We’re committed to providing expert advice and helping our clients understand their money and financial situation inside and out. Below are some common loan and real estate terms used when speaking about real estate finance*.

INDEX:

A

Adjustments

the process of allocating expenses (Council, electricity, phone, water rates) has paid for but not used, and which the buyer has not used but will be billed.

Amortisation Period

the period of time one has to repay a loan at the arranged terms.

Arrears

an overdue account yet to be paid.

Auction

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

B

Bankruptcy

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

Basic Variable

a variable home loan at a reduced rate but generally with fewer features than a standard variable.

Body Corporate

a corporation of the owners of units within a building. They form a self-elected council for the management of the building and common areas.

Break Cost

costs incurred when a loan is paid off before the end of its term. Generally applies to fixed loans.

Bridging Finance

a loan that enables you to cover the purchase of a new property when you are yet to sell your existing property.

Buyer’s Agent

an agent or broker who represents the buyer in a property purchase.

C

Caveat

the Latin for ‘beware’. Usually it is in the form of a contract clauses that stipulates a particular requirement.

Certificate of Title

this document details the land dimensions and ownership details, and whether there are any encumbrances on it.

Certificate of Currency

a certificate issued by an insurance company showing that a building is insured.

Combination Loans

where various loans come under the same banner to form one loan. May have a portion variable, fixed or even a portion as a line of credit. Also known as split loans.

Company Title

a property title that applies when owners of units in a block form a company.

Construction Loans

a loan specifically granted for the purpose of funding the building of a new dwelling. You are generally able to draw down money as required, so you can pay as necessary.

Consumer Credit Code

an Act of Parliament governing the relationship between borrowers and lenders.

Contract of Sale

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

Conveyance

the legal process for the transferal of ownership of real estate.

Covenant

terms and conditions that specify the usage of a block of land or the buildings on it.

Credit

borrowed money to be paid back under an arrangement with a lender. Also, a sum of money paid into an account.

D

Deed

a legal document that states an agreement or obligation regarding a property.

Default

failure to meet debt payment on a due date.

Deposit Bonds

guarantees that the purchaser of a property will pay the full deposit by the due date. Institutions providing deposit bonds act as a guarantor that payment will be made. They are often used as surety when cash isn’t readily available at short notice.

E

Equity

the monetary difference between your mortgage balance and the actual market value of your home.

F

First Home Owner Grant (FHOG)

a lump sum amount given to first home buyers who are buying or building a new home. Although it is a national scheme, the grant is funded by the states and territories, so the amount differs according to where you are buying.

First Home Loan Deposit Scheme (FHLDS)

a new government scheme for first time buyers allowing approved applicants to take out a mortgage with just a 5% deposit and avoid paying lenders mortgage insurance.

Fixed Interest Rate

an interest rate set for an agreed term.

Formal Approval

when the lender formally approves your loan application and offers you unconditional loan approval.

Freehold

the dwelling and the land on which it stands is owned by the owner indefinitely.

G

Genuine Savings

evidence of regular savings over a defined period of time, normally at least 3 months.

Guarantor

a party who agrees to be responsible for the payment of another party’s debts.

H

Honeymoon Rate

also known as an Introductory Rate. A low interest rate offered on introductory loans (the first period of some loans). It can be fixed, capped or variable for the first period of the loan. At the end of the initial period (‘honeymoon period’) the loan usually reverts to the standard variable rate.

I

Interest Only Loan or Rate

a loan where the principal is paid back at the end of the term and only interest is paid during the term. The loans are usually for a short term of one to five years.

Interest

the lending body’s charge for the use of funds or the return on deposited funds.

Introductory Loan or Rate

a loan offered at a reduced rate for an introductory period (usually no longer than 15 months) to new borrowers.

J

Joint Tenants

equal holding of property between two or more persons. If one party dies, their share passes to the survivor/s.

K

L

Land Transfer Registration

a State Government tax assessed on the selling price of the property.

Lender’s Mortgage Insurance (LMI)

a form of insurance that the lender takes out so as to cover the risk of the borrower being unable to repay the mortgage. If you want to borrow more than 80% of the property’s value, you have to pay mortgage insurance. LMI is a one-time payment, usually made when you settle on the property. The amount you pay depends on the loan amount, the value of your property and how much of the purchase price you want to borrow (e.g. 95%). It protects the lender in the event that you can’t meet your repayments and the home is sold with the debt outstanding.

