Glossary of terms

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100% LVR (Loan to Value Ratio) home loan or No Deposit Home Loan

A 100% LVR home loan allows you to borrow the full purchase price of a property without requiring a deposit. Whilst you don’t necessarily need to demonstrate savings, it is expected that you have the funds to cover transaction costs such as legal fees and statutory charges. This loan is also known as a no deposit home loan.

ABA

Australian Bankers' Association. The ABA is the national organization of licensed banks in Australia.

Accelerated repayments

The ability to make higher or additional repayments to the scheduled repayment set by the lender.

Acceptance

To agree to the terms of an offer or contract.

Account keeping fees

Account keeping fees are charged to cover or partially cover the lender's internal costs of administering the loan. These fees are usually ongoing.

Accrued interest

Interest accounted for but not yet due for payment. Most lenders typically calculate and accrue interest on a daily balance and charged out to the account monthly.

Additional securities

An additional asset (usually property), offered by the borrower that gives the lender a further comfort/security over the loan it secures.

Adjustments

Expenses such as Council rates, electricity, phone, water rates) beyond settlement day the vendor has paid for but not used and which the buyer will receive value for following settlement. The reverse also applies where the buyer may be paying expenses following settlement that the vendor had received value for whilst the property is in his/her possession. These amounts are usually calculated by the Solicitor or Conveyancer and an adjustment is made to the final settlement figure.

Agent

A person or body authorised to act on behalf of a client in the sale, purchase or management of property.

Allotment

A block of land created out of a larger area.

Amortisation period

The period of time (set usually in years); the borrower has to repay a loan at the arranged terms.

Application fees

Fees charged to cover or partially cover the lender's costs of processing a loan approval.

Appraised value

The estimate value of a property being used as security for a loan. A licensed Valuer or Real Estate agent can give you an estimated value of your property.

Arrears

An overdue amount yet to be paid.

Assets

Money, property or goods owned.

Auction

A public sale of property with ownership going to the highest bidder, subject to a reserve price being reached.

Back to the top Balloon payment

A large loan repayment, typically towards the end of the loan term, to clear a debt.

Bank cheque

A Bank cheque is a cheque provided by the bank from your funds.

Bankruptcy

When a debtor has his/her estate placed into the hands of a receiver who has the responsibility for its distribution.

Bridging finance

A short-term loan that covers the time gap between the purchase of a new property and the sale of an old property.

Body corporate

See Owners’ Corporation.

Bridging finance

A short-term loan that covers the time gap between the purchase of a new property and the sale of an old property.

Building insurance

Insurance which covers the cost of rebuilding or repairing a property following structural damage.

Building regulations

The standards formulated by local councils which must be met by owners/builders to maintain quality of buildings.

Back to the top Capital gain

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 for the purpose of investment bought and sold in Australia after September 1985.

Capped loan

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

A warning. An entry made in a land registry or court to prevent a certain step being taken (e.g. the transfer of land) without notice to the person who lodged the caveat.

Caveat emptor

Latin which translates to “Let the buyer beware”.

Certificate of title

A document that details the title or ownership details of a property, and whether there are any encumbrances on the title. Not all States and Territories have Certificates of title.

Chattels

Any property other than freehold land. Personal chattels are movable, tangible articles of property such as clothes and furniture. Real chattels included leasehold interest in land.

Commission

A fee payable to a real estate agent, by the vendor, for the sale of property, or by a lender to a Mortgage Broker for arranging a loan.

Common property

An area used by many, not an individual. Owned by the Owners’ corporation.

Company title (also known as Stratum Title)

As the owner you become a shareholder in the company that manages the common area, not just a member as in Strata title. Lenders are sometimes reluctant to lend against company title or stratum units because of difficulties and complexities involving the operation of the company. Check with your Mortgage Broker prior to considering a Company Title property as the options for finance will be limited.

