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| ABIO-Australian Banking
Industry Ombudsman provides an avenue through which customers can make complaints
about their bank and have them dealt with independently |
| Acceptance - To agree
to the terms of an offer or contract |
| Accrued interest - Interest
calculated and due (on a loan) but not yet added to the loan |
| Additional repayment -
Extra funds paid into loan over and above the minimum prescribed payments |
| Amortisation - Systematic
repayment of a loan through regular instalments over a period of time.(eg.
Weekly, Monthly or Fortnightly) Borrower pays the interest and part of the
principle in each repayment. |
| All-in-one loan - A loan,
generally variable, that allows you to deposit all of your income into the
loan account for all your day to day purchases and transactions. The longer
spare funds stay in the account, the greater the interest savings. |
| Application fees - Fees
that Lenders charge to consider the loan application. These are paid up
front and are usually not refundable unless the loan is declined. |
|
Annual Percentage Rate (APR) - The
advertised rate of interest per annum
|
| Arrears - Amount that
the loan is overdue for repayment. |
| Assets - Money, Property
or Goods owned b the applicant(s). 'Real' assets refer to real estate assets
only |
| Auction - Public sale
of property with ownership going to the highest bidder, subject to a reserve
price being reached and deposit money being paid (usually 10% of sale price). |
| Average Annual Percentage
Rate - (AAPR) This calculates the true rate taking into account the
application fee, monthly fees and charges over the life of the loan. |
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| Balance Sheet - A statement
fo assets, liabilities and equity for a business at a stated date. |
| Basic variable - A variable
rate home loan at a reduced rate to a standard variable, but generally with
fewer features. |
| Bid - Making an offer
to purchase at the current announced price at an auction. |
| Break Costs - Costs incurred
when a loan is paid off before the end of it's term. Generally only applied
to fixed rate loans. |
| Bridging finance - A short
term loan, usually with high interest, that covers a financial gap between
the purchase of a property and the sale of a current property. As a rule,
lenders do not like financing this type of loan unless a firm contract for
the sale of the current property is in place |
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| Capital - The current
value of your long term assets (ie: house, property or business) |
| Capital Gain - The monetary
gain obtained when you sell an asset for more than you paid for it. |
| Capital Gains Tax - A
federal tax on the monetary gain made on the sale of an asset for more than
you paid for it. |
| Capitalisation - When
interest payable is accrued and added to the total debt payable. |
| Capped 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 councils building regulations. |
| Certificate of title -
A document that details the land dimensions and the owner(s) of the property.
It also details any 'encumbrances' such as Mortagages. |
| Combination loan - Where
various loans come under the same banner to form one loan. May have a portion
variable , fixed or even as a line of credit. Also known as a split loans. |
| Company title - A property
title where owners of units form a company. It is difficult to raise finance
against this type of title because a new owner has to be approved by all
the existing owners. These types of titles usually sell at a discount. |
|
Comparison rate - Used to compare
the actual rate of a loan, taking into account nominal interest rate per
annum, the compounding frequency and upfront and ongoing fees, as outlined
in the Consumer Credit Code.
|
| Compound interest - Interest
that is paid on both the accumulated interest as well as the original principle |
| Community title - A property
title where several homes are erected on an estate where the owners have
access to a community club house, swimming pool, barbecue area, tennis court
etc. These are becoming popular these days. The owners have to pay levies
for upkeep on the community facilities. Usually quarterly levies apply. |
| Construction loan - A
loan granted for the purpose of funding the building of a new dwelling.
You are generally able to draw down money as required, so you can pay as
necessary. |
|
Consumer Credit Code - An act of
Parliament governing the relationship between borrowers and lenders.
|
| Contract of sale - A written
agreement outlining the terms and condititons for the purchase or sale of
a property. |
| Conveyancing - The legal
process for the transferal of ownership of real estate. |
| Convenant - Special terms
that apply to certain properties. e.g. home must be made of brick (no fibro) |
| Credit Rating Agency of Australia
(CRAA) - Usually known as 'CRAA'. Association thta lenders subscribe to
which holds credit information on all of us. Individuals, for a small fee,
can obtain a listing from the 'CRAA' detailing their credit history. |
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| Daily Interest - Interest
calculated on a daily basis - therefore varies according to daily account
balance |
| Default - Failure to meet
debt payment on a due date. |
| Deposit bond - Guarantees
that the purchaser of a property will pay the full deposit by the due date.
Institutions providing deposit bonds will act as a guarantor that payment
will be made. They are often used as surety when cash isn't readily available
at short notice. |
| Debt Service Ratio (DSR)
- Ratio of income to loan repayments. Most lenders have their own particular
methodology in calculating the income/outgo ratio. At Mortgage Maker, because
we use numerous lenders, we apply the following method: All fixed monthly
commitments X 1200 divided by gross annual income. Income/Outgo ratios determine
the applicants capacity to repay. |
| Disbursements - These
are costs, due to bodies other than the lenders or solicitors, which are
incurred by the purchaser/borrower. |
| Disposable interest -
Any income left over after all known expenses have been met e.g mortgage
payments, bills etc. |
-E-
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| Effective interest rates -
See average annual percentage rate. |
| EFTPOS - (Electronic Funds
Transfer Point of Sale) This facility allows you to use your ