A
ABA: Australian Bankers' Association
Accelerated Payment: The option to make higher
repayments to pay off the loan faster.
Acceptance: To agree to the terms of an offer or
contract.
Account-keeping Fees: Are charged to cover or
partially cover the lender's internal costs of
administering the loan.
Accrued Interest: Interest you have earned or
incurred that is yet to be paid or charged.
Add Securities: An asset that guarantees the
lender their loan until the loan is repaid in full.
Usually the property is offered to secure the loan.
Adjustments: The process of allocating expenses
(Council, electricity, phone, water rates) on settlement
day that the seller has paid for but not used, and which
the buyer has not used but will be billed for.
Agent: Person or body authorised to act on behalf
of a client in the sale, purchase or management of
property.
Allotment: A block of land created out of a
larger area.
Amenity: Is a characteristic or feature of a
neighbourhood.
Amortisation Period: The period of time one has
to repay a loan at the arranged terms.
Annual Percentage Rate (APR): The advertised rate
of interest per annum.
Apartment: See Home Unit.
Application Fees:
Are charged to cover or partially cover the lender's
internal costs of setting up a loan approval for a home
buyer.
Appraised Value: Estimate of the value of a
property being used as security for a loan.
Appreciation: The increase in the value of
property caused by economic factors like inflation, or
an excess of demand over supply for that property type.
Arrears: An overdue account yet to be paid.
Articles of Association: A document which spells
out the internal rules of operation of a company. (see
also Memorandum of Association).
Assets: Money, property or goods owned.
At
Call: A bank account from which money can be
withdrawn immediately.
ATM: Automatic Teller Machine
Auction:
Public sale of property with ownership going to the
highest bidder, subject to a reserve price being
reached.
B
BAD (Bank Account Debits tax): State or Territory
government tax (except ACT) on withdrawals from accounts
on which a cheque may be drawn.
Balance Sheet: A statement of assets, liabilities
and net equity for an enterprise at a point of time.
Balloon Payment: A large loan repayment to clear
a debt.
Bank Bill Swap Reference Rate: A market rate of
interest that is widely used to price commercial
borrowing's and can be found in most newspapers.
Bank cheque: A cheque that draws money
specifically from funds you own held in a bank.
Banker's Opinion: Enquiries made from one bank to
another to check on a customer's reliability or credit
worthiness.
Bankruptcy: When a debtor has his/her estate
placed into the hands of a receiver who has the
responsibility for its distribution.
Battleaxe: A block of land shaped like an axe,
where the handle is in the approach. Generally situated
between other blocks, thus having no apparent street
frontage.
Bearer: Person presenting a cheque
to a bank.
Bill of Sale: A written agreement
whereby ownership is transferred but the original owner
is allowed to retain possession.
Body Corporate: A corporation of the owners of
units within a strata building. They form a self-elected
council for the management of the building and common
areas.
Bond: A sum of money paid by a tenant and held by
the Rental Bond Board to protect against losses from
non-payment of rent and damage done to the rental
property.
Book Value: The net dollar value at
which an asset or security is carried on a balance
sheet.
Bridging Finance: A short-term loan that covers a
financial gap between the purchase of a new property and
the sale of an old property.
Building Regulations: The standards formulated by
local councils to control the quality of buildings.
C
Capital: The
current value of your long-term assets - house, property
or business as well as cash and securities.
Capital Gain: The monetary gain obtained when you
sell an asset for more than you paid for it.
Capital Gains Tax: A Federal tax on the monetary
gain made on the sale of an asset bought and sold after
September 1985.
Capped Loan: A loan where the interest rate is
not allowed to exceed a set level for a period of time
but, unlike fixed rate loans, is allowed to drop.
Cash Flow: In relation to company accounts,
reported net income plus amounts charged off for
depreciation, amortisation and extraordinary charges to
reserves.
Caveat: Latin for "beware". Usually
it is in the form of a contract clause that stipulates a
particular requirement.
Caveat Emptor: Latin for "let the buyer beware".
Certificate of Title: This document details the
land dimensions and ownership details of a property, and
whether there are any encumbrances on it.
Chattels: Are personal property. There are two
types. Real chattels are buildings and fixtures.
Personal chattels are clothes and furniture.