Comparison rate

A comparison rate is the nominal interest rate incorporating certain fees and charges to help consumers identify and compare the true cost of a home loan. When shopping for a home loan, people often focus on the advertised interest rate. From the 1st July 2003, the Australian Government made it mandatory to display a comparison rate for any advertisement of a credit rate, including home loans. The calculation takes into account the following:

  • Loan amount
  • Interest rate
  • Term and repayment frequency
  • Establishment and ongoing fees & charges

Compound interest

Interest that is paid on both the accumulated interest as well as on the original principal.

Contents insurance

A policy insuring household contents against theft and damage.

Contract

A legally enforceable agreement between individuals or entities.

Contract of sale

A written agreement outlining the terms and conditions for the purchase or sale of property.

Conveyancer

A person qualified and licensed to handle all documentation for the sale and or purchase of a property and the transfer of ownership of that property.

Conveyancing

The legal process for the transfer of ownership of real estate.

Cooling-off

A 'cooling-off period' may apply after contracts are exchanged. This refers to the period of time during which the purchaser may cancel the contract, although they will lose a portion of their deposit. The cooling-off period is not available for properties purchased at auction and is not available in all states, so check with your legal adviser.

Countersigned

Additional signature or signatures to guarantee the validity of a document.

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 Check (Credit Report)

There are a number of organisations (credit reporting bodies), who hold credit details on everyone who has established a credit history. The public can contact these organisations and obtain a copy of their credit report, usually free of charge. Most lenders use the services of credit reporting agencies in their loan decisioning process.

Credit limit

The maximum amount a borrower can drawdown/use at any one time.

Creditor

A party to whom money is owed.

Crossed cheque

A cheque with two parallel vertical lines across it to specify that the cheque must be paid into an account and cannot be cashed unless authorised by the payee and signatory.

Back to the top 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

The failure to meet a debt payment on a due date. Borrowers who fail to pay their scheduled home loan repayments will be in breach of their credit contract and in default of the mortgage. If you’re having difficulty maintaining your loan repayments then you should contact your Mortgage Broker or lender immediately.

Deposit

The amount you pay on exchange of contracts as part of your initial contribution to the purchase of your home. This is usually between 5 and 10% of the purchase price. An alternative to providing a cash deposit is a deposit bond.

Deposit bond

A deposit bond acts as a substitute for a cash deposit in between signing a contract and settlement and can be issued for all or part of the deposit amount required, up to 10% of the purchase price. At settlement, the purchaser is required to pay the full purchase price including the deposit.

Duplex (also Semi-Detached)

A type of construction where two buildings are attached together by a common wall or walls.

Disbursements

The various costs your solicitor or conveyancer pays to other organisations and bodies on your behalf. Examples of these are, search and requisition fees or fees and stamp duty/ land tax. Your solicitor or conveyancer will itemise the disbursements on the invoice they send you.

Back to the top Early termination payment

The cost of winding up a loan early, also known as an early repayment fee. These fees were recently under NCCP, for all credit contracts entered into on or after 1 July 2011.

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.

Equity

The difference between the amount you owe on your home loan and the current value of your property.

Equity loan

A loan usually secured by the proportion of the value of your house which you own.

Equity mortgage

A loan secured by the part of the value of an asset (usually house) which you own.

Exchange of contracts

The legal point of time when the vendor and purchaser swap documentation and start enquiries with a view to settlement. These contracts differ from state to state. Your legal advisor or real estate agent will provide the relevant documents to you to facilitate the exchange of contracts.

Back to the top Fittings

Items that can be removed from a property without causing damage to it. Fittings which will remain in the property must be specified in the contract for sale.

Fixed interest rate

An interest rate set for an agreed term. Fixed interest rate loans offer more certainty than variable interest rate loans because the interest rate does not change for a specified period of time which is usually between from between one to 5 years or more.

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.

Freehold

Freehold, the term used when the owner has complete and indefinite ownership of a property and the land on which it stands.

Frozen account

An account in which all transactions have been suspended.

Back to the top Garnishee

To legally divert a part or whole of someone's money or property to someone else by order of a Court.

Gearing

The ratio of your own money and borrowed funds in an investment.

