Glossary - Lending
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
A
Adjustments - Amount of property taxes, council and water rates prepaid by the vendor and adjusted at settlement for amounts for which the purchaser will be liable.
Agent's Commission - This fee (usually a percentage of the sale price) is payable to a real estate agent for selling a house.
Appraised Value - An estimate of the value of property offered as security for a home loan. The appraisal is undertaken for financial lending purposes and may not reflect the actual market value.
Assets - Everything that a person or company owns or has a right to, from which a benefit can derive. Net assets are assets in excess of liabilities. Liquid assets are assets either in the form of cash or readily convertible into cash.
Auction - Public sale of a property to the highest bidder.
B
Bankruptcy - A legal process that people go through when they can not pay their debts. A bankrupt person gives control of most of the debts and assets to a bankruptcy trustee. The trustee decides which (if any) of the assets can be sold to pay off the debts.
Body Corporate - A strata corporation incorporated in relation to land subdivided wholly or mainly for residential purposes under a law providing for strata, cluster, precent or other subdivision of land or whose issued shares give a right to occupy land for residential purposes. The Body Corporate usually has the responsibility for the management and upkeep of common areas of the property.
Borrower - A person using money that has been loaned to them by a bank or other lender or a person. Another name for a borrower is a debtor
Bridging Finance- Short term finance used when buying and selling houses to cover the gap between receipt of funds from sale of existing house and the payment of funds to purchase another house.
Building Regulations - Designed to uphold the standards of public safety, health, and construction, these regulations are in place and have been formulated by responsible authorities to control the quality of buildings.
C
Capital Gain - Profit from sale of a particular asset at a higher market price than it cost. Investors often buy for the sale of an expected increase in value of an asset rather than of the income it may generate during the time they own it.
Capital Growth- The increase in value of an asset or investment i.e. the difference between the current values and the original purchase price. (Provided the result is positive, not negative)
Caveat Emptor - Latin for "Let the Buyer Beware" . This means that buyers of goods (in this case, landed property) are responsible to examine the goods ( the property being purchased) closely or read the fine print (to the contract) carefully before completing the purchase. Under common law this means that if someone is sold faulty goods he or she has no right to obtain compensation.
Certificate Of Title - The document of title to the estate or interest in land. It sets out the Crown description of the land, proprietorship and shows any registered interests such as mortgagees, charges and caveators. It also shows any restrictive covenants and easements which affect the estate or interest.
Chattels - Chattels are personal property. There are two types - the first type are real chattels (buildings and fixtures) and the second type are personal chattels (clothes, furniture etc.).
Commission - See Agent's Commission.
Committed Elsewhere - You have bought a new property, and need to sell your current property to fund the purchase.
Common Area - An area which is for use by many, not an individual. For example, home units have common areas such as stairs and driveways.
Common Law or Old System Title - System of land title where title is established by looking at a chain of transactions and events dating back to the original owner. Most old system title has been converted to Torrens Title and any remaining will usually be converted to Torrens Title on the sale of the property.
Community Title- A form of subdivision, where owners receive a Torrens Title for the lot they own and are members of body corporate. They also share ownership of the common facilities.
Company Title - This Title applies when a company owns the whole of the property. By purchasing shares in the company, the purchaser obtains an entitlement to occupy a particular part of the property. See your solicitor before buying.
Comparison Rate - The comparison rate helps you compare one loan with another so you know how much you will pay over the life of the loan. While the interest rate is a major component, it's not only the cost. There are other fees and charges that affect the true cost of the loan. The comparison rate calculates fees associated with setting up the loan, such as establishment and service fees. It doesn't include government charges or early pay out fees.
Contract Note - The first document signed on buying a house is sometimes a Contract Note, instead of a Contract of Sale. This document, when signed by both parties, is as legally binding as a Contract of Sale and the buyer and seller should treat it with the same importance.
Contract of Sale - A written agreement which details the terms and conditions regarding the purchase or sale of a property. It is usually prepared by the vendor's agent, solicitor or conveyancer.
Conveyancing - The legal process where ownership of real estate is transferred from one party to another.
Cooling Off Period - This is a period of time, which may vary between 24 hours and 14 days from the time it is signed (depending on the type of contract), when you or your organisation can decide not to continue with a contract. Cooling off periods vary in each state of Australia .
Cover Note - This is a document giving temporary insurance cover over a property until a formal policy is issued by the insurance company.
D
Deposit - An amount of money placed in trust or paid to the vendor directly as evidence of intention to buy. In most cases, it is 10% of the purchase price.
Deposit Bond (also known as a deposit guarantee bond) - A written guarantee from an insurance company on behalf of the buyer to the seller guaranteeing payment of all or part of the deposit.
