GLOSSARY
Appraised Value
Estimate of the value of a property being used as security for a loan.
Assets
Real Estate, Securities, Cash and other goods owned by individuals and/or companies.
Body Corporate
A corporation of the owners of units within a strata building. pArt of its role is to manage the building and common areas.
Bridging Finance
A short term loan taken out by people who are buying a new property and need finance for settlement while they are waiting for their existing property to be sold.
Certificate of Title
A certificate issued by a government body that describes a title reference to a particular parcel of land, the registered owner of that land and any encumbrances (such as a mortgage) registered against the title.
Community Title
A form of subdivision, where owners receive a Torrens Title for the lot they own and are members of a body corporate. They also share ownership of the common facilities.
Company Title
This title applies when the unit owners are actually shareholders in a private company. As a shareholder, they are entitled to exclusive occupation of a particular unit. However, if an owner wants to change the occupancy in any way (for example, by renting the unit or selling its share holding) it must be approved by the company. Lenders are generally not enthusiastic about lending on company title properties.
Comparison Rate
The interest rate of a loan which includes interest and most fees and charges for the loan. Allows you to compare different loans.
Construction Loans
A loan which funds the building of a new dwelling or commercial premise.
Consumer Credit Code
Parliament act which governs the relationship between borrowers and lenders.
Contract of Sale
A legally enforceable written agreement between individuals or entities, outlining terms and conditions for the sale of a property.
Conveyancing
Legal process for the transfer of real estate ownership.
Cooling off period
A period of time, which may vary between 24 hours and 14 days (depending on the type of contract) during which a person or organization can decide not to continue with a contract. Cooling off periods vary in each state in Australia.
Covenant
Imposes conditions on the use of, or the nature of the dwellings erected on, a parcel of land.
Deposit bond
A written guarantee from an insurance company on behalf of the buyer to the seller guaranteeing payment of all or part of the deposit.
Disbursements
Solicitors incidental costs incurred when acting for a client e.g. searches, certificates, past records etc.
Draw Down
Transfer of money from lending institution to the borrower before or after the loan has settled.
Early Termination Fees
Fees payable when a loan is repaid before the end of its term.
Easement
A right held by someone else to use land belonging to someone else for a specific purpose. For example, mains, drains and water pipes are usually covered by an easement.
Encumbrance
An outstanding liability or charge on a property.
Equity
The difference between the value of an asset and the amount still owing on it. A persons equity in their house is the difference between it's value and the amount of mortgage still owed on the house. i.e. Property worth $250,000, mortgage loan is $150,00, equity is $100,000.
Establishment fee
A fee charged by a lender for setting up a loan.
First Home Owner Grant
A national government scheme to assist first home buyers.
Fixed Interest Rate
A fixed interest rate does not vary for the fixed rate period, so payment remains constant. An interest rate that does not alter, regardless of any variations in the market's interest rates, for the fixed term.
Fixtures
Items that would cause damage to the property if removed. If a seller wisher to remove fixtures this must be stated in the contract of sale and damage made good by the seller.
Gazumping
Where the vendor and prospective buyer have verbally agreed on a price, but the property is sold to another buyer who has offered a higher price.
Government or Statutory charges
All home loans and purchase/refinance of residential property attract government charges such as stamp duty and mortgage duty. These charges are determined by the relevant State government and vary from State to State.
Guarantor
A form of security of a loan, where someone agrees to be responsible for the payment if the borrower defaults or is unable to pay.
Honeymoon period
When the interest rate is lower than the standard rate for a period of time (usually 6-24 months) when a new loan is started.
Interest Only Loan
A repayment option in which, during a specified term, only the interest accrued on the home loan is paid. This normally converts to Principal & Interest (P&I) repayments at the end of the Interest Only term.
Joint Tenants
Equal share of ownership between two or more persons. If one person dies then the title reverts to the remaining joint tenants, irrespective of the deceased persons will. Refer to the other option "Tenants in common".
Land Transfer Fee
State Government tax on the selling price of a property. Each state tax fee is different but it is generally $60.
Lenders Mortgage Insurance
Insures your lender against non-payment or default on a residential property loan. It does not protect or cover the borrower. The cost of Lenders Mortgage Insurance is covered by the borrower. Mortgage Insurance makes it possible for buyers to borrow over 80% of a property's value.
Leveraging
Using an asset as security for borrowing.
Liabilities
A persons debts.