Goods and Services Tax (GST)

Goods and Services Tax which is a Federal tax levied as a percentage (currently 10%) added to the price charged on specified goods and services.

Guarantee

A promise made as bound by the terms of a contract.

Guarantor

A person or company that endorses an agreement to guarantee that promises made by the first party (the borrower) to the second party (lender) will be fulfilled, and assumes liability if the borrower fails to fulfill them (defaults). In case of a default, the guarantor must compensate the lender, and usually acquires an immediate right of action against the borrower for payments made under the guarantee.

Back to the top Holding deposit

A refundable deposit which demonstrates the buyer’s intent to proceed with the purchase, whilst providing a level of comfort that secures the property.

Honeymoon rate

Honeymoon, or introductory rate, home loans offer a discounted interest rate for an introductory period, usually the first 1-3 years of the loan. Once the honeymoon or introductory period ends, the interest rate usually reverts to a higher rate.

Back to the top Inclusions

Items included with a property such as fixtures and fittings which must be specified in the contract of sale.

Income statement

A statement of income and expenditure for a period, usually a year.

Interest

Fee charged by the Lender for the use of funds, or the return on deposited funds. See also daily interest.

Interest only loan

A loan where the borrower elects to make monthly repayments of interest and no principal reductions. The interest only period is usually limited (up to ten years), depending on the product option selected by the customer. At the end of the interest only period repayments will change to principal and interest for the remainder of the loan term.

Back to the top Joint tenants

The equal holding of property between two or more persons. If one party dies, their share passes to the survivor(s). Property held under joint tenancy cannot be bequeathed under a will.

Back to the top Land tax

A State Government tax charged to the owners of any property based on a stipulated value of the land, other than a principal place of residence.

Lease

An agreement between two parties under which one is granted the right to use the property of another for a specified period under specific terms and conditions.

Liabilities

A person'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 (the credit limit) to be used at a customer's discretion.

Loan Establishment Fees

An establishment fee is similar to an application fee, which is charged by the lender to set up a loan.

Loan pre-approval

A loan pre-approval confirms how much you can borrow from your lender. It is conditional upon the property you wish to purchase being acceptable security, and your lender confirming your income and other information provided in your application. Care should be taken when seeking loan pre-approvals, as it is important to understand the exact terms of the pre-approval prior to securing a purchase. The safest pre-approvals are ones where the only conditions relate to the security property once it is known.

Loan term

Period over which a loan agreement is in force, and before or at the end of which the loan should either be repaid or renegotiated for another term. See also loan terms.

Loan to valuation ratio (LVR)

The ratio of the amount lent to the valuation of the security (usually the house). The ratio of the amount lent to the valuation or price of the home being purchased. The loan to valuation ratio (LVR) measures the amount of the loan compared to the value of the property being used as security for the loan, expressed as a percentage figure. For example, a property valued at $750,000, against a loan of $500,000 returns an LVR of 66%, (500,000/750,000 = 66.6%). High LVR generally means a higher risk to the lender. A lender may opt to secure a high LVR loan (80% +), with what is known as Lender’s Mortgage Insurance where the borrower pays a one off premium. Your Mortgage Broker will be able to assist in further explaining Lender’s Mortgage Insurance and LVR.

Back to the top Margin

The difference between the lender's interest indicator or reference rate, and the rate actually charged to borrowers.

Maturity

The date a debt or investment must be paid in full.

Minimum fixed amount

The minimum amount that can borrowed at a fixed rate of interest.

Minimum lump sum payment

The minimum amount that can be repaid as a lump sum.

Minimum redraw amount

The minimum amount that can redrawn from a loan at any one time.

Monthly fees

The fees charged to cover or partially cover the lender's internal costs of administering the loan each month.

Mortgage

A form of security for a loan usually taken over real estate. The lender, the mortgagee, has the right to take the real estate if the borrower, the mortgagor, defaults on the loan repayments. A mortgage over land is registered or noted on the Certificate of Title to that land.

Mortgage term

The length of time over which you agree to pay back your mortgage, usually up to a maximum of 30 years.

