This is a guide only, general in nature and not intended to constitute advice.
Agents Commission
The fee paid to the real estate agent for selling the property.
Amortisation Period
It’s the agreed length of time that a borrower has to repay a loan. For home loans, the timeframe is usually around 25 to 30 years. It’s set during the application and approval process. The loan balance declines by the amount of the scheduled payment, plus the amount of any extra payment.
For example, a loan balance will reduce quicker if the owner is paying ‘Principal and Interest’ rather than just ‘Interest only’. Often an amortisation schedule is drafted to showcase how a loan is repaid over the length of the term.
Application
A formal request for a loan that includes the information about the potential borrower, the property and the requested loan. The application form will include information about the potential borrower’s capacity to repay the loan. The information provided will help the lender decide on whether to grant the loan to the potential borrower. The lender may also ask for additional information to help them make a decision.
Application fee – also referred to as an Establishment Fee
The fees a bank or lender charges to set up the loan when you apply. It’s generally to cover the lender’s internal costs. It may or may not cover other costs such as a property valuation or credit report, and it may or may not be refundable if the lender declines the loan. In some cases, lenders will offer to waive the application fee.
Appraised Value
Estimate of the value of a property being used as security for a home loan. Used by lenders in calculating the loan parameters.
Appreciation
This is where the value of the property increases. For example, if you purchased a property for $400,000 10 years ago and the property is now valued at $900,000, the property has appreciated in value by $500,000 during those 10 years.
Approval
There are three types of approvals when it comes to a mortgage approval process. Pre-approval, conditional approval and unconditional approval.
Approval in Principle – also referred to as Pre-Approval
Pre-approval is generally used when you are approved in principal for a loan amount but don’t have a specific property in mind. Pre-approvals are valid for 3 months, so even if you’re not ready to buy today, you can secure your finance in preparation. Keep in mind that only when a loan is confirmed as unconditional, the lender can still back out of the deal.
Arrears
If a loan is described as being ‘in arrears’ it means the borrower hasn’t kept up with their required payments and there is an outstanding or overdue amount.
Assets
Assets come in many shapes and forms, cash, property, superannuation, shares or goods owned. Depending on whether you are borrowing in a personal or business capacity, assets will help provide collateral against the borrowings.
For example, in a standard home loan, the home (house or apartment) is the asset that the lender will lend against. In a business loan, the assets might be the stock and machinery.
Auction
This is a sales process whereby the item/property is sold to the highest bidder. Auction laws may vary from state to state so discuss the legal requirements with your agent. One of the biggest considerations about buying a property at auction is signing a 66W and waiving your cooling off period. If you don’t have pre-approval, you’re taking a risk by bidding.
Basis Point
A unit of measure used to describe the percentage change in value. One basis point equals 0.01% e.g. 25 basis points is the same as 0.25%
Basic Variable Rate Loan
A loan with an interest rate that changes and can vary.
BID (Best Interest Duty Act)
A federal law that ensures mortgage brokers act in the best interest of the client. Interestingly the same law does not apply to Banks and other lenders!
Body Corporate
This can also be referred to as an Owners Corporation or a Community Corporation. It’s a legal entity established to manage a Strata Scheme, which includes managing the building and common property (e.g. elevators or rooftop gardens in apartment buildings) or areas (e.g. shared driveways or private roads). There are usually periodical fees that must be paid.
Borrowing Capacity
The amount of money you can borrow based on your income, liabilities and monthly living expenses.
Break Costs – also referred to as Early Repayment Fees or Economic Costs
Refers to a penalty charge incurred for paying out a loan balance on a fixed term loan before the term has expired. For example, if you originally secured a fixed interest rate home loan for 3 years and you decide to payout the loan before the end of the 3 years, the lender will charge a penalty fee for ‘breaking’ the term.
Each lender calculates their break cost differently, so you need to review your credit contract or contact the lender to find out your break costs. Break costs calculations take into consideration how much If you are considering selling your property, you should find out if a break cost applies as they can be a large economic cost for the borrower.
Bridging Loan – also referred to as Relocation Loan.
A loan where you can borrow for a new home before you sell your current home. This is usually a temporary facility.
Bridging Finance
Bridging finance is exactly that, it’s a bridge between two loans. Usually used when a property owner has found a new home to buy, but they haven’t sold their existing home yet. A bridging loan is only a short-term solution as the interest rates are usually much higher than a standard home loan and the lender will only lend you the money for short amount of time. You’re also paying two home loans at the same time, so you don’t want that to continue for too long.
Budget
A plan of your income and expenditure
Building Inspection
An inspection carried out prior to the purchase of a property to make sure the building is structurally sound and to assess the condition of the property. Often combined with a pest inspection and referred to as a ‘Pest and Building’, the inspection is carried out by a qualified inspector and costs for a standard report are around $500. Contracts of sale can be made subject to the satisfactory building inspection if you haven’t been able to organise one before paying your holding deposit.
Building insurance
Insurance cover for your property in the event of a fire or flood, etc.
Building Society
A financial institution owned by its customers or “members”. It offers banking and other financial services, particularly focussing on mortgage lending.
Capital Gain
Profit from selling an asset at a higher market price than it cost
Capital gains Tax (CGT)
Capital Gains Tax or CGT is a federal tax on the monetary gain made on the sale of an asset. The tax does not apply to the gains made on the sale of an owner-occupied residence, so it generally applies only to investment properties. Speak to your accountant prior to selling to see if this tax affects you.
Capital Growth
When you buy a property and it increases in value over time. Capital growth is the difference between the purchase price and what it is now worth.
Capped Loan
A capped home loan is a loan with a cap on the interest rate. Different to a variable interest rate, the cap prevents the interest rate from rising above a certain specified rate. The borrower can still benefit from any decrease in the interest rate however they generally start at a higher rate than a standard variable interest rate.
Caveat
A caveat lodged upon a land or property title indicates that a party, that is not the owner, claims some right over or interest in the property.
Caveat Emptor
Latin for ‘let the buyer beware’. In other words, the buyer has the responsibility to examine the goods being purchased.
Certificate of Title
A document with all information relevant to a particular property or piece of land. A current edition of a Certificate of Title will normally detail title information including the name/s of the owner/s, the lot/plan numbers and other registered interests on the title such as mortgages, easements and covenants.
A lender usually holds this document as security. Once the loan is fully repaid, the Certificate of Title is returned to the borrower.
Chattels
Chattels are items of personal property, such as clothing, appliances and furniture. In real estate terms chattels are usually movable items which may be included in the sale, such as furniture.
Co-Borrower
When two people sign a loan they are co-borrowers. Both parties are then jointly and separately liable for repaying the full amount owing.
Common Property
A part of the property that is for the use of all tenants or owners
Community title (specific to NSW)
A property title where several dwellings are erected on an estate and the owners own their property and land on freehold title, but have shared access to community facilities e.g. swimming pool, barbecue area, tennis court, etc. All property owners pay levies for upkeep of the community facilities.
Company title
A type of ownership for a unit/flat/apartment in a building that is owned by a company. A purchaser buys particular shares in the company which gives the purchaser the right to occupy a specific unit/flat/apartment. Lenders are generally not enthusiastic about lending on company title properties.
Comparison Rate
A rate that includes both the interest rate and most fees and charges payable during the life of the loan, expressed as a single percentage figure. This helps you compare interest rates across various lenders and loans with their fees incorporated into the rate. For example, a bank with a great interest rate but a $2,000 establishment fee might be a worse choice than the bank with a slightly higher intrest rate an $100 upfront fee. It usually covers upfront and ongoing maintenance fees but doesn’t cover costs such as package, offset, redraw or early repayment fees.
Construction – also referred to as building loan
A loan designed for building a new home or major renovations that allows borrowers to draw down funds to pay builders and tradespeople as the building project progresses.
Conditional Approval
Conditional approval is generally used when you are approved but there are some outstanding items that the lender wants before granting unconditional approval. For example, you might still need to provide updated payslips.
Contract of Sale
A written agreement outlining the terms and conditions of a property sale. Once signed this is a legally binding agreement. This contract needs to be prepared before the property goes on the market.