Line of Credit

a flexible loan arrangement with a specified ceiling to be used at a customer’s discretion.

Loan to Valuation Ratio (LVR)

(LVR) the ratio of the amount lent to the valuation of the security (usually the house).

Low Doc Home Loan

a home loan that requires fewer official documents than a normal home loan, but often has a higher interest rate. Low doc home loans can be suitable product for people who are self-employed.

M

Mortgage

a form of security for a loan usually taken over real estate. This lender, the mortgage, has the right to take the real estate if the mortgagor fails to repay the loan.

Mortgagee

the lender of funds.

Mortgagor

the person borrowing the money in the terms of a mortgage.

N

Negative Gearing

where the return on an investment is insufficient to meet the costs of the investment, leading to a reduction in assessable income for taxation purposes.

Non-Genuine Savings

sums of money that may have been gifted to you or received as a lump sum from a transaction, but have not been a regular occurrence over time.

O

Offset Account

also known as Mortgage Offset. A transaction account, linked to your home loan, which you can deposit your surplus cash into. Any money in the deposit account reduces (or ‘offsets’) the loan principal, even if only temporarily. So while it’s there, you pay less interest. Your interest is calculated on the loan principal minus the balance in the account. For example, if the principal on your loan is $180,000 and you have $5,000 in the transaction account, your interest will be calculated only on $175,000 ($180,000 – $5,000).

Ongoing Fee

any loan maintenance fee charged regularly over the loan term.

Option to Buy

a legally binding document which gives a person, for a fee, the right to buy something usually within a specific price.

Owner Occupied

a property in which the owner lives.

Overdraft

a pre-arranged limit to which a person can exceed an account balance.

P

Pre-Approval

when a lender advises you in writing how much they will lend you, subject to their terms and conditions.

Principal and Interest Loan

a loan in which both the principal and the interest are paid during the term of the loan.

Private Sale

the sale of a property without an estate agent.

Q

R

Redraw Facility

a loan facility whereby you can make additional repayments on your loan and then access these extras funds when necessary. They will often have limitations such as a minimum redraw amount and a fee for each withdrawal.

Refinancing

to replace or extend an existing loan with funds from the same institution or another.

Residential Investment Loan

a loan granted to purchase a property intended for investment purpose (for example, to be rented out) as opposed to owner-occupied purposes.

S

Security

an asset that guarantees the lender their borrowings until the loan is repaid in full. Usually the property is offered to secure the loan.

Self-Managed Super Fund (SMSF)

if you want to buy a property through your super fund, it has to be a self-managed fund.

Serviceability

the ability of a borrower to meet loan repayments, based upon the loan amount, the borrower’s income, expenses and other commitments.

Settlement / Settlement Date

when you’re buying a property and the transaction is completed. In other words, settlement is when the house legally becomes yours. Your lender makes final payments on your behalf, in exchange for the relevant documents of ownership.

Stamp Duty on Property Purchase

a State government tax on the purchase price of a property.

Standard Variable Loan or Rate

a variable home loan, usually with comprehensive features (as opposed to a basic variable). This is often the variable rate fixed rates roll to at the end of their fixed term.

T

Tenants in Common

where more than one person owns separate, defined portions of a property. If one person dies, the relevant portion passes through the deceased’s estate rather than to the other property owner/s as with joint tenancy. Each owner can hold a specific share of ownership and has the right to dispose of their interest.

Title Search

a request to the Lands Titles Office to ascertain the ownership of a specified property and any encumbrances, covenants and easements that may be recorded on the title. This process ensures the vendor has the right to sell and transfer ownership.

Transfer of Land

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

U

Unencumbered

a property free of liabilities or restrictions.

V

Valuation

a report as required by the lender, detailing a professional opinion of the property’s value.

Variable Interest Rate

an interest rate that varies during the term of the loan, in accordance with market forces.

W / X / Y / Z

*Please note: This information provided should be used as a guideline only. Contact us for further details or to find out how they relate to your financial situation.