Mortgagee

The lender of funds.

Mortgagor

The person borrowing money under the terms of a mortgage.

Back to the top National Consumer Credit Protection Act (NCCP)

An act of Parliament governing the relationship between borrowers and lenders.

Negative gearing

Where the income from an investment property is insufficient to meet the interest costs of the loan used to fund the investment property.

No Deposit Home Loan or 100% LVR Loan

A 100% LVR home loan allows you to borrow the full purchase price of a property without requiring a deposit. Whilst you don’t necessarily need to demonstrate savings, it is expected that you have the funds to cover transaction costs such as legal fees and statutory charges. This loan is also known as a 100% LCR Home Loan.

Back to the top Off The Plan

When you buy a property from the plans only and not the finished building. The purchaser will not be able to physically inspect the property or see the standard of finishes, the practical layout, the size and dimensions or the outlook. However the purchaser may be able to view a display unit and sample finishes. There may be stamp duty concessions on “Off the Plan” purchases as the stamp duty is usually calculated on the Land portion only but make sure to check what is relevant in the state you are making the purchase.

Offer to purchase

Usually a written contract setting out the terms under which the buyer agrees to buy. If accepted by the seller, it forms a legally binding contract subject to the terms and conditions stated in the document.

Offset account

A non-interest earning account where the balance is offset against the home loan to reduce the total of the loan. The interest is calculated on the balance less the offset..

Old system title (common law title)

A system of land where a purchaser receives a title that is only as good as that which a seller can sell. Old System transactions require examination of a series of deeds and documents relating to all dealings in the land back to what is recognised in law as 'good root of title' (for example, a conveyance for value more than 30 years ago).

Option to buy

A legally binding document which gives a person, for a fee, the right to buy something, usually within a specific time frame at a specific price and subject to specific conditions.

Overdraft

An arrangement on a cheque or savings account under which a bank extends credit up to a maximum amount (the overdraft limit) and against which the customer can make withdrawals. Interest is charged on the fluctuating daily balance.

Owners' Corporation (also Body Corporate)

A representative body for and on behalf of the owners, to administer, control, maintain and manage all areas of the common property for the strata scheme.

Back to the top Passed in

A property is 'passed in' at auction if the highest bid fails to meet the reserve price set by the vendor.

Payee

The person or entity to which a cheque is payable.

Portability

A feature that enables a home loan to be transferred from one property to another, without the need to pay out your home loan and take out a new home loan, saving on time and mortgage related costs. Portability is an important option to consider, especially if you are considering a fixed rate loan. Please ensure you check lenders’ portability policy for you specific requirements or consult a Mortgage Broker for assistance.

Pre-approval

A home loan pre-approval confirms how much you can borrow from your lender. It is conditional upon the property you wish to purchase being acceptable security, and your lender confirming your income and other information provided in your application. Care should be taken when seeking loan pre-approvals, as it is important to understand the exact terms of the pre-approval prior to securing a purchase. The safest pre-approvals are ones where the only conditions relate to the security property once it is known.

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 repaid over the term of the loan.

Private sale

The sale of a property without enlisting the services of a real estate agent.

Private treaty sale

A private treaty sale is where a house is offered for sale at a negotiated price. The normal practice is for the vendor to set a price, and the buyer negotiates with the seller until a mutually agreeable price is reached. Unlike an auction, the potential buyers do not know what others may be offering for the property.

Back to the top Rate Lock fee

A rate lock fee allows a borrower to lock into a fixed interest rate whilst the documentation to facilitate the transaction is being prepared. During this time, the interest rate is protected from increasing.

Redraw facility

A redraw facility allows you to withdraw the additional repayments made into your loan. The advantages of a redraw facility is that it encourages borrowers to make extra repayments, thereby saving on interest costs whilst providing access to funds when they are needed. There may be a fee from the Lender to redraw these funds, so you will need to refer to the product terms or consult your Mortgage Broker.

Refinancing

To replace or extend an existing loan with funds from either the same or another lender.