Once you’ve found a property that you want to buy, ask the Real Estate agent for a copy.
The contract should include:
- Conditions of the sale, such as financing information or additional building inspections
- The names of the vendor and purchaser
- The property’s address
- The amount of deposit that must be paid
- The sale price of the property
- The date of the property settlement
- Whether the property will be available as a vacant possession, or if it is subject to a lease
- Other personal property sold as part of the package deal
Contract Variation
Changing your original contract.
Conveyancer
Licensed conveyancer or conveyancing solicitor are professionally qualified to advise in legal matters involved in the buying or selling of property or businesses. You should speak to your conveyancer before you look for a property or before you decide to put your property on the market.
Conveyancing
Legal process of transferring ownership of a property from one person or legal entity to another. This is usually undertaken by a solicitor or licensed conveyancer.
Cooling-Off Period
The amount of time either the buyer or seller has to change their mind in a private sale. This may not apply if a property is bought or sold at auction or if a 66W certificate is signed.
Credit
Credit is when you want to borrow money for a purchase and enter into an agreement to pay it back. There are many types of credit available for a variety of uses including credit cards, personal loans, car loans and mortgages.
Credit Limit – also referred to as ‘Facility Limit’.
The maximum amount that can be borrowed under the current loan contract.
Creditor
A person or organisation who is owed money.
Credit Report – also referred to as credit reference
This is a report prepared by an authorised credit reporting agency that shows the credit history of a borrower. For example, applied for other loans and been rejected? It will be in here. Defaulted on loan or credit card repayments in the past? It will be in here. A lender will use this report as part of their assessment for a home loan approval.
Credit Union
Similar to a building society, a credit union operates similarly to a bank, but is owned and controlled by people who use its services.
Cross Collateralise
A term used when a loan uses multiple (at least 2) properties to secure a loan. The additional property(s) provides the lender with a lower loan to value ratio (LVR) on the loan. For instance, a loan of $300,000 against Property A valued $350,000 results in a LVR of 85.7%. If we cross collateralise Property B valued at $300,000 (with $100,00 owing), then the prevailing LVR is now 61.5% (total debt divided by total value of securities).
Daily interest
Interest calculated on a daily basis, typically in a variable loan.
Debit Card
A bank access card used to make withdrawals from current funds in a bank account.
Debt
Money that is owed or due by the customer.
Debt consolidation
Merging several debts together so you only have one account to pay.
Deferred payment
When you agree with the lender that you can pay the loan instalment at a later date.
Debt serving ratio (DSR)
A lender will measure your ability to pay the loan instalments using the DSR.
Default
If you have missed a loan payment.
Deposit
Money that you will be contributing from your own funds towards the purchase of your property. In some cases, part or all of this money may need to be genuine savings.
Deposit Bond – also referred to as Deposit Guarantee
A Deposit Bond is a form of guarantee that may be accepted by vendors in lieu of cash when purchasers must pay deposit monies on signing the contract of sale. The purchaser can obtain a deposit bond from a financial or insurance company.
Depreciation
The decrease in value over time of a property, due to wear and tear, etc.
Discharge
Removing a lender’s name from your property title when refinancing with another lender.
Drawdown
The amount of loan funds that are provided at the time of settlement by the lender for the purchase of your property. For example, you may have pre-approval to borrow $600,000, but you find a home for $550,000 and only need to drawdown $450,000 to complete the purchase.
Drawdown Date
The date you use your loan funds for the first time
Establishment Fee – also referred to as Application Fee
Another name for an application fee, it is the amount you pay your lender when applying for a home loan.
Exchange of Contracts
Prior to settlement where the purchaser and vendor enter a binding contract for sale, each party signs a copy of the contract, the purchaser pays the deposit and the parties exchange those contracts with each other.
Extra Repayments Facility
The total amount of additional payments you can pay each year on a fixed loan.
Equity
The amount of an asset that is owned, that is, the value of the asset less any loans that are against it. For instance, if your home is valued at $400,000 and you owe $300,000 on your loan, then your equity is $100,000.
Equity loan
Using the equity in your home to secure a loan for another purpose.
Facility Limit – also referred to as Credit Limit
The maximum loan amount that a borrower can access under their home loan contract.