Disbursements - Disbursements are the incidental costs incurred by a solicitor when acting for a client, e.g. searches, certificates, past records, etc.
Draw down - Draw down refers to the transfer of money from a lending institution to the borrower before or after the loan has settled.
E
Early Repayment Fees - Fees payable when a loan is repaid before the end of its term.
Easements - A right held by someone to use land belonging to someone else for a specific purpose. For example, mains, drains and water pipes are usually covered by an easement.
Encumbrance - A legal claim on a particular property. e.g. easement or mortgage.
Equity - The part of an asset (house) which you own over and above the amount borrowed from the Bank which has a mortgage over the house property.
Establishment Fee - The fee charged when applying for a new home loan, payable on draw down of funds.
Exchange Of Contracts - Process prior to settlement where the purchaser and vendor enter a binding contract by each signing a copy of the contract and then exchanging those copies with each other.
Extra repayments - If this feature is available on your home loan, you can make extra repayments that will reduce your interest.
F
First Home Owner Grant - A national government scheme to assist first home buyers. The scheme provides a $7,000 grant to people buying or building their first home. It is not means tested.
Fixed Rate - An interest rate that does not alter, regardless of any variations in the market's interest rates, for the fixed term.
Fixed Rate Loan - A loan priced at a fixed rate of interest for a set term. Interest rate and payments remain the same during the fixed term of the loan regardless of interest rate changes in the market.
Freehold - Common term used for an 'estate in fee simple'. This means that the proprietor of the land has absolute ownership of the property.
G
Gazumping - Where the vendor and buyer have verbally agreed on a price, but the property is sold to someone else who has offered a higher price.
Guarantor - A guarantor is someone who agrees to be responsible for the payment of the loan if the borrower defaults or is unable to pay.
H
Holding Deposit - A holding deposit is an amount of money put into a bank account, or left with a person or company, to secure the purchase of an item.
Home Units - A grouping of residential dwellings. They share common areas (e.g. gardens, storerooms) and are commonly registered under Strata Title.
I
Interest - A charge on borrowed money or the return earned on funds invested.
Interest Only Loans - A repayment option in which, during a specified term, only the interest accrued on the home loan is paid. This normally converts to Principal and Interest repayments at the end of the Interest Only term.
Inventory - A listing of items that could be included with a property, e.g. furniture, furnishings, dishwasher and other moveable items.
Investment Property - A property that the owner does not live in. A property purchased for earning a return on investment.
J
Joint tenants - The holding of land by two or more persons where there is a right of survivorship i.e. on the death of one joint owner, the land as a whole vests in the survivors and can only be disposed of by will by the last surviving owner.
K
L
Land Tax - Based on the property value, it is a State Government tax which is payable by the owners of the property.
Lease - An agreement between two parties under which one is granted the right to use the property of the other for a specified period of time in return for a series of payment by the user to the owner.
Leveraging - Using an asset as security for borrowing.
Liabilities - Your outstanding debts or what you owe.
Line Of Credit Loan - A revolving line of credit, lending a specified amount and allowing that amount to be borrowed again once it has been repaid.
Loan Repayment Capacity - Your monthly fixed debt commitments divided by your monthly gross income expressed as a percentage.
Loan to Valuation Ratio - Loan to value ratio (LVR) is the amount of your loan compared to the value of your property or asset purchased with the loan funds, expressed as a percentage. For example, a loan of $400,000 to buy a property worth $500,000 results in a loan to value ratio of 80%. Banks place a limit on the loan to value ratio depending on things such as the type of property, the location and the financial position of the borrower.
M
Maturity - The date on which a debt or other borrowing is due to be repaid.
Mortgage - A document drawn up between a borrower and lender, giving the lender a conditional right to property as security for the money lent.
Mortgage Duty - A state government tax based on the loan amount, not payable in the NT.
Mortgage Insurance - Mortgage insurance insures your lender against non-payment or default on a residential property loan. Mortgage insurance makes it possible for buyers to borrow up to 100% of a property's value.
Mortgagee - The one who lends the money to purchase the goods or property.
Mortgagor - The one who borrows the money to purchase the goods or property.
Multiple Listing - This happens when a person selling a property gives it to more than one agent. The first agent who has a buyer ready, willing and able to meet the price and terms acceptable to the vendor, receives the commission for the sale.
N
O
Offer To Purchase - A written offer of a specified price for a specified property. The offer may be firm (no conditions attached) or conditional (certain conditions apply).
100% Offset - If this option is available on your home loan, it means that the money you have in your transaction account acts the same as if it was in your mortgage account - it reduces the balance of your loan on which interest is calculated, which in turn reduces your interest repayments allowing you to pay your loan off sooner.
