A
Acceptable referee Includes accountants, solicitors, magistrate, doctor & justice of the peace
Acceptance To agree to the terms and conditions of an offer or contract
Additional repayment Extra funds paid into the loan over and above the minimum prescribed payments
Allotment The area of land that is subdivided into smaller portions of land
Amortisation To pay off principal and interest under a loan over a period of time, usually by installments
Application fee The fee that is charged by a lender when you lodge a loan application
Appreciation When the value of the property increases from its original value
B
Body corporate levy The fee paid to a body corporate to cover various administrative cost relating to the common property
Bridging finance A shorter term loan that is taken out to purchase a new property before selling your existing property
Break cost Relates to fixed rate loans where the borrower terminates the loan contract before the expiry of the fixed rate period
C
Capital gain The amount by which proceeds from the sale of property exceeds the original purchase price
Certificate of title This document details the land dimensions and ownership details, and whether there are any encumbrances
Certificate of currency A certificate issued by an insurance company showing that a building is insured
Company title The title where the unit holders are shareholders in a private company
Comparison rates A comparison rate is a tool to help consumers identify the true cost of a loan. It is a rate which includes both the interest rate and the ascertainable fees and charges relating to a loan, reduced to a single percentage figure
Contract of sale A written agreement outlining the terms and conditions for the purchase or sale of property
Cooling off period 5 day period after exchange of contracts during which time the contracts may be cancelled
D
Default Failure to meet debt payment on due date
Deposit A portion of the purchase price, usually 10%, is paid by the buyer at the time of exchanging contracts on the purchase of a property
Depreciation The value of the property decreases
Debt service ratio Maximum of the applicants weekly, fortnightly or monthly wage which will support loan repayments over the agreed loan term. Usually expressed as a percentage – most lenders set a maximum DSR between 30% to 33%
Deferred establishment fee Fee imposed by some lenders where the borrower has sought refinance with another lender within the first few years of the loan
Drawdown Debiting of loan funds at settlement
Discharge fee Fee charged when a loan is discharged
E
Economic cost A fee which may be payable if, during a fixed rate period, the borrower makes certain changes such as switching the loan from a fixed to variable rate or fully prepaying the loan prior to the expiry of the fixed rate period. Economic cost is the lender’s estimate of its loss resulting from the change
Equity The difference between what you owe and what your property is currently worth
Exchange of contracts An exchange of contracts is when the buyer and seller enter into a binding contract that commits them to the purchase/sale of the property
F
Financial institutions duty FID is state duty on the receipts of financial institutions
Fixed interest rate An interest rate that allows you to lock it in for a set time period
Formal approval When the lender formally approves your loan application and offers you unconditional approval
Full Doc Full Doc loans are designed for borrowers who can provide full documentation of their income. This can include payslips, tax returns and other financial statements.Full Doc loans offer the customer greater options when it comes to loan choice as well as a lower rate.
G
Gross income Total income before tax
giroPost A facility allowing you to conduct banking transactions through the post office
H
Home equity loan A home equity account gives you a revolving line of credit secured by the value of your house. This allows you to use the funds for any other purpose such as the purchase of a second property, or shares or other investments. The interest rate is generally higher than a standard variable rate and these accounts are not suitable for everyone.
Honeymoon rate Term applied to introductory loans. The rate can be fixed, capped or variable for the first 12 months of the loan. At the end of the term the loan reverts to the standard variable rate
I
Interest only loan Usually a short term arrangement whereby payments are made on the interest only, not the principal
J
Joint tenants The holding of property by two or more people in equal shares
L
Loan to valuation Ratio (LVR) This is the measure of the amount of the loan compared to the value of the property. For example, if you have borrowed $160,000 and your property is valued at $200,000, the LVR would be 80%
Lender’s Mortgage Insurance Some lenders may provide up to 95% of funds for a loan if you agree to take out mortgage insurance (LMI). This figure is a one off payment usually made at the time of settlement. The figure is calculated based on variables such as the loan amount, the value of your property and the exact LVR (i.e. the figure between 80% & 95%). This payment allows the lender to recoup the unpaid principal in the event of default and the borrowers debt is transferred to the mortgage insurer
M
Mortgage offset Offset accounts can help reduce your tax bill by offsetting taxable income from deposit accounts against interest paid in after tax dollars on mortgage repayments. However, not all offset accounts are equal, with many not paying the same interest as you are charged on your mortgage
Mortgagee The institution who lends the money
Mortgagor The person who borrows the funds
N
Negative gearing Where the return on an investment is insufficient to meet the costs of the investment, leading to a reduction in assesable income for taxation purposes
Net income Gross income less tax
O
Ombudsman The Credit & Investments Ombudsman provides an avenue through which customers can make complaints about their credit provider and have them dealt with independently
Offset loan Helps reduce interest costs on a loan by linking the loan to a deposit account. The balance in the transaction account ‘offsets’ the loan principal. Interest is then calculated on the loan principal minus the balance in the account. For example, if the principal on the loan is $180,000 and there is $5000 in the transaction account, then interest is only calculated on $175,000.
P
Portable loans A portable loan allows you to sell your house and move to a new one without having to refinance. The main benefits of portability apart from not having to refinance is utilisation of stamp duty and not having to pay break costs if you are on a fixed rate
Pre approval When a lender advises you in writing how much they will lend you, subject to lending terms and conditions
Principal & interest loans A loan in which both the principal and interest are paid during the term of the loan
R
Redraw facility Allows you to access any additional repayments you have made on your loan
Refinancing To move your loan from one lending institution to another
S
Settlement The completion of the sale transaction. Final payments are made at settlement in exchange for the relevant documents. The purchaser can then take ownership of the property
Service fee Usually a monthly fee levied to cover the cost of administering & maintaining the loan account i.e. fixed and variable costs such as staff, IT software / hardware
Split loan Combination of either a variable rate loan and a fixed rate loan or the combination of a standrard term loan and a line of credit
Stamp duty Stamp duty is a state government tax which is calculated on the sale price of the property. Stamp duty is also payable on mortgage documents and is calculated on the amount borrowed
Standard variable rate (SVR) The rate which lenders apply to their ‘premium’ home loan product. Carries features such as a redraw facility, portability, salary account and mortgage offset
Strata title Title that is commonly used for units, which forms part of the owners corporation
Switching fee A fee charged where an existing borrower wishes to change from one loan type to another e.g. variable rate loan to fixed rate loan
T
Tenants in common The holding of property by two or more people in equal or unequal shares
Torrens title Title that grants ownership of land
Transfer A document registered in the Land Titles Office recording the change of ownership
V
Valuation A report as required by the lender detailing a professional opinion of the property’s value
Valuation fee Fee which may be charged if the lender seeks to cover the cost of valuing the property taken as security for the loan