Family Equity – also referred to as Family Guarantee, Family Pledge or Guarantor Home Loans
A family member(s) (the guarantor) allows the equity in their own property to be used as additional security for the borrower’s loan. The idea is to lower the loan to value ratio and avoid paying lender’s mortgage insurance. The equity in the guarantor’s property is not used as cash to buy a property. The primary security for the mortgage will be the borrower’s property. The lender will also take a mortgage over the guarantor’s property. Some lenders offer limited liability guarantees.
First Home Owners Grant – also referred to as FHOG
This is a Federal and State Government scheme to assist first home buyers. To see if you qualify and meet your specific state’s conditions visit www.firsthome.gov.au.
Fittings
Items that can be removed from the property, such as furniture.
Fixed Interest Rate
The interest rate for the duration of the fixed term will not change. This also means that your repayments during the fixed term won’t change either.
Fixtures
Items that are part of the property, such as baths, dishwashers and built in cupboards.
Formal approval – also referred to as Unconditional Approval
Unconditional approval is when the bank is satisfied that you have provided all the necessary information for them to commit to lending you the money.
Freehold – also referred to as Torrens Title
This indicates that the dwelling and the land it sits on are owned indefinitely by the owner.
Gearing
The relationship between rental income and relevant expenses.
Genuine Savings
For most lenders where the borrowing is 80 or 85% of the value of the property or higher, it is a requirement that at least 5% (in some cases 10% for investment property purchases) of the deposit be of genuine savings. This requires applicants to show evidence of regular savings over at least 3 months. This may include a savings pattern over at least 3 months and/or funds that are held for over 3 months in an account or share portfolio. Also loan payments on an existing property, or rental history can be considered. The FHOG and borrowed funds are not considered genuine savings.
Government Charges
A term used to refer to various charges payable to the government as part of a mortgage loan. Examples include stamp duty and transfer and mortgage registration fees.
Green home loan
A loan to build an environmentally friendly home that meets certain sustainability conditions.
Goods and Service Tax (GST)
GST is a tax of 10% that applies to most goods and services sold or consumed in Australia.
Guarantee
A promise by a third party to meet a borrower’s obligations if they are unable to pay.
Guarantor (Asset)
A third party who is providing additional security to help a family member buy their own home.
Guarantor (Income)
A third party who is providing additional income to help a family member buy their own home. With Responsible Lending guidelines, this is no longer available with most lenders.
Hardship Variations
If you are struggling to meet repayments, some lenders may allow you to change some terms of the loan.
Holding Deposit
A refundable deposit that indicates the buyer’s intention to go ahead with the loan. It is not legally binding and does not secure the property for the buyer.
Home Buyers Assistance Account (HBAA, previously known as the REBA Grant)
If you’re buying your first home in WA and it meets the HBBA grant criteria – and you’re buying from a licensed real estate agent – you could be eligible to receive a grant to go towards the costs of buying your home.
Home Equity Loan
When a borrower has equity in their home, they may use this as security for a new loan. You can typically borrow approximately 80% of the value of your equity. You may be able to use a home equity loan to fund the purchase of an investment property or renovations.
Home Loan Top Up – also referred to as Top Up Loan or Principal Increase
Providing there is sufficient equity in the property, you may be able to borrow more money.
Honeymoon Rate – also referred to as Introductory Rate
A low interest rate offered at the start of a loan. At the end of a specified period the interest rate converts a higher rate. Be aware of 2-year fixed interest loan products that offer amazing honeymoon rates for one year.
Inclusions
Items included in the property, such as light fittings, which should be listed in the contract.
Interest In Advance Repayments
A repayment option where a borrower pre-pays the following year’s interest in the current year and therefore can claim it back as a deduction in their tax returns in the current year. It is normally offered on Fixed Rate Investment Loans to property investors.
Interest in Arrears
Interest charged on a loan at the end of a set time e.g. when interest accrued in the current month is charged at the end of the month.
