Glossary
Confused about some of the terms?
Here’s what they mean:
Average Annualised Percentage Rate sometimes called the Compulsory Comparison Rate, this figure takes into account the other costs associated with the loan etc, and expresses them as an average interest rate, to create a level field with which to compare like loan product interest rates.
Extra funds paid into the loan in addition to the minimum monthly payments.
The period of time a loan is calculated over (and repaid).
The fee charged by a lender to cover or partially cover the lender's costs of setting up or establishing the loan.
An overdue repayment on a loan.
Also known as economic break costs or exit fees. These are usually charged when a borrower breaks a fixed loan (i.e. repays or refinances that loan) prior to the end of the fixed term or when a loan (fixed or variable) is repaid fully by the borrower with a set time frame. Lenders generally charge early exit fees if a loan is fully paid out within the first 4 years.
Also referred to as a relocation loan, this is a temporary loan that enables someone to purchase a new property prior to selling their existing home.
Person to act on behalf of the buyer to find and negotiate on properties the buyer wishes to buy.
A legal document which sets out the location of the property, the owners and if there is a mortgage held on the property – similar to registration papers on a car.
The financial gain received when you sell a property for more than you bought it. If it is an investment property tax may be charged on the capital gain.
The actual interest rate that you receive on a loan when fees and charges are taken into account. For example, when a lender advertises an interest rate, there may be application and ongoing fees that accompany the loan. When you take these fees into account it is the same as paying a higher interest rate, therefore the CRS is a more accurate reflection of your loan’s interest rate.
Legislation designed to protect the rights of the individual or personal borrower by ensuring banks and other financial institutions all adhere to the same rules when providing personal, domestic or household credit. It should provide borrowers with complete and honest information. Also known as the Uniform Consumer Credit Code or UCCC.
A written contract or agreement outlining the terms and conditions for the purchase or sale of a property.
The legal process for the transferral of ownership of real estate from the owner to the new buyer.
Credit Ombudsman Service Limited. Formerly known as MIOS (Mortgage Industry Ombudsman Service).
Interest calculated on a daily basis - varies according to daily account balance.
The accounting practice where the cost of a fixed asset of a business is spread over the life of the asset. Depreciation is a non-cash expense which allows the money to be retained by the business, thus technically allowing the business the capacity to replace the asset over time.
A sum of money paid to secure the purchase of the property, usually 5% or 10%, however this figure can be negotiable with the vendor. Further sums of money may be paid to reduce the loan amount when the loan is established – i.e. the more money you pay towards the property the less money you need to borrow.
The costs charged such as search fees, stamp duty & land taxes relating to the purchase of land/property – also includes the fees such as Council Rates or Strata/Community fees that the previous owner has paid in advance and needs to be reimbursed at settlement. A Conveyancer/Solicitor is usually engaged to determine these costs.
Act of transferring money from lending institution to the borrower after the loan has settled.
The difference between the value of a property and the amount still owed to a Lender by the owner. A person's overall equity refers to his net financial worth, or the difference between what they owns and what they owe (i.e. Assets - Liabilities = Equity).
An interest rate which remains the same over a set period of time, regardless of increases or decreases in the variable rate.
Income from a person or company, before tax, superannuation or payroll deductions.
A person/s who agree to be responsible for the payment of another person's debts.
The Lender's charge for the use of funds or the return on deposited funds, usually charged as a percentage.
A loan where only the interest portion of the loan is paid back to the lender and the original principal loan amount remains the same. The interest only portion of a loan is usually for a short period of time, 1 to 5 years, after which it reverts to principal & interest repayments (i.e. reducing loan amount) or a new interest only period commences.
Property in the names of two or more persons, where all persons have an equal interest in the whole property. When one person dies his interest passes to the survivor(s). They are known as Joint Tenants or Joint Proprietors of that property.
A debt which you are responsible for paying, such as a loan or credit card facility.
(Lenders Mortgage Insurance) An insurance policy that protects the lender in the event that the borrower cannot repay the loan. In most cases the LMI premium is paid by the borrower and in some cases the lender lend money to the borrower to pay the premium over the life of the loan, rather than having to make a lump sum payment upfront – this is called capitalisation.
(Low Document) A style of loan which is usually available to self employed people who are unable to provide evidence of their income over the previous two financial years. For low doc loans the borrower usually signs a declaration outlining their income rather than providing financial reports or tax returns as evidence of how much they earn.
(Loan to Valuation Ratio) this is the loan amount compared to the property value and is expressed as a percentage – e.g. a $80,000 loan on a $100,000 property would have an LVR of 80%.
Where the lender takes a security (i.e. a house) against a loan. The Lender (the mortgagee) has the right to take (repossess) the property if the mortgagor fails to repay the loan.
The Lender of the funds.
The person borrowing money in the terms of the mortgage.
Gearing your investment so that the cost to maintain it (loan repayments, council rates, maintenance etc) out weigh the income produced by the investment, leading to a reduction in taxable income.
The income received by an individual AFTER tax has been taken out.
The profit remaining in a business after all expenses have been taken out, but BEFORE TAX.
Buying a property from the plans only, where the finished product cannot be seen because construction has not commenced.
A savings account which is attached to a mortgage where the interest earned is applied to reduce the interest on the mortgage.
Where a loan is transferred from one property to another property without having to refinance or break the original loan.
A written authorisation to another person, or persons, to perform certain acts for the signer, as if they were the signer.
The capital sum borrowed on which interest is paid during the term of the loan.
A loan in which both the principal and the interest are paid during the term of the loan and the loan amount reduces over time.
The additional costs associated with the purchase of a property such as Stamp Duty, Land Tax, Strata/Community Fees and disbursements.
A feature on some loans which enables the borrower to draw money back if they are ahead of their repayments.
To replace or extend an existing loan with funds from the same institution or another lender.
An examination to confirm that the vendor is in a position to sell the property and that there are no encumbrances on the property.
Ability of borrower to make and meet repayments on a loan, based on the borrowers expenses and income(s).
This is when you become the legal owner of the property and pick up the keys!
A Government charge in respect to the purchase of the property or sometimes the purpose of the loan.
Property in the names of two or more people and in which each has a separate and distinct share. When one person dies his share is not passed to the survivor(s) but becomes part of his estate for disposal according to his will.
System whereby ownership and all dealings on a property are detailed on the one document, i.e. a Certificate of Title or Deed of Grant. Under this system a mortgage is a charge or encumbrance on the title. Registration is compulsory to effect legal transfer of an interest in property and each time the property is sold, mortgaged, or a mortgage discharged, the transaction is recorded on the Certificate of Title.
A property free of liabilities, restrictions or mortgages – i.e. owned outright.
A report as required by the Lender, detailing a professional opinion of a property's value. This is usually based on the sale of similar style properties in the area.
An interest rate that can increase or decrease over the term of the loan in line with market conditions.
The owner of the property being sold.