Citicorp Life Insurance: the option of having
free life insurance included with a loan.
Clear
Title: A vendor has a clear title when there are no
interests (like an outstanding mortgage) on the vendor’s
title.
Cluster Housing: Group of houses that
share common space.
Commercial Property: Property intended for use or
occupancy by retail and wholesale businesses (e.g.
stores, office buildings, hotels and service
establishments).
Commission: A fee payable to
a real estate agent, by the vendor, for the sale of
property.
Common Area: An area used by many, not an
individual. Owned by the tenants in common.
Company title: a property title that applies when
owners of units in a block form a company.
Comparison Rate: A nominal rate per annum
calculated based on certain fees and charges together
with the compounding frequency as outlined in the
Consumer Credit Code.
Compound Interest: Interest that is paid on both
the accumulated interest as well as on the original
principal.
Compulsory Acquisition (resumption): The power of
a government authority to purchase property from an
owner without the owner agreeing to sell.
Consumer
Credit Code: An act of Parliament governing the
relationship between borrowers and lenders.
Contract: A legally enforceable agreement between
individuals or entities. In real estate, contracts are
exchanged when the deposit is paid.
Contract of Sale: A written agreement outlining
the terms and conditions for the purchase or sale of
property.
Conveyancing: The legal process for the
transferral of ownership of real estate.
Countersigned: Additional signature or signatures
to guarantee the validity of a document.
Covenant: Terms and conditions that specify the
usage of a block of land or the buildings on it.
Cover Note: A note of temporary property
insurance before the implementation of a formal policy.
CRAA (Credit Reference Association of Australia):
The body which holds credit details on all people who
have established a credit history.
Credit: Borrowed money to be paid back under an
arrangement with a lender. Also, a sum of money paid
into an account.
Credit Foncier Loan: A Loan which is repaid in
instalments comprising both principal and interest
components. Most mortgages are structured this way.
Credit Limit: Maximum amount a borrower can use
at any one time.
Creditor: A party to whom money is owed.
Crossed Cheque: A cheque with two parallel vertical
lines across it to specify that the cheque must be paid
into an account and cannot be cashed.
D
Daily Interest:
Is interest calculated on a daily basis - therefore
varies according to daily account balance.
Debit: An account entry to charge a withdrawal to
a specified account.
Debt Service Ratio: This is a measure of the
borrower’s capacity to repay the loan. Lenders calculate
the Debt Service Ratio by taking into account a
borrower’s expenses as a proportion of their income.
Debtor: Someone who owes money to someone else.
Deed: A legal document that states an agreement
or obligation regarding a property.
Default: Failure to meet debt payment on a due
date.
Deposit: A deposit is normally paid by the buyer
at the time of exchanging contracts. It is normally
between 5-10% of the total purchase price.
Director: A person elected by shareholders to be
responsible for the management and operation of the
company.
Dual Occupancy: A block of land or existing
dwelling which is zoned in a way which allows the owner
to erect a building which has two distinct living
arrangements (for example, a duplex or a house with a
granny flat attached).
Duplex: A two-storey block of apartments with one
apartment covering each floor.
E
Early Termination
Payment: The cost of winding up a loan early.
Easement: A right to use a corridor or passage of
land which is owned by another.
EFT (Electronic Funds Transfer): Electronic
transfer of funds from one account to another.
EFM (Equity Finance Mortgage): An EFM works in
conjunction with a traditional home loan. Together they
let you move some of the expense of a traditional home
loan to later when you eventually sell your property.
Encumbrance: An outstanding liability or charge on a
property.
Endorse: To sign the back of a cheque to confirm
or transfer its ownership to someone else.
Equity: The interest or value which an owner has
in an asset over and above the debt against it.
Equity Loan: A loan usually secured by the
proportion of the value of your house which you own.
Equity Mortgage: A loan secured by the part of
the value of an asset (usually house) which you own.
ERIC: Effective Rate of Interest plus Costs
Establishment Fees: Lending body fees which may
or may not be charged to set up a loan.
ETIA: Early Termination Interest Adjustments
F
Facility:
This is another term used to describe a loan account.
FID: Financial Institutions Duty, state duty on
the receipts of financial institutions.
Fittings: Items that can be removed from a
property without causing damage to it.