Interest Only (IO) Repayments
Loan repayments where you repay the interest only. No principal payments are made for a specified time. This is usually used by investors to maximise their negative gearing benefits. If you plan on keeping the property beyond the interest only period, think carefully about this strategy. Remember, eventually you have to pay back the principal, so your repayments will increase significantly when the interest only period ends. For example if you pay interest only for the first five years of a 30-year loan, you’ll be paying the principal back over 25 years instead of 30, therefore increasing your loan repayments.
Interest rate
The percentage a lender charges you for the money you have borrowed.
Investment Loans
A loan used for investment purposes (such as the purchase of an investment property or shares). It typically has a higher interest rate and may be less flexible than an owner-occupied loan.
Joint Tenants
Joint Tenancy is the equal holding of property by two or more people. When one party dies, his/her share goes automatically to the surviving party/parties of the property.
Land Tax
An annual tax paid to the state government calculated according to the value of the property – each state or territory is different.
Lender
An organisation which lends money to others.
Lenders Agreement – also referred to as Facility Agreement or Letter of Offer
The contract between you and your lender which sets out the terms and conditions of your loan.
Lenders Mortgage Insurance (LMI)
LMI is taken out by the lender to protect itself from default by the borrower. Generally required for home loans with a Loan to Value Ratio (LVR) above 80%. The lender passes on the cost to the borrower in the form of a one-off premium. Usually, some or all of this cost is added to the loan, but it can be paid upfront. The cost of LMI can differ between lenders based on which insurance company they use, and is calculated on an ascending scale depending on the amount of your loan above 80% (up to a maximum of 95%) (if applicable) LVR.
Leveraging
Using an asset, such as property, as security for borrowing.
Liability
Your outstanding debts or debt limits you owe.
Liabilities
Your debts that you are liable for, such as a loan or credit card.
Limited Liability Guarantee
A form of guarantee that limits the guarantor’s exposure to a fixed amount against their property. For instance, if a first home buyer couple are purchasing a property valued at $400,000 and are contributing a 5% deposit ($20,000), then their parents can provide a limited guarantee for 15% ($60,000) so the buyers can borrow at an 80% LVR. The first home buyers are borrowing 95% of the property value ($380,000) without incurring an LMI cost.
Line of Credit (LOC) – also referred to as Equity loan or All in One loan
A flexible loan arrangement with a specified limit to be used at a borrower’s discretion.
For example, if the property is worth $800,000, you want to put down a deposit of $160,000. You need to borrow 80% of the value and so your LVR is 80%.
Liquid Assets
Assets which can be converted to cash in a simple way.
Loan to Value Ratio (LVR)
This is the ratio of the loan amount to the value of the property expressed as a percentage. For instance, if the loan amount is $300,000 and the value of the property is $400,000, then the LVR is 75%. When the LVR is above 80%, the borrow usually has to pay for lender’s mortgage insurance (LMI).
Low Doc Home Loan
A type of home loan which is great for self-employed individuals, requiring different types of financial evidence.
Lump Sum Payment
An extra repayment made to a loan outside the scheduled repayments.
Monthly Service Fee
A fee you pay each month on your loan account
Mortgage
A loan from a bank or lender allowing you to finance the purchase of a home, where you use the property as security for the loan. Mortgage also refers to the document that states the property is security for the money borrowed to purchase it.
Mortgagor
A person(s) who borrows money from a lender and gives a mortgage over their property as security for the loan.
Mortgagee
A financial institution or individual that lends money to a borrower and takes a mortgage over the property of the mortgagor, borrower or a guarantor as security.
Mortgage Broker
A person who has an established network of lenders, who can advise you on the right type of loan and help you to arrange the loan.
Mortgage Foreclosure – also referred to as Repossess
If you stop paying the loan repayments, the lender can force the sale of the house to recuperate their money.
Mortgage Protection Insurance
An insurance that covers you in the event that you are unable to meet your mortgage repayments in the event of death, sickness, unemployment and disability.
National Consumer Credit Protection (NCCP)
Australian legislation to offer protection and rights to the consumer.
Negative Gearing
Borrowing money to buy an investment asset, such as a property, without receiving enough income from the investment to cover the interest expenses and other costs involved in maintaining it.
Non-Conforming Loan
A different type of loan for individuals who do not meet the criteria required for a standard loan. A broker can advise you what type of loan is great for you and your circumstances.
