Application fee / Establishment fee
Fee charged to cover or partially cover the lender’s internal costs of considering a loan application. The fees are sometimes required to be paid upfront and are not usually refundable unless the loan is refused.
Assets
A list of what an individual currently owns, such as real estate, savings accounts, cars, home contents, superannuation, shares etc.
Break costs
Costs incurred when a fixed rate loan is paid off before the end of the fixed rate period, or when additional payments are made in advance.
Capital gain
The monetary gain obtained when you sell your property for more than you paid for it.
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
This is a rate that includes both the interest rate and the upfront and on-going loan fees, expressed as a single percentage.
Daily interest
Interest calculated on a daily basis varies according to the outstanding balance.
Deposit
An initial cash contribution towards the purchase of the property, usually payable on exchange of contracts.
Deposit bond
A substitute for cash deposit that guarantees the purchaser will pay the full purchase amount by the settlement date. Institutions providing deposit bonds act as a guarantor that payment will be made.
Equity
The value of an asset not subject to any lender’s interest. For example, a property worth $350,000 with an outstanding mortgage debt of $150,000. Equity in property is $200,000.
First Home Owner Grant (FHOG)
The FHOG scheme is a federal government initiative but is administered by each State or Territory Revenue Office. The grants available in each state or territory differ.
Fixed interest rate
An interest rate set for a fixed period. At the end of the fixed rate period, most lenders will allow you to fix your rate again at the existing rates offered or revert to their standard variable rate.
Freehold title
The form of property ownership where the property and the land it stands on fully belong to the owner.
Genuine savings
Funds that have been accumulated or held for a certain period of time prior to applying for a loan. In most situations genuine savings need to be shown over a 3-month continuous period.
Guarantor
A guarantor is a third party to a loan who is helping the borrower obtain finance by offering additional security support. Guarantors are generally limited to spouses or immediate family members. A guarantor may be liable for the loan debt if the borrower defaults.
Interest Only (IO)
A loan in which only the interest on the principal is repaid with each repayment for a specified period.
Introductory (honeymoon) rate
A reduced interest rate offered for a specified period of a loan.
Joint tenants
Equal holding of property between two or more persons. If one party dies, their share passes to the survivor/s.
Lenders Mortgage Insurance (LMI)
A form of insurance taken out by the lender to safeguard against a financial loss in the event of a security being sold due to the loan going into default. The borrower pays a once-only premium. The insurance covers the lender, not the borrower.
Liabilities
A person’s debts or financial obligations, including existing credit card debts and personal loans.
Loan to Valuation Ratio (LVR)
The ratio of the home loan amount compared to the valuation of the security. Commonly called LVR. For example, for a loan of $300,000 on a home valued at $400,000, the LVR is $300,000 divided by $400,000 then multiplied by 100, and expressed as a percentage. The LVR in this scenario is 75%.
Mortgage
A form of security for a loan usually taken over real estate. The lender (mortgagee) has the right to take the property if the mortgagor fails to repay the loan.
Mortgagee
The lender of the funds and holder of the mortgage.
Mortgagor
A person who borrows money and grants a mortgage over their property as security for the loan.
Non-conforming loan
Specialist lenders provide these types of loans to borrowers who fall outside the normal eligibility requirements of mainstream lenders.
Offset account
A transactional account linked to the home loan. The balance held in this account offsets the balance in the home loan, helping to reduce the interest paid and overall term of the loan.
Principal
The outstanding loan amount on which interest is calculated.
Principal and Interest (P&I)
A loan in which both principal and interest are paid with each repayment during the term of the loan.
Redraw facility
A loan facility whereby you can make additional repayments and then access those extra funds if necessary.
Refinancing
To replace or extend an existing loan with funds from the same lender or a different lender.
Security
Usually the property offered as security for a loan.
Settlement date
Date on which the new owner finalises payment and assumes possession of land.
Stamp duty
The main type of stamp duty that may be payable when borrowing to purchase a home is transfer stamp duty.
Transfer Stamp Duty is calculated on a sliding scale based on the purchase price of the property. Significant concessions on transfer stamp duty may be available for First Home Buyers. The amount varies from State to State.
Strata title
The form of property ownership most commonly associated with units, apartments and townhouses, where the owner holds title to a particular unit, which is called a lot, in a strata plan.
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.
Term
The length of a loan or a specific portion within the loan.
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.
Torrens title
Torrens title is the most common form of property title in Australia. The Real Property Act (RPA) is the legislation that governs the operation of Torrens title. Ownership of the property is registered with the Land Titles Office and evidenced by the Certificate of Title, which shows the current owner’s name and any other interests in the property e.g. mortgages.
Unencumbered
A property free of encumbrances (mortgages) or restrictions.
Valuation
A report required by the lender, detailing a professional opinion of property value.
Variable interest rate
An interest rate that varies during the term of the loan, in accordance with market forces.
Unsure about any of these terms? Please feel free to contact us we will be happy to discuss so you fully understand.