Line of Credit
An amount of money that can be borrowed, but on which interest is only charged when some or all of the loan is drawn.
Loan to Value Ratio (LVR)
The ratio of the amount lent to the valuation of the property, ie. for a $50,000 loan against the value of a $200,000 property the LVR is 25%. Banks will place a limit on the loan to value ratio depending on things such as the type of property, the location and the financial position of the borrower.
Mortgage
A document drawn up between a borrower and lender, giving the lender a conditional right to the property held as security for the repayment of the money lent.
Mortgagee
The person or organisation who lends the money to purchase goods or property and takes a mortgage over the goods or property.
Mortgagor
The person or organization who borrows the money to purchase goods or property and provides a mortgage to the lender.
Mortgage Offset
A savings account linked to the home loan. There are generally 2 types of offsets. 100% offset and partial offset.
Mortgage Protection Insurance
Different to Lenders Mortgage Insurance. This is where the borrower can protect oneself from failing to make loan repayments.
Mortgage Stamp Duty
The State Governments stamp duty on the mortgage taken to secure a loan. Also referred to as "Loan Stamp Duty".
Negative Gearing
The investment return (rental for example) does not meet the minimum loan repayments.
Ombudsman
Australian Banking Industry Ombudsman (ABIO). A body which provides lending customers an avenue to make formal complaints which can be assessed independently.
Portability
The ability for a person to transfer their existing loan to another property. Additional fees may apply if the loan size is increased.
Principal
The capital sum borrowed on which interest is then paid.
Principal and Interest (P&I)
A loan where both the outstanding loan balance (principal) and interest is repaid on a regular basis, over the life of the loan.
Progress Payments
If the property you purchase is under construction, progress payments may need to be made to the builder as the building is constructed. Payment requests are made to the lender as invoices are received from the builder.
Redraw Facility
Where a borrower can redraw the additional repayments made over the minimum payment. Minimum redraw amounts may apply with some lenders.
Refinance
To pay off a loan and arrange a new loan, sometimes with a different lender.
Rental Guarantee
A guarantor from the vendor/developer giving the purchaser a set return. Generally provided for investment properties.
Security
An asset that protects the lenders risk until the loan is fully repaid. It is usually the property you are purchasing and can be claimed by the bank if you default on your loan.
Serviceability
Ability of a borrower to make and meet payments on a loan, based on borrowers' expenses and income.
Settlement Date
Finalising of payment and taking possession of a property.
Split Loan
Usually one loan formed in two parts. Generally the loan is split between part variable and part fixed rates.
Stamp Duty
A state government tax, payable for "stamping" of legal documents. The amount varies according to the amount borrowed and the purchase price. First Home owners may be eligible for certain concessions.
Strata Title
This title provides a person with ownership of a 'unit' of a larger building which can be sold, leased or transferred at your discretion. Also entitles you to membership of the Body Corporate.
Survey
A plan that shows the boundaries and the building position on a block of land.
Tenants in common
Equal or uneven share of a property by two or more persons. The property is divided according to law if one party dies. The deceased person's portion is subject to the conditions of their last will and testament. Refer to 'Joint Tenants' for the other option.
Term
The time frame of a home loan or fixed loan period.
Title Deed
Registration showing ownership (past and present) of a property. Details the names of owners and institutions who have registered a charge against the property.
Title Fees
State Government Tax for the title search, transfer of property ownership, registering a new mortgage or discharging of an existing one.
Title Search
A search undertaken at the land titles office to ensure the vendor has the right to sell and transfer ownership. Usually conducted by a conveyance or solicitor, it shows interest such as proprietor, mortgages and charges and any restrictive covenants and easements which affect the estate or interest.
Torrens Title
Known as a Certificate of Title, all previous and current owners are listed on the one deed, as are all previous mortgages. This is the most common form of property title in Australia. Refer to "Strata Title" as the alternative for units.
Transfer
A document that needs to be registered with the relevant land titles office so that the change in ownership is recorded on the certificate of title.
Valuation
A report providing a professional opinion on the value of the property - usually authorised by a bank to determine impartial value of property. A valuation obtained by one lender is not suitable for another as each lender has different criteria in their valuations. Valuations are only valid for lending purposes for 3 months from the date of assessment due to the change in market conditions. Valuations can take several days as access may be required.
Variable Interest Rate
An interest rate that varies during the term of the loan, in accordance with market conditions. Repayments change to cover the new interest rate.
Vendor
One who offers property for sale.