Glossary of Terms
A
ABA
Australian Bankers' Association
ABIO
The Australian Banking Industry Ombudsman provides an channel through which customers can make complaints about their bank and be dealt with independently
accrued interest
Interest you have earned or incurred that is yet to be paid or charged
additional repayment
Extra money paid into your loan over and above the minimum prescribed amount
adjustments
Process of allocating expenses on settlement day that the seller has paid for but not used and which they buyer has not used but will be responsible for (e.g. council rates, utility, phone bills)
all in one loan
Usually variable loan that allows you to deposit all your income against your loan and withdraw money from the loan account for everyday expenses. The longer spare funds reside in the account, the greater the potential savings on interest
amortisation
Period of time you have to repay a loan at the arranged terms
application fees
Fees charged to cover lender's internal costs of setting up a loan approval for a buyer
ASIC
Australian Securities and Investment Commission
auction
Public sale of property - ownership goes to the highest bidder subject to a reverse price being reached
B
bad debt
Debt with little chance of being settled and is written off as a loss
balance sheet
Statement of assets and liabilities and net equity for a company/entity at a point in time
bank cheque
Cheque that draws money specifically from funds you hold in the bank
bankruptcy
A debtor's estate is placed into the hands of a receiver who then distributes whatever funds are available for distribution
basic variable
Variable home loan at a reduced rate but generally has fewer features than a standard variable loan
body corporate
A group of owners of units within a building who form a self-elected committee to administer and manage common areas and the building
break costs
Costs incurred when a loan is paid off before the end of its term (generally occurs in fixed loans)
bridging finance
Loan to cover purchase of a new property when you are yet to sell the existing one
C
capital
Current value of your long term assets e.g property, business
capital gain
Monetary gain when you sell an asset at a profit i.e. for more than you paid for it
capital gains tax
Federal tax on your monetary gain from the sale of an asset (applies if asset bought and sold after Sep 1985)
capitalisation
When interest payable is accrued and added to the total debt payable
capped loan
Where interest rate is not allowed to exceed a set level for a period of time but is allowed to drop (not fixed)
Certificate of title
Document that details land dimensions and ownership details and any encumbrances
chattels
Personal property - buildings and fixtures as well as clothes and furniture
combination loans
Where variable loans come under same banner to form one loan. Can have a portion fixed, variable or line of credit (also called split loans)
Common property
Area used by many as owned by tenants in common
company title
Property title when owners of units in a block form a company
comparison rate
Compare actual rate of loan against another taking into account all charges (nominal interest rate p.a., compounding frequency, upfront and ongoing fees) - according to Consumer Credit Code
compound interest
Interest paid on both accumulated interest and original principal
construction loan
Specifically for purpose of funding the building of a new dwelling. Generally, you can draw down money as required to pay as and when you need to
consumer credit code
Act in Parliament governing relationship between buyers and sellers
contract of sale
Written agreement outlining terms and conditions for purchase or sale of property
contract
A legally enforceable agreement between parties e.g exchanged when deposits are exchanged on the sale of a property
conveyancing
Legal process for transferring ownership on a property
cover note
Temporary property insurance before a formal policy is in place
CRAA
Credit Reference Association of Australia - holds credit card details on the general public
credit
Money which is borrowed to be paid back under as arrangement with a lender. Also an amount that is paid into an account as opposed to a debit
credit limit
Maximum amount borrower has access to at any one time
creditor
A party to whom money is owed
D
daily interest
Interest calculated daily so varies depending on the account balance
debit
Account entry to show a withdrawal to an account
debtor
Someone who owes money to another party
default
Failure to meet a debt payment on a due date
default rate
The rate a loan moves or rolls over to automatically at the end of any fixed period
deposit bonds
Guarantees the purchaser of a property will pay the full deposit by the due date. Institutions provide deposit bonds and act as guarantors, providing surety often when cash is not readily available
disposable income
Income remaining after all known expenses have been deducted
draw down
Access available loan funds, especially lines of credit where limit is set and you can use the funds as required
E
end loan
Loan amount you are left with after you have sold your existing home and paid the proceeds towards a bridging loan
encumbrance
An outstanding liability or charge on a property
endorse
Sign the back of a cheque to confirm or transfer its ownership to someone else
equity
Amount of an owned asset
equity loan
Loan usually secured by proportion of the value of your house which you own
establishment fees
Lender's fees to set up a loan - may or may not be charged
exchange of contract
Legal point of time when the vendor and purchaser swap legal documents and start enquiries with view to settlement
F
fittings
Items that can be removed from a property without causing damage to it
fixed interest
Interest rate which is set for an agreed term
fixtures
Items that would cause damage to a property if removed. Their removal must be stated in the contract of sale and any damage made good by seller
FHOG
First home owners grant
freehold
Dwelling and the land on which is stands is owned by the owner indefinitely
G
gearing
Ratio of your own money against borrowed funds
GiroPost
Facility to allow you to conduct banking transactions at a post office
guarantee
A promise made and bound by the terms of a contract
guarantor
Party who agrees to be responsible for payment of another person's debt
H
holding deposit
Refundable deposit based on goodwill of the buyer to go ahead with the purchase
I
income statement
Statement of income and expenses for a period, usually a year
interest
Lending body's charge for a 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 as compensation to lender for loss of interest revenue
interest only loan
Loan where principal is paid back at the end of the term and only interest is paid during the term of the loan. Loans are usually for a short term (1-5 yrs)
internet banking
Transfers, payments, home loan applications and the like are made via the internet
introductory loan
Loan offered at reduced rate for an introductory period (usually no more than 15 months) to new borrowers