Owner Occupied Property - A property in which the owner lives.
P
Passed In- A property is 'passed in' (i.e. not sold) at auction if bidding does not reach the vendor's reserve price.
Plan - This shows the ground plan design, elevation of house, number and size of rooms, kitchen, bathrooms, laundry layout and position of the house on the land.
Portable Loan- A loan that enables the borrower to move properties without having to refinance, subject to credit approval.
Principal - The actual amount of money that has been borrowed to buy a property.
Principal and Interest Repayments - A repayment option in which both the amount borrowed and the interest accrued on that amount are repaid over an agreed term.
Private Sale - The owner of a property does not engage a real estate agent, but deals directly with buyers, to market their property.
Private Treaty - Sale of a property via a real estate agent through private negotiation and contract, rather than by auction.
Progress Payments - If this feature is available on your home loan, you can make progress payments to builders as construction work is completed.
Q
R
Redraw or Redraw Facility - A facility that allows additional repayments made on a loan to be accessed, or drawn on by the borrower, at any time.
Refinance - To pay off a loan and arrange for a new loan, sometimes with a different lender.
Remortgage - Loan taken out by a borrower to replace another one secured on the same property. Typically taken out by borrowers switching lenders to achieve a better rate.
Reserve Price - The minimum price a seller has specified he/she will accept at auction.
S
Security - Something given or deposited as surety for the payment of debt. In the case of home loans, the property which is to be bought with the loan money usually acts as the security.
Serviceability - Serviceability refers to your capacity to make and meet repayments on a loan, based on your expenses and income.
Settlement - Completion of a sale when the balance of the contract price is paid to the vendor and the buyer becomes legally entitled to take possession of the property.
Settlement Date - The date on which the sale of the property is finalised; money and security changes hands and the new owner takes possession.
Sole Agency - One agent or agency has the exclusive rights to sell a property.
Stamp Duty - Revenue raised by governments on written instruments such as agreements, conveyances, transfers of land. When buying a home, the most common types of stamp duty payable are stamp duty on transfer of land and stamp duty on mortgage.
Strata Title - Most commonly used for flats and units, this title gives you the ownership of a small piece of a larger property. You have sole right to a particular unit and can lease, sell or legally dispose of your unit as you desire. You also have an undivided share of the common land. You also become a member of the Body Corporate which controls maintenance.
Stratum Title - This title gives you legal ownership over a piece of property and also gives you a share in the company set up to look after the common areas of the flats or units you live in. It does not include "air space".
Structural Survey - A detailed survey of the structure of a building carried out by a Structural Engineer or Chartered Building Surveyor. Surveyors are liable for negligence.
Survey - Shows boundaries of the land and location of the building.
T
Tenants in Common - Each tenant (or owner) owns a specified share of the land. Shares can be equal or unequal. Unlike joint tenants, there is no right of survivorship. Each share may be dealt with by sale, bequest, gift etc., as for sole ownership.
Term - The time length of a loan.
Title Deeds - Set of documents containing information on the present and past ownership of a property. Details names of owners and institutions that have registered a charge against the property
Title Search - A Search undertaken of records registered at the land titles office to confirm interests in land of a particular land property. A title search show interests such as proprietor, mortgagees, charges, and caveators. The search also reveals any restrictive covenants and easements which affect the estate or interest.
Top Up - Top up is a feature available on some home loans which lets you increase the limit on your existing loan.
Torrens Title System - Title is under a system given the name of its South Australian author in 1858. The principles of this system are expressed in State Land Title and Real Property Acts and any act or acts amending or re-enacting them. This system gives a registered proprietor of an interest in land a perfect and unchallenged titles, subject only to the encumbrances and conditions mentioned on the title certificate.
Transfer Of Land - A document registered in the Land Titles Office which recognises and acknowledges change of property ownership. This is also noted on the Certificate of Title.
U
Uncommitted Monthly Income - Your available net income once all monthly expenses including loan repayments have been taken into consideration.
Unencumbered - A property free of encumbrances, convenants, restrictions.
V
Valuation - A report written by a registered valuer, detailing their opinion of the property value.
Variable Rate Loan - A loan for which the interest rate changes as conditions in the money market change.
VEDA Advantage- A company that holds the largest source of credit information about Australian people.
Vendor - One who offers a property for sale.
Vendor Bid - A bid made by a vendor at the auction of their property. It may be used to start the bidding process.
W
X
Y
Z
Zoning - Zonings fall into many categories, the two most common being commercial and residential. Local Councils and/or Planning Authorities control the use of land and designate it as such