Off-The-Plan
Buying a property prior to construction taking place
Offset Account
A mortgage or home loan offset account is a savings account that is linked to your home loan. The balance in your savings account is used to reduce or offset your home loan balance before interest is charged on your loan. This is in lieu of receiving interest on your savings. For example, if you have a $400,000 loan and $50,000 in your offset account, you will only be charge interest on $350,000 of your home loan.
Ombudsman
An independent body that resolves disputes and investigates problems.
Option
This is a legally binding agreement where a purchaser may reserve a property for a period of time under mutually agreed terms, usually by making a deposit. Depending on the terms, the buyer may be able to walk away from purchasing the property if the deal doesn’t work out, although they typically forfeit the deposit and may have other financial penalties.
Over-Capitalising
When the cost of renovations is greater than the value it adds to a property, and the costs will not be recouped if the property is sold.
Owner Occupied
A term implying that you will be residing in the property you are purchasing, as opposed to purchasing a property for investment purposes.
Passed In
A term used to indicate that a property has not been sold at an auction if the bidding doesn’t reach the vendor’s reserve price. However, the final bidder will have first opportunity to negotiate with the vendor. If you have pre-approval, the price is within budget and want to buy the property, make sure you are the final bidder if it is passed in.
Portability
The ability to ‘move’ a loan from one security (usually a property) to another, which can be helpful when selling and buying a new home.
Pre-Payment
Additional payments made to a loan in addition to the scheduled repayments.
Principal
The actual amount of money that has been borrowed to purchase a property and is still owing.
Principal and Interest (P&I) Repayments
A repayment option in which both the amount borrowed (the principal) and the interest accrued on that amount are repaid over an agreed term.
Private Treaty Sale
This occurs when a real-estate agent finds a buyer for the property without going to auction.
Progress Payment
A payment made to a builder by the bank. Payments are made to the builder at the completion of key stages of the construction (usually 5 to 8 stages).
Property Value
Your property value as determined by your lender. Your lender may use your property’s purchase price, get an external valuer or do their own valuation to determine the property value.
Purchaser
The party buying a property for sale.
Rate Lock
A loan option available to borrowers that are taking out a fixed rate loan that enables them to secure the fixed rate they are applying for. A rate lock normally holds that rate for 3 months even if the rates change. Normally the fixed rate applied to your fixed rate loan is the rate applicable for the term chosen at the time of settlement. A Rate Lock fee is usually charged.
Redraw
A loan feature that allows additional repayments made on a loan (that is, additional repayments to the scheduled repayments) to be accessed or drawn by the borrower at any time. At the same time these additional funds are reducing the loan balance and therefore the accrued interest charged on the loan.
Refinance
This involves paying off an existing loan and setting up a new one with a different lender. You may choose to do this if your existing lender can’t offer you the rate or loan features you require.
Rental Vacancy
This is a numerical value, usually expressed as percentage, that measures investment homes or units that are not occupied. This can be measured on a national, state or suburb level. The lower the percentage the more attractive the location for possible property investment. An increase in vacancy rates in rental property indicates a surplus of housing space.
Rental Yield (Gross)
This is a numerical value, usually expressed as percentage, that measures the income (rental) return you get from an investment property. The rental yield can be expressed as a percentage of the purchase price or a current valuation. The income is usually the gross annual rental income. For example, if a property is rented for $300 per week ($15,600 per year) and the purchase price of your investment property is $300,000, then the rental yield is 5.20% (15,600 / $300,000). Measured over time, falling yields can either mean an oversupply of rental properties and hence falling rents or a rising property market with prices or valuations increasing or both. Increasing yields can either mean a strong rental market with rising rents or a falling property market with decreasing valuations or both.
Rentvesting
A popular term used to describe buying an investment property while living in a rental property.
Repayments
The amount that the loan contract specifies must be paid at an agreed frequency (e.g. weekly, fortnightly or monthly). For variable rate loans this can change with interest rate changes; as rates increase the amount of repayment can also increase, inversely when rates decrease the loan repayment can also decrease.