Repayment holiday

A repayment holiday gives you the ability to stop or reduce the amount of your loan repayment. The term and total amount of the repayment holiday is dependant on the buffer or additional repayments you have built up over time (available redraw) on your home loan. This buffer allows you to stop or reduce the amount of loan repayments as available redraw covers your scheduled home loan payments. Contact your lender to check the availability of a repayment holiday and whether your available redraw will cover the payment you wish to miss or reduce.

Requisitions on title

Requisitions are questions asked by the buyer of the seller about the title and statutory obligations and controls affecting the property. The right to make requisitions is created by the contract and the seller must answer the requisitions accurately and in a reasonable time.

Reserve price

The specified minimum price acceptable to a seller at auction and which commits the seller to sell the property if the reserve is reached. If bidding falls short of the reserve price it is usual for the seller to negotiate with the highest bidder to arrive at a mutually agreeable price.

Right of way

A right of way is a particular type of easement i.e. a right to travel over land belonging to another person in a particular manner. It does not give a right to take any produce or soil from that other person’s land.

Rise and fall clause

A building contract clause that allows the final pricing to move up or down according to the fluctuations of material prices or wages or variations to building work.

Back to the top Search

An examination of records or documents at a Land Titles Office or Government Department to confirm ownership of property, registered easements and other encumbrances or current or future proposals in respect of the land.

Security

A right of a lender against the real property or other assets of a borrower to guarantee or secure the repayment of a loan.

Semi-Detached (also Duplex)

A type of construction where two buildings are attached together by a common wall or walls.

Settlement date

The date on which documentation for the transfer of ownership of property from the seller to the buyer takes place upon satisfaction of the purchase price.

Signatory

A person authorised to access an account or who has authority to sign and be bound by documents.

Split loan

The loan is split into two (or more) accounts. Customers sometimes use this option to take part of their loan at a fixed interest rate and part of their loan at a variable interest rate giving them rate certainty on the fixed rate portion and flexibility on the variable rate portion. Contact your Mortgage Broker for further details in relation to split loans.

Stamp duty on transfer

A State Government tax based on the value or purchase price of the property. Each state and territory charges different rates so be sure to check which is relevant to you.

Strata title

A form of title to a unit or lot on a plan of subdivision associated with townhouses, units and blocks of flats and based on the horizontal and vertical subdivision of air space. Owners have a certificate of title, are absolute owners of a freehold flat and have an undivided share of the common property.

Stratum title

Also known as Company Title. As the owner you become a shareholder in the company that manages the common area, not just a member as in Strata title. Lenders are sometimes reluctant to lend against company title or stratum units because of difficulties and complexities involving the operation of the company. Check with your Mortgage Broker prior to considering a Company Title property as the options for finance will be limited.

Survey

A plan that shows the boundaries, and the position, of any buildings within a block of land and confirmation whether the building complies with Local Government legislation.

Back to the top Tenants in common

Joint ownership of property which may be in equal or unequal shares. Each joint owner may dispose of their share in the property independently and unlike Joint Tenancy, the shares do not automatically pass to the other owners in the event of death but form part of that person’s estate.

Torrens Title

Torrens Title is the name given to the system of registration of ownership and dealing with property. Under this system, title to a property is established by a statutory title issued by the Registrar General. It is the most common form of residential property ownership. You are lawfully entitled to lease, sell or dispose of the property as you desire.

Transfer

A document registered with the Land Titles Office that confirms a change of ownership. The change of ownership is noted on the Certificate of Title.

Back to the top Unencumbered

A property free of mortgages, encumbrances, covenants or restrictions.

Back to the top Valuation

A report required by the lender detailing a professional opinion of a property's value.

Variable interest rate

A rate that varies in accordance with rates in the marketplace.

Vendor

A party who offers a property for sale.

Vendor statement

A statement by the seller to the buyer detailing material particulars regarding the property in question.

Villa

A single storey, attached dwelling.

Back to the top Zoning

Local authority guidelines regarding the permitted uses of land and buildings on that land.

Back to the top

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