Acceptance | Agreement to the terms and conditions of an offer contract. |
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Additional repayment | Additional money paid into your loan over and above the minimum monthly repayments. |
Application fee | A fee paid to the lender for setting up a home loan. |
Appraisal fee | A fee charged for a professional opinion about how much a property is worth. |
Amortising loan | The formal term for a standard principal and interest loan. |
Arrears | Being overdue in repayments. |
Asset | An item owned with a monetary value (e.g. cash and/or property). |
Balloon loan | A loan that has regular payments that do not cover the full loan amount by the end of the term, so a larger lump sum is due at maturity. |
Basis points | Equal to 0.01% interest. (e.g. 50 basis point is an interest rate of 0.5%) |
Break cost | Fees charged by the lender if the loan is paid off in full before the end of the loan term. |
Bridging finance | A temporary loan used as a gap measure between buying your new home and selling the old one. |
Budget | A detailed review of your income and expenses. |
Capital gains tax | Tax payable on the profit made when selling an investment property. |
Cash advance | A loan on a personal line of credit, typically a credit card attracting higher than normal interest. |
Certificate of title | Document showing who owns the property as well as all the associated details of size and whether there is a mortgage registered on the title. |
Comparison rate | A rate which includes fees and charges so loans can be compared on an equal basis (e.g. a loan with a low advertised rate but high fees might cost the same as a loan with a higher advertised rate but low fees). |
Contract variation | Any variation or alteration to the terms of a contract. |
Conveyancing | Legal work carried out by your legal representative to transfer ownership of a property. |
Creditor | A person or organisation who loans money on the expectation it is to be repaid. |
Credit | An agreement whereby the borrower receives goods or money now, on the understanding it is to be repaid under set guidelines that commonly include an interest charge. |
Credit/facility limit | The maximum loan amount that a borrower can borrow under their home loan contract. |
Credit report | A report outlining an individual’s credit history, public records and any credit black spots. |
Daily interest | Interest calculated on a daily basis. Most variable rate loans calculate interest on a daily basis. |
Debit card | A bank access card used to make withdrawals from current funds in a bank account. |
Debt | An amount of money owed by one person or organisation to another. |
Debt consolidation | To combine one or more debts previously held separately into one merged amount. |
Debt servicing ratio (DSR) | Measures whether you can afford the mortgage payments. To calculate the DSR, the lender uses a number of factors to work out the amount of your income that is available to repay the debt. |
Default | Failure to make a loan repayment by a specified date. |
Deferred payment | An agreement between two parties where the amount due to be paid on a given date may be postponed until a later date. |
Deposit | Amount given in advance to show intention to purchase a property. |
Deposit bond | An insurance policy to cover the deposit on a property being purchased. |
Depreciation | The amount claimed on an investment property for the reduction in the value of an item due to usage, passage of time, wear and tear. |
Exit fee | A fee charged by some lenders when you decided to refinance with another lender within the first years of the loan. |
Equity | The difference between your mortgage and your property’s value. |
Fixed interest | Your interest rate is locked in for a fixed term; you are then protected against possible interest rate rises for the selected ‘fixed’ term period. |
Foreclosure | When you default on your mortgage and the lender forces a sale on your property, with the proceeds going towards the mortgage debt. |
Gearing | Investment property is negatively geared when expenses exceed rental income. Investment property is positively geared when the rental income received is greater than the total amount of expenses. |
Hardship variation | It may be possible to vary the terms of your contract should you find yourself in a position where you are having difficulty meeting your repayment obligations. |
Lender | A person or organisation who provides money to another under the proviso that it will be repaid according to set guidelines and terms. |
Lender’s mortgage insurance (LMI) | A one-off insurance premium that protects the lender in the event that you default on your mortgage repayments. |
Liquid assets | Assets, either in cash or easily convertible to cash. |
Loan to value ratio (LVR) | The value of the loan divided by the value of the property that the loan is for (e.g. if you buy a $500,000 property and need a $350,000 loan – your LVR is 70%). |
Low-doc home loan | Low documentation loans designed for the self-employed who don’t have the documentation required to get traditional home loans. These usually carry higher interest rates. |
Mortgage | A loan for the purpose of purchasing a property, where the property is used as security. |
Mortgagee | The lending institution. |
Mortgagor | The borrower (you). |
National Consumer Credit Protection | Australian legislation covering consumer protection and consumer rights. |
Negative gearing | Where the income from an investment property is insufficient to meet the interest costs of the loan used to fund the investment property. |
Non-conforming loans | Designed for those who find it more difficult to meet the borrowing conditions of standard loans. |
Offset account | An account linked to your mortgage. The balance in the account ‘offsets’ the principal of the loan. Overall interest is calculated on the principal less the offset account balance. |
Ombudsman | Independent body established within a particular industry to investigate and resolve disputes as an outside party to the dispute. |
Overdraft | An arrangement on a cheque or savings account under which a lender extends credit up to a maximum amount and against which the customer can make withdrawals. |
Pre-approval | An initial approval process that provides an estimate of how much someone can borrow, before they find a property. |
Principal | The amount of capital borrowed. |
Refinance | Switching your loan from one product (or lender) to another, usually with a better interest rate or conditions. Your initial loan is paid out and your debt is transferred across to the new product or lender. |
Repossess | To reclaim possession of goods or assets for failure to make payments within agreed terms. |
Reverse mortgage | Usually for older home owners who have already paid off their home loans and borrow against the value of their home without having to sell the property. |
Revolving line of credit | A line of credit that is secured by the value of your home. Allows you to use the funds for other purposes such as the purchase of a second property or other investments. Generally incurs a higher interest rate than a standard variable rate loan. |
Security | A right of a lender against the property or other assets of a borrower to guarantee or secure the repayment of a loan. |
Secured loan | In this type of loan, the property being purchased is held as security against the loan. |
Settlement | The day on which the process of changing title of a property occurs. Your legal representative will organise for the exchange of money and documents so that you become the legal owner of the property. |
Split loan | Home loans where a predetermined portion of the loan is locked in at a fixed interest rate and the rest comes with a variable rate of interest. |
Unsecured loan | A loan in which no property is held as security, generally attracting a higher rate of interest due to increased risk on the part of the lender. |
Valuation | An estimation of the value of the property prepared by an independent professional valuer. |
Variable interest rate | The interest rate will vary depending on several factors, including the Reserve Bank’s current cash rate and prevailing sentiment. |
Vendor | The person who is selling the property. |