Repayment Holiday
If you are ahead in your repayments, you may be able to apply for a break or ‘holiday’ from your repayments.
Repossess
Failing to pay your repayments may result in the lender repossessing your property.
Reserve Price
The minimum price that the vendor will sell the property for at auction.
Reverse Mortgage
Accessing the equity in your property, sometimes known as equity-release.
Secured Loan
A loan that is secured against a property and may have a lower interest rate. If you do not pay the loan, the lender could repossess the property.
Security
A security is a trade-able asset of any kind. In respect to home loans, it’s mainly a property. Lenders take a mortgage over the security until a borrower has fulfilled their obligations under the loan agreement and repaid their loan.
Semi-Detached
A house that shares a common wall with another house
Servicing – also referred to as Borrowing Capacity
In terms of finance, servicing refers to an applicant’s ability to repay a loan. An applicant’s ability to service a loan depends on their income, current debt commitments and living expenses. Also important in determining an applicant’s servicing is the interest rate and term of the loan as well as the ability to meet an increase in repayments due to interest rate rises. Any foreseeable changes in income or expenses will also need to be considered.
Settlement
In respect to a home purchase, this refers to the completion of the Contract of Sale when the balance of the contract price is paid to the vendor and the property is legally transferred to the buyer.
Settlement date
Date on which the new owner finalises payment and assumes possession of land. Sometimes called the “draw down” date, as this is the date the loan is usually fully drawn.
Split Loan
When you divide your loan into multiple parts (usually two). You may choose to do this so that a portion of the loan has a fixed interest rate and the remainder has a variable interest rate.
Stamp Duty – also referred to as Transfer Duty
This is a government duty paid by a buyer on the transfer of land when a property is sold. The amount of duty varies for each State and Territory in Australia. This can be a significant cost and needs to be taken into consideration when purchasing land or home. There are concessions for first home buyers (conditions apply).
Standard Variable Loan
A loan which has an interest rate that varies according to market forces. The loan usually has comprehensive features, such as offset and redraw facilities.
Strata Fees – also referred to as Strata Levies
These are payable (usually quarterly) to the Body Corporate when you purchase a strata titled home or unit.
Strata Title
This involves the subdivision of land and the building on the land into lots and common property. The lots comprise the units or apartments while the common property comprises the land above, below and around the building, as well as common facilities within the building (such as foyers, elevators, stairs, landings, car park, driveways and a range of equipment).
Survey
An assessment of the property and land boundaries.
Switching
In respect to home lending, this term usually refers to changing the type or feature of your home loan. For example, switching from a variable to a fixed rate loan or changing your interest payment option from ‘interest only’ to ‘principal and interest.’ This type of switch may attract a fee. This term is also more widely used to move your home loan from one lender to another.
Tenants in Common
This is a type of co-ownership where two or more people own distinct interests (which can be equal or unequal) in the same property. When one party dies, their share of the property does not pass to the other owners and is passed on to his/her will.
Term
This refers to the length of the loan. It can be expressed in months or years. For instance a 360 month term or a 30 year term.
Term Deposit
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. Typically used to earn more interest on savings as the interest rate is often slightly higher than for money in an everyday bank account.
Third Party
A person(s) who does not have a direct connection with the home loan. They are not an applicant or borrower to a loan. In most cases they are guarantors. This term may also be used to refer other related parties that are indirectly involved in your home loan such as a broker and solicitor/conveyancer.
Title
This usually refers to Land Title. This is an official record of the ownership of a property. It can also include information about mortgages, covenants, caveats and easements.
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.
Unencumbered
A property with no encumbrances (no mortgages).
Unsecured loan
A loan that is NOT secured against a property so may have a higher interest rate.
Valuation
The value of the property as determined by the lender or an independent valuer.
Variable Interest Rate
The interest rate on this type of loan can move up or down with variations in the market’s interest rates and changes in a lender’s funding costs. These changes in interest rate will change the minimum loan repayments you are expected to make.
Variation
Changes to an existing loan with the same lender such as a loan split or product switch.
Vendor
Person(s) who is selling the property.
Zoning
Used by local authorities to control the way a property in that area must be used, such as residential, retail or commercial.