J
joint tenants
Equal holding of property between 2 or more people. If a party dies, that share goes to the survivors
L
land tax
State government tax charged to owners of a property over a stipulated value unless it is their principal place of residence
land transfer registration
State government tax assessed on the selling price of the property
lease
Document granting a period of tenancy of a property and specifies terms and conditions
liabilities
Debts or obligations
lien
The right to hold property as security against a debt or loan
line of credit
Flexible loan arrangement with a specified ceiling to be used at a customer's discretion
loan security duty
Mortgage stamp duty
loan to valuation ratio
LVR - ratio of the amount lent (loan) to the valuation of the security (generally the value of the house)
M
margin
The difference between the lender's interest rate (or an indicator) and the rate actually charged to borrowers
maturity
Date that a debt or investment must be paid in full
mortgage
Security for a loan taken out for property deal
mortgagee
Lender of funds
mortgagor
Person borrowing funds for a mortgage
mortgage brokers
Person or organisation that markets several loans from a panel of lenders. Their service is to offer the best loan to suit a borrower's circumstances
mortgage discharge fee
Administration fee to cover costs incurred in winding up a loan
mortgage insurance
Taken out by the lender in the event the borrower defaults on the loan/sale of property i.e cannot cover outstanding amount required. Mortgage insurance premiums are payable by the borrower generally when the amount borrowed is over 80% of the property value (LVR > 80) but it could be applied for lower loan to valuation ratios
mortgage manager
Company responsible for managing every facet of a borrower's loan. Often source loans from mortgage originators
mortgage originator
Retail and wholesaler lenders who source securitised funds to package them as loan products
mortgage protection insurance
Covers borrower's loan repayments in the event they cannot meet them due to illness or redundancy. Not the same as mortgage insurance
mortgage registration fee
State government fee for registration of a mortgage (usually about $80)
N
negative gearing
Where the return on an investment is insufficient to meet the costs of the investment, which then means a reduction in assessable taxable income
non-conforming borrowers
Applicants who fall outside the normal credit eligibility parameters from a mainstream lender's perspective
O
off plan
A property (often a unit) is purchased before it is built and completed and the decision is based on the developer's plans
offer to purchase
Legal agreement that details a specific price and arrangement for the purchase of a specific property
offset account
Savings account linked to your mortgage such that interest earning on your savings is applied to reduce the interest on your mortgage
ombudsman
The Australian Banking Industry Ombudsman (ABIO) provides an channel through which customers can make complaints about their bank and be dealt with independently
ongoing fee
Any loan maintenance fee charged regularly over the life of a loan
overdraft
Pre-arranged limit arranged through a bank to which a person can exceed an account balance
P
passed in
Property is "passed in" at auction if the highest bid fails to meet the reserve price set by the vendor
payee
Person or entity to which a cheque is payable
portability
A new property may be substituted as security for an existing loan
principal
Capital sum borrowed on which interest is paid
principal and interest loan
Loan in which both principal and interest are paid during term of the loan
private sale
A sale which does not include a real estate agent's involvement
private treaty sale
A property sale where buyer negotiates on a price set by the seller as opposed to an auction sale
R
redraw facility
Loan facility whereby you can make additional repayments and then access these funds when necessary. Limitations such as minimum redraw amount and a withdrawal fee often apply
refinancing
Replace or extend an existing loan. Taken out either with the same institution or another
rental guarantee
Developer promises a certain return on an investment property. Usually based on a % of purchase price and often relates to investment properties purchase off plan
reserve price
Specified minimum price acceptable to a seller at auction
residential investment loan
Loan granted for an investment property i.e. property will be rented out as opposed to owner occupied
S
search
Examination to confirm a vendor is in the position to sell a property and there are no encumbrances
securitsation
Taking a pool of diverse assets such as different home loans and converting them to a tradeable security such as a bond which investors can then purchase and trade
security
An asset that guarantees the lender their borrowings until the loan is paid in full. Often the property itself is the security
semi-detached
Two houses that share a common wall/s
settlement date
Date on which new owner finalises payment and takes possession
signatory
Person authorised to use and sign on an account
stamp duty on loan
State government tax on mortgage amount
stamp duty on property purchase
Sate government tax on the purchase price of a property
standard variable
A variable home loan with comprehensive features compared to a basic variable loan. Often rolls on when fixed rate expires
stepped
Stepped account is where different interest rates are applied to different portions of the account e.g first $1,000, second $1,000
strata title
Gives you ownership of a "unit" within a larger building which you may sell, use, lease or transfer at your discretion. Also entitles you to membership of the body corporate
stratum title
Records your ownership of a "unit" of a larger property. Owner becomes a shareholder in the company that manages the common area, not just a member
sub-prime borrowers
Same as non-conforming borrowers
T
tenants in common
Holding of property by one or more people in equal or unequal parts. If one party dies, property is divided according to law
term
Duration of a loan or portion of that loan
term deposit
Type of savings account where the size of the deposit, interest rate and length of time the money is deposited for are all fixed. Often called a fixed interest account
title search
Process to ensure the vendor has the right to sell and transfer ownership
Torrens title
Records your ownership of a piece of property which you are legally entitled to lease, sell or dispose of as you wish. Also known as Certificate of Title
transfer
Document registered with Lands Title Office that confirms the changes of ownership as noted in Certificate of Title
U
unencumbered
Property free of liabilities or restrictions
V
valuation
Report as required by the lender which gives a professional assessment of the property's value
variable interest rate
Rate that varies in accordance with rates in the marketplace
Z
zoning
Local authority guidelines as to the permitted use of land |