Fixed Interest Rate: You can choose to "lock in"
your interest rate for a specific period, for example,
for 2, 3, or 5 years. Lenders may charge a fee if you
"break" this period, so it is important to ask the
lender if any fees apply.
Fixtures: Items that would cause damage to a
property if removed. Their removal must be stipulated in
the contract of sale and any damage made good by the
seller.
Floating Rate: An interest rate which moves in
line with market or benchmark rates instead of remaining
constant for the life of the loan.
Freehold: The dwelling and the land on which it
stands is owned by the owner indefinitely.
Free
Standing: A dwelling which stands independently of
others.
Frozen Account: An account in which all
transactions have been suspended.
G
Garnishee: To
legally divert a part or whole of someone's money or
property to someone else.
Gazumping: Gazumping may take two forms:
1/
The intending buyer believes that the property has been
secured by payment of a holding deposit, and proceeds to
arrange finance, legal and other matters. When ready to
exchange contracts, the intending buyer finds that
another buyer (of which he was unaware) has exchanged
contracts on the same property.
2/ The vendor or real
estate agent accepts two or more deposits and then
before contracts are exchanged, tells the intending
purchasers that the price has gone up. The intending
buyers are then left to outbid each other as if it were
an auction.
Gearing: the ratio of your own
money and borrowed funds in an investment.
Government or statutory charges: All home loans
and purchase of residential property will attract
certain government charges. For example, stamp duty and
mortgage duty.
GST: Goods and Services Tax.
guarantee:
A promise made as bound by the terms of a contract.
Guarantor: This is the person giving the
guarantee. Most lenders will require the guarantor to
get legal and financial advice before giving the
guarantee.
H
High Start Loan: A loan where the initial repayments
are high and decrease over the term of the loan.
Highest Bid: The top price offered by a bidder at
auction. If the reserve price is not reached and the
property is passed in, the highest bidder is given the
first option to negotiate with the vendor.
Holding Deposit: A refundable deposit
demonstrating the goodwill of the buyer to go ahead with
the purchase.
Honeymoon Rate: Some lenders offer a "discount"
or introductory rate for a short period of time, say a
year, to entice you to take out a loan with them. At the
end of the "honeymoon" period, the interest rate
normally reverts to the lender’s standard variable rate.
I
ILR (Indicator
Lending Rate): The base rate on which interest rates
for variable rate overdrafts and term loans are set.
Inclusions: Items included with the property e.g.
light fittings, stove, etc.
Income Statement: A statement of income and
expenditure for a period, usually a year.
Interest: The lending body's charge for the use
of funds or the return on deposited funds. See also
daily interest.
Interest Only: Usually a short-term arrangement
whereby payments are made on the interest only, not the
principal.
Interest-Only Loan: Under an interest-only loan,
usually the borrower makes no principal repayments. The
repayments are for the amount of interest, which has
accrued on the loan, which is paid monthly in arrears.
Internal Rate of Return: A measure of the return
on an investment (or loan) which takes into account the
time value of money by showing the rate of interest at
which the present value of future cash flows is equal to
the cost of the investment or loan.
Inventory:
A list of items included with a property e.g. furniture,
moveable items, etc.
Investment: The purchase of an asset (like real
estate) in order to produce capital gain on resale or to
earn income or both.
J
Joint Tenants:
Equal holding of property between two or more persons.
If one party dies, their share passes to the survivor/s.
Joint Venture: A project undertaken by two or
more parties, to achieve a mutual aim.
L
Land Tax: A
State Government tax charged to the owners of any
property over a stipulated value, unless it is their
principal place of residence.
Lease: A document granting a period of tenancy of
a property under specific terms and conditions.
Lender’s Mortgage Insurance: This covers the
lender’s risk if a borrower defaults on their home loan
and the lender has to sell the property securing the
loan for less than what is owed on the loan.
Lessor: A person who owns a property and allows
another to occupy it under a lease.
Liabilities:
Loans, debts, or obligations.
Lien: The right
to hold property as security against a debt or loan.
Lifestyle Option: The option to defer up to half
of the regular repayments, in the event of loss of
income due to things outside the control of the
borrower.
Line of Credit Loan: This is a flexible loan that
allows you to have funds transferred to your cheque
account when required.
