Glossary
We understand that when we, and our colleagues talk about lending we use many terms that you may not be familiar with. Please use our glossary to make sense of the terminology.
Accrued Interest - Interest calculated and added to the interest amount payable, but which is not yet paid.
Amortisation - Scheduled repayments of a loan through regular instalments 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.
Application Fee - An application fee is charged by the lender to cover the initial cost of processing your application. Depending on the lender this fee may cover additional costs such as property valuations.
Arrears - The total of overdue loan repayments.
Assets - Anything of value owned, for example real estate, cash, shares.
Bridging Finance - A short term loan that covers a financial gap between the purchase of a property and the sale of a current property.
Building / pest inspection - A report providing information on any structural problems / faults. A pest inspection will identify any termites that are present in the property.
Capital Gain / Growth - The financial gain you receive when you sell something for more than you paid for the asset.
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.
Contract of Sale - A written agreement outlining the terms and conditions for the purchase of sale of a property.
Conveyancing - The legal process of transferring the ownership of property.
Covenant - Imposes conditions on the use of, or the nature of the dwellings erected on, a parcel of land.
Credit Bureau - An organisation 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.
Equity - The part of the property owned by the borrower not subject to any lenders interest.
e.g property worth $400 000, with a mortgage loan of $200 000
the equity would be
$200 000.
Garnishee - To legally divert whole or part of someone's money to another party.
Gearing - Borrowing to invest.
Guarantor - A person or people who agree to pay back the loan in the event the borrower can not do so.
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".
Lenders Mortgage Insurance or LMI - A once off premium paid at settlement to protect the lender from any losses that may occur as a result of a default by the borrower, does not offer any protection to the borrower.
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 to Valuation Ratio or LVR - The calculation used to represent the borrowers equity in the property. e.g Jill owes $180 000 divided by the property valued at $300 000, LVR of 60% meaning that Jill has 40% equity.
Maturity - The date by which your debt must be paid in full.
Mortgage Stamp Duty - A government charge payable on the amount secured by your mortgage.
Mortgagee - The party taking a mortgage over land, usually to secure a loan (the Lender).
Mortgagor - The party granting a mortgage over land, usually to enable borrowing from a Lender (the person/s borrowing the money).
Negative Gearing - When borrowing costs (fees and interest) exceed the income generated by the investment in a negative cash flow.
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.
Owner Occupier - A person who is purchasing a property as their primary place of residence.
Positive Gearing - When the income generated by the investment exceeds borrowing costs (fees and interest) resulting in appositive cash flow.
Principal - The actual amount of money borrowed or remaining unpaid on a loan, not including interest.
Redraw - A facility that allows the borrower to make additional repayments beyond the minimum agreement, and then draw back against these funds when required.
Security - An asset that is offered by a borrower on the basis a lender will sell the asset in the event the borrower fails to repay the loan in full.
Settlement - When all parties involved in the sale of a property meet together and exchange documentations and funds to complete the sale.
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.
Survey - A plan that shows the boundaries and the building position on a block of land.
Transfer Stamp Duty - A government charge payable on the purchase price of the property.
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.
Valuation - A report detailing a professional valuer's opinion on the value of the property.
Please feel free to contact us any time with questions big or small.
We look forward to the opportunity to assist you with your finance what ever the shape or size.