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Glossary of Terms

Term Description
Accrued Interest Interest calculated and added to the interest amount payable, but which is not yet paid.
Amortisation Scheduled repayment of a loan through regular installments over a period of time (e.g. weekly, fortnightly or monthly repayments over a 30 year term). The borrower pays the interest and part of the principal in each repayment. Contrast to "Interest Only Loan".
Application Fees Fees that Lenders charge to consider a loan application. These are paid up front and are usually not refundable unless the loan is refused.
Arrears The total of overdue loan repayments.
Assets Real estate, securities, cash and other goods owned by individuals.
Bridging Finance A short term Loan that covers a financial gap between the purchase of a property and the sale of a current property.
Capped Rate Loan A Loan where the interest rate is guaranteed not to exceed a stated rate for a fixed period of time. The interest rate can fall.
Certificate of Compliance A certificate issued by Council (for a fee) confirming that all buildings on the land comply with Council's building regulations.
Certificate of Title A certificate issued by a government body that describes a title reference to a particular parcel of land, the registered owner of that land and any encumbrances (such as a mortgage) registered against the title.
Community Title A property title where several dwellings are erected on an estate, where the owners have access to a community club house, swimming pool, barbecue area, tennis court etc. The owners have to pay levies for upkeep on 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 of a unit/flat/apartment buys particular shares in the company which gives the purchaser the right to occupy the unit/flat/apartment. Lenders are generally not enthusiastic about lending on company title properties.
Covenant Imposes conditions on the use of, or the nature of the dwellings erected on, a parcel of land
Credit Bureau An organization to which Lenders subscribe that holds credit information on individuals. For a fee, it is possible to obtain a listing that details your credit history.
Establishment Fee A fee charged by a Lender to set up a loan.
Equity The amount of an asset not subject to any Lender's interest e.g. property worth $300,000, with a mortgage loan of $150,000 - equity is $150,000.
Equity Loan (or Line of Credit) A loan usually secured by the proportion of the home in which one has equity. It usually operates like an overdraft, where the borrower has a set credit limit to which they can draw funds.
Fixed Interest An interest rate set for a fixed term. Penalties may apply if the loan is paid out before the term expires.
Garnishee To legally divert whole or part of someone's money to another party.
Gearing The ratio of income required to service debts.
Guarantee A form of security for a loan where someone else promises/guarantees to repay the loan if the borrower defaults. Most Lenders will consider Guarantees in very limited circumstances only.
Interest Only Loan A loan where the principal is repaid at the end of the loan term and interest only is repaid during the term of the loan. These loans are usually short term, say 1 to 5 years.
Joint Tenants Where more than one person is the owner of the property. If one person dies, then the title reverts to the survivor(s), irrespective of the deceased's will. Refer also to "Tenants in Common".
Liabilities A person's debts. There are also "Contingent Liabilities", which are Liabilities that are contingent on something happening e.g. where a guarantee is acted upon through a loan default. In other words, the liability may or may not come into effect.
Loan Stamp Duty The State Government's stamp duty on the mortgage taken to secure a loan. Also referred to as "Mortgage Stamp Duty". Some States offer exemptions on this for first home buyers.
Loan to Valuation Ratio The ratio of the amount lent to the valuation of the security. Commonly called LVR. An example would be a Loan of $120,000 on a home valued at $130,000. The Loan to Valuation Ratio is $120,000 multiplied by 100 and divided by $130,000 - 92.3%.
Mortgagee The party taking a mortgage over land, usually to secure a loan.
Mortgagor The party granting a mortgage over land, usually to enable borrowing from a Lender.
Negative Gearing Where the income earned from an investment is less than the costs associated with obtaining and maintaining the investment. The "loss" can be deducted from taxable income.
Old System Title Under "Old System", there is a separate deed prepared and executed each time property is transferred or a mortgage is taken etc. If one transaction is missing, the ownership can revert to a previous owner. A complex title system, with heavy associated legal costs. Less than 5% of land remains under Old System Title.
Overdraft A prearranged limit to which a person can exceed the account balance. Usually used for business purposes.
Principal The capital sum borrowed.
Principal & Interest A loan where both the principal and interest are repaid together on a regular basis, mostly by monthly installments (P&I).
Strata Title Similar to Torrens Title, but usually over units. With Torrens title, the land is owned plus everything thereon. With Strata Title, only a particular unit is owned.
Security An asset that protects a Lender's risk until the loan is fully repaid. Usually property, such as real estate, is offered as security.
Settlement Date Date on which the new owner finalises payment and assumes possession of land. Sometimes called the "Drawdown" date, as this is the date the loan is usually fully drawn.
Stamp Duty on Transfer State Government tax assessed on the sale price of the property. First home buyers may be eligible for concessions on this.
Survey A plan that shows the boundaries and the building position on a block of land.
Tenants in Common Where more than one person is the owner of the property. Each owner has a nominated share of ownership, such as 25% each.
Torrens Title Torrens Title is the most common form of property title in Australia. All previous and current owners are listed on the one deed, as are all previous mortgagees etc. Also know as "RPA" standing for "Real Property Act", the legislation that governs the operation of Torrens Title.
Valuation A report giving a professional opinion on the value of property. A valuation obtained for one Lender is NOT suitable for another Lender, as each valuation has an indemnity clause that protects the specific Lender. Valuations can take several days, as the Valuer may need access to the dwelling, so appointments with current owners/renters are necessary. This can slow the process. Some Lenders may not require formal valuations, subject to certain conditions.
Variable Interest Rate An interest rate that varies during the term of the loan, in accordance with market forces.
Zone Certificates A Certificate that confirms the local government authority guidelines as to the permitted uses of the land.
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Updated November 2013