Loan Agreement: The contract between the lender
and the borrower which sets out the conditions that
apply to your loan. It is important that you read the
agreement carefully, and wise to get legal and financial
advice, before you enter into the loan.
Loan Pre-approval: The loan is approved before
the borrower bids on or offers for the property.
Loan Security Duty: Mortgage stamp duty.
Loan to Valuation Ratio (LVR): The ratio of the
amount lent to the valuation of the security (usually
the house).
Low Start Loan: A loan where the initial
repayments are low and increase over time.
Lump Sum Payment: Is an additional payment made
by the borrower to reduce the loan amount. These
payments are in addition to regular instalments.
M
Margin: This
is the difference between the lender's interest
indicator rate (or other reference rate) and the rate
actually charged to borrowers.
Maturity: the date a debt or investment must be
paid in full.
Max Loan Amount: The maximum amount that can be
borrowed.
Max LVR (maximum loan to valuation): This means
the amount you can borrow expressed as a percentage of
the valuation of the security (usually the property you
are buying). For example, 90% LVR means you can borrow
up to 90% of the valuation of the property.
Max
term: The maximum length of a home loan or a
specific portion within that loan.
Min Fixed Amount: The minimum amount that can
borrowed at a fixed rate of interest.
Min Lump Sum Payment: The minimum amount that can
be repaid as a lump sum.
Min Redraw Amount: The minimum amount that can
redrawn from a loan.
Monthly Fees: Are the fees charged to cover or
partially cover the lender's internal costs of
administering the loan each month.
Mortgage: A form of security for a loan usually
taken over real estate. The lender, the mortgagee, has
the right to take the real estate if the mortgagor fails
to repay the loan.
Mortgage Duty: A government tax which is payable
by the borrower on the borrower’s mortgage. The amount
of the duty varies from state to state and in some
states, mortgage duty may not be payable when the loan
is refinanced.
Mortgage Guarantee Insurance: Protecting the
lender against loss. The lenders are protected against
loss on the loan should the borrower default on the
repayments or other covenants of the mortgage. Borrowers
remain liable for their default.
Mortgage Offset: A non-interest earning account
that is offset against a home loan to reduce the total
interest payable.
Mortgagee: The lender of money, and the party who
has the mortgage over your property.
Mortgagor: The person borrowing money under the
terms of a mortgage.
N
Negative Gearing:
Where the return on an investment is insufficient to
meet the interest costs of the loan used to fund the
investment.
O
Offer to
Purchase: A legal agreement that details a specific
price for the purchase of a specific property.
Offset Account: A savings account linked to your
mortgage in such a way that the interest earned on your
savings is applied to reduce the interest on your
mortgage.
Old System Title: (common law title) consists of
a 'chain' of the title documents stretching back to the
original owner.
Option to Buy: A legally binding document which
gives a person, for a fee, the right to buy something
usually within a specific time frame at a specific
price.
Overdraft: A pre-arranged limit to which a person
can exceed an account balance.
P
Passed In: A
property is 'passed in' at auction if the highest bid
fails to meet the reserve price set by the vendor.
PAYE: Abbreviation for Pay-As-You-Earn, a
taxation procedure for wage and salary earners under
which income tax is deducted in instalment from periodic
pay.
PAYG: Abbreviation for Pay-As-You-Go, a taxation
procedure for wage and salary earners under which income
tax is deducted in instalment from periodic pay.
Payee: The person or entity to which a cheque is
payable.
Plan: Detailed illustration of a house that shows
the internal layout and dimensions and the position of
the house on the land.
Portability: Where pre-approval can be
transferred from one property to another. Saving on
government loan security duty.
Power of Attorney: A formal appointment where a
person appoints another (called the attorney) to act as
their legal representative.
Principal: The amount outstanding on your
loan.
Principal & Interest Loan: This is the most
popular type of loan where you repay a portion of the
principal and the interest over the term of the loan by
regular instalments.
Private Sale: Sale of a property without the
involvement of an estate agent.
Private Treaty Sale: A property sale where the
buyer negotiates on a price set by the seller, rather
than through the auction process.
Progress Payments: When a lender pays instalments
to a builder as the building is constructed, normally in
five payments
R
Rates: The
amount charged by the local council or water authority
to provide services to a property.
