or passage of land which is owned by another.
+ encumbrance an outstanding liability or charge on a property.
+ end loan the loan amount you are left with after you have sold your existing home and paid the proceeds towards your bridging loan.
+ endorse to sign the back of a cheque to confirm or transfer its ownership to someone else.
+ equity the amount of an asset actually owned.
+ equity loan a loan usually secured by the proportion of the value of your house which you own.
+ established property a house that’s already built.
+ establishment fees lending body fees which may or may not be charged to set up a loan.
+ exchange of contract the legal point time when the vendor and purchaser swap documentation and start enquiries with a view to settlement.
+ exit fee a fee charged by some lenders when you pay off your home loan.
F
+ financial institution dity (fid) state duty on the receipts of financial institutions.
+ first home owner grant (fhog) a grant provided by the government to help first home owners into their own home.
+ fittings items that can be from a prompter without causing damage to it.
+ fixed interest rate an interest rate set for an agreed term.
+ fixtures items that would cause damage to a property if removed. Their removal must be stipulated in the contract of sale and any damage made good by the seller.
+ formal approval when the lender formally approves your loan application and offers you unconditional loan approval.
+ freehold the dwelling and the land on which it stands is owned by the owner indefinitely.
+ frozen account an account in which all transactions have been suspended.
+ full doc “full doc” stands for “full documentation”. It’s a loan that’s designed for borrowers who can provide full documentation of their income (payslips, tax returns and other financial statements). When you apply for a full doc loan, you get more options and generally a lower interest rate.
G
+ garnishee to legally divert a part or whole of someone’s money or property to someone else.
+ gearing the ratio of your own money and borrowed funds in an investment.
+ genuine savings evidence of regular savings over a defined period of time.
+ giropost a facility allowing you to conduct banking transaction through the post office.
+ green title when the owner of a property has full ownership (i.e. they don’t share ownership with someone else). Green title is helpful when making improvements, because no-one else needs to be considered.
+ gross income your total income before tax.
+ guarantee a promise made as bound by the terms of a contract.
+ guarantor a party who agrees to be responsible for the payment of another party’s debts.
H
+ highest bid the top price offered by a bidder at auction. If the reserve price is not reached and the property is passed in, the highest bidder is given the first option to negotiate with the vendor.
+ holding deposit a refundable deposit based on the goodwill of the buyer to go ahead with the purchase.
+ home-to-home loan also known as bridging finance. A type of loan that enables you to buy or build a new home before selling your existing one, without paying two mortgages at the same time.
+ honeymoon rate also known as an Introductory Rate. A low interest rate offered on introductory loans (the first period of some loans). It can be fixed, capped or variable for the first period of the loan. At the end of the initial period (‘honeymoon period’) the loan usually reverts to the standard variable rate.
I
+ inclusions items included with the property e.g. light fittings, stove, etc.
+ income statement a statement of income and expenditure for a period, usually a year.
+ instalment the regular payment that a borrower agrees to make to a lender.
+ interest the lending body’s charge for the use of funds or the return on deposited funds.
+ interest adjustment when additional repayments are made on a fixed loan, an interest adjustment cost is sometimes charged to compensate the lender for loss of interest revenue.
+ interest only loan or rate a loan where the principal is paid back at the end of the term and only interest is paid during the term. The loans are usually for a short term of one to five years.
+ internet banking when banking transactions such as transfers, payments and often home loan applications can be made via the Internet.
+ introductory loan or rate a loan offered at a reduced rate for an introductory period (usually no longer than 15 months) to new borrowers.
+ inventory a list of items included with the property e.g. furniture, moveable items, etc.
J
+ joint tenants equal holding of property between two or more persons. If one party dies, their share passes to the survivor/s.
L
+ land loan a loan for a block of land.
+ land tax a State Government tax charged to the owners of any property over a stipulated value, unless it is their principal place of residence.
+ land transfer registration a State Government tax assessed on the selling price of the property.
+ lease a document granting a period of tenancy of a property under specific terms and conditions.
+ lender's mortgage insurance (lmi) if you want to borrow more than 80% of the property’s value, you have to pay mortgage insurance (LMI). Mortgage insurance is a one-off payment, usually made when you settle on the property. The amount you pay depends on the loan amount, the value of your property and how much of the purchase price you want to borrow (e.g. 95%). It protects the lender in the event that you can’t meet your repayments and the home is sold with the debt outstanding.