Real Property:
Land with or without improvements on iT.
Redraw Facility: If you have made any lump sum
and additional principal repayments to your loan
account, you can access those extra repayments whilst on
a variable rate.
Redraw Fee: Is charged to
cover or partially cover the lender's internal costs of
allowing the borrower to redraw money.
Refinancing: This means that you switch your current
loan from one lender to another.
Requisitions on
Title: A process by which the buyer requests
additional information about the title of the property
from the seller.
Reserve Price: Preset minimum acceptable price of
seller at auction.
Right of Way: Can be either somebody's right to
cross other property or a general pathway across your
land.
Rise and Fall Clause: A building contract clause
that allows the final pricing to move up or down
according to the fluctuations of material prices or
wages.
S
Search (title):
The process of investigating or examining title to land,
to ascertain if the vendor has the right to transfer
ownership. A title search reveals the names of the owner
and other precise details of the property, like the
existence of any restrictive covenant, encumbrance or
caveat on the title.
Semi-detached: Two houses that share a common
wall or walls.
Settlement: Is the completion of the sale or
purchase of a property. When the final payments are made
at settlement, the lender will receive the signed
transfer and the mortgage. The lender will hold the
title deeds and the mortgage until the loan is repaid.
The keys to the property are either handed over at
settlement, or picked up from the estate agent
immediately following settlement.
Settlement Date: Date on which the new owner
finalises payment and assumes possession.
Signatory: A person authorised to utilise an
account.
Split fixed/variable: A split account is one in
which different amounts of interest are paid on
different portions of the account. e.g. the fixed rate
on the first $1,000 and the variable rate on the second
$1,000.
Stamp Duty: Stamp duty is a state government tax
which is payable when a property is sold. Stamp duty is
calculated on the purchase price of the property and is
paid by the buyer. Each state and territory has a
different rate of duty.
Stepped: A stepped account is one in which
different amounts of interest are paid on different
portions of the account. e.g. 2 percent on the first
$1,000 and 3 percent on the second $1,000.
Strata Title: This title gives you ownership of a
'unit' of a larger building which you may sell, lease or
transfer at your discretion. Also entitles you to
membership of the body corporate.
Stratum Title: A title that records your
ownership of a 'unit' of a larger property. Unlike a
strata title, the owner becomes a shareholder in the
company that manages the common area, not just a member.
Survey: A plan that shows the boundaries of, and
any buildings' position within, a block of land.
Susceptibility Report: Shows likelihood of future
pest infestations.
Switch to Fixed Fee: Is charged to cover or
partially cover the lender's internal costs changing the
loan between fixed and variable rates. With RAMS you can
fix all or part of your home loan (minimum amount of
$50,000) free.
T
Tenancy: The
right to occupy land or buildings as provided by the
terms of a lease or other agreement.
Tenants in
Common: The equal or unequal holding of property by
two or more persons. If one party dies, the property is
divided according to law.
Terrace: One of a row of houses joined together
with common walls.
Term: The length of a home loan or a specific
portion within that loan.
Term Deposit: Often called a fixed interest
account - a type of savings account where the size of
the deposit, the interest rate and the length of time
the money is deposited for are all fixed.
Title Search: Process to ensure that the vendor
has the right to sell and transfer ownership.
Torrens Title: A document registered with the
Land Titles Office which records your ownership of a
piece of property. You are lawfully entitled to lease,
sell or dispose of the property as you desire. Also
known as Certificate of Title.
Town House: Usually a two storey dwelling
registered under a strata title.
Transfer: 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,
encumbrances or restrictions.
V
Valuation: A
report required by the lender detailing a professional
opinion of a property's value.
Variable Interest Rate: This is a fluctuating
rate of interest charged by lenders. Variable interest
rates change as official market interest rates rise and
fall.
Vendor: The party who offers a property
for sale.
Vendor Statement: A statement by the
seller to the buyer detailing material particulars
regarding the property in question.
Villa: Single storey attached dwelling.
Y
Yield: The
financial return, usually expressed as a percentage p.a.
Z
Zoning: Local
council authority guidelines, as set out by local
councils or planning authorities, as to the permitted
uses of land and buildings on that land.