+ liabilities someone’s debts or obligations.
+ lien the right to hold property as security against a debt or loan.
+ line of credit a flexible loan arrangement with a specified ceiling to be used at a customer’s discretion.
+ loan security duty mortgage stamp duty.
+ loan to valuation ration (lvr) (LVR) the ratio of the amount lent to the valuation of the security (usually the house).
+ low doc home loan a home loan that requires fewer official documents than a normal home loan, but often has a higher interest rate. Low doc home loans are useful for people who are self-employed.
M
+ margin this is the difference between the lender’s interest indicator rate (or other reference rate) and the rate actually charged to borrowers).
+ maturity the date a debt or investment must be paid in full.
+ mortgage a form of security for a loan usually taken over real estate. This lender, the mortgage, has the right to take the real estate if the mortgagor fails to repay the loan.
+ mortgage broker a person or organisation marketing numerous loans from a panel of lenders. They offer a service where they will select the best loan or loans for borrowers from this selection.
+ mortgage discharge fee an administration fee to cover the costs (e.g. documents) incurred in winding up a loan.
+ mortgage insurance (lender’s) a form of insurance taken out by the lender to cover themselves in the event that the borrower defaults on their loan and the sale of the property is unable to cover the outstanding amount. Mortgage insurance premiums are usually payable by the borrower when the amount borrowed is over 80% of the property value and sometimes at lower loan to valuation ratios.
+ mortgage manager a company responsible for managing every facet of a borrower’s loan. Often sources loans from mortgage originators.
+ mortgage offset also known as an offset account. A transaction account, linked to your home loan, which you can deposit your surplus cash into. Any money in the deposit account reduces (or ‘offsets’) the loan principal, even if only temporarily. So while it’s there, you pay less interest. Your interest is calculated on the loan principal minus the balance in the account. For example, if the principal on your loan is $180,000 and you have $5,000 in the transaction account, your interest will be calculated only on $175,000 ($180,000 – $5,000).
+ mortgage originator retail and more often wholesale lender who sources securities funds in order to package them as loans.
+ mortgage protection insurance not to be confused with mortgage insurance, this covers borrowers’ loan repayments in the event that they are not able to meet them through illness or redundancy, for example.
+ mortgage registration fee a State government fee for the registration of a mortgage, usually around $80.
+ mortgagee the lender of funds.
+ mortgagor the person borrowing the money in the terms of a mortgage.
N
+ negative gearing where the return on an investment is insufficient to meet the costs of the investment, leading to a reduction in assessable income for taxation purposes.
+ non-genuine savings sums of money that may have been gifted to you or received as a lump sum from a transaction, but have not been a regular occurrence over time.
O
+ off the plan the purchase of a property, often an apartment, before it has been completed i.e. after only having seen the plans, not the finished product.
+ offer to purchase a legal agreement that details a specific price for the purchase of a specific property.
+ offset account also known as Mortgage Offset. A transaction account, linked to your home loan, which you can deposit your surplus cash into. Any money in the deposit account reduces (or ‘offsets’) the loan principal, even if only temporarily. So while it’s there, you pay less interest. Your interest is calculated on the loan principal minus the balance in the account. For example, if the principal on your loan is $180,000 and you have $5,000 in the transaction account, your interest will be calculated only on $175,000 ($180,000 – $5,000).
+ ombudsman the Australian Banking Industry Ombudsman (ABIO) provides an avenue through which customers can make complaints about their bank and have them dealt with independently.
+ ongoing fee any loan maintenance fee charged regularly over the loan term.
+ option to buy a legally binding document which gives a person, for a fee, the right to buy something usually within a specific price.
+ overdraft a pre-arranged limit to which a person can exceed an account balance.
+ owner occupied a property in which the owner lives.
P
+ passed in a property is ‘passed in’ at auction if the highest bid fails to meet the reserve price set by the vendor.
+ positive gearing when you receive more in rental income from your tenants than what you pay on the likes of loan repayments, interest, property maintenance, management fees, rates etc.
+ pre-approval when a lender advises you in writing how much they will lend you, subject to their terms and conditions.
+ principal the capital sum borrowed on which interest is paid.
+ principal and interest loan a loan in which both the principal and the interest are paid during the term of the loan.
+ private sale the sale of a property without an estate agent.
+ private treaty sale a property sale where the buyer negotiates on a price set by the seller, as opposed to an auction sale.
R
+ redraw facility a loan facility whereby you can make additional repayments on your loan and then access these extras funds when necessary. They will often have limitations such as a minimum redraw amount and a fee for each withdrawal.
+ refinancing to replace or extend an existing loan with funds from the same institution or another.
+ rental guarantee a promise by the developer guaranteeing a certain level of return on an investment property. Usually stated as a percentage of the purchase price, it generally relates to investment properties purchased off the plan.
+ reserve price a minimum price acceptable to a seller at auction.
+ residential investment loan a loan granted to purchase a property intended for investment purpose (for example, to be rented out) as opposed to owner-occupied purposes.
+ rise and fall clause a building contract clause that allows the final pricing to move up or down according to the functions of material prices or wages.
S
+ search an examination to confirm that a vendor is in a position to sell a property and that there are no encumbrances on it.
+ securities the process of taking a pool of diverse assets such as different home loans and converting them into a tradable security such as bond which investors can then purchase and trade.
+ security an asset that guarantees the lender their borrowings until the loan is repaid in full. Usually the property is offered to secure the loan.
+ self-managed super fund (smsf) if you want to buy a property through your super fund, it has to be a self-managed fund.
+ semi-detached two houses that share a common wall or walls.
+ servicability the ability of a borrower to meet loan repayments, based upon the loan amount, the borrower’s income, expenses and other commitments.
+ service fee some lenders charge a service fee to cover the cost of administering and maintaining your home loan account.
+ settlement / settlement date when you’re buying a property and the transaction is completed. In other words, settlement is when the house legally becomes yours. Your lender makes final payments on your behalf, in exchange for the relevant documents of ownership.
+ signatory a person authorised to utilise an account.
+ split loan a loan where you pay a fixed rate on part of the principal and a variable rate on the rest. Or it might alternatively be a combination of a standard home loan and a line of credit home loan.
+ stamp duty on loan amount a State government tax on mortgage amount.
+ stamp duty on property purchase a State government tax on the purchase price of a property.
+ standard variable loan or rate a variable home loan, usually with comprehensive features (as opposed to a basic variable). This is often the variable rate fixed rates roll to at the end of their fixed term.
+ stepped a stepped account is one in which different amounts of interest are paid on different amounts of interest are paid on different portions of the account. e.g. two percent on the first $1,000 and three percent on the second $1,000.
+ strata title this title gives you ownership of a ‘unit’ of a larger building which you may sell, lease or transfer at your discretion. Also entitles you to membership of the body corporate.
+ stratum title a title that records your ownership of a ‘unit’ of a larger property. Unlike a strata title, the owner becomes a shareholder in the company that manages the common area, not just a member.
+ survey a plan that shows the boundaries of, and the building position within, a block of land.
+ switching fee a fee charged when you already have a loan from a lender, and you change to another type of loan (e.g. variable rate loan to fixed rate loan).
T
+ tenants in common where more than one person owns separate, defined portions of a property. If one person dies, the relevant portion passes through the deceased’s estate rather than to the other property owner/s as with joint tenancy. Each owner can hold a specific share of ownership and has the right to dispose of their interest.
+ term the length of a home loan or a specific portion within that loan.
+ term deposit often called a fixed interest account. A type of savings account where the size of the deposit, the interest rate and the length of time the money is deposited for are all fixed.
+ title search a request to the Lands Titles Office to ascertain the ownership of a specified property and any encumbrances, covenants and easements that may be recorded on the title. This process ensures the vendor has the right to sell and transfer ownership.
+ torens title torrens title is the most common form of property title in Australia. The Real Property Act (RPA) is the legislation that governs the operation of Torrens title. Ownership of the property is registered with the Land Titles Office and evidenced by the Certificate of Title, which shows the current owner’s name and any other interests in the property e.g. mortgages.
+ transfer a document registered with the Land Titles Office that confirms the change of ownership as noted on the Certificate of Title.
U
+ unencumbered a property free of liabilities or restrictions.
V
+ valuation a report as required by the lender, detailing a professional opinion of the property’s value.
+ variable interest rate an interest rate that varies during the term of the loan, in accordance with market forces.
Z
+ zoning local authority guidelines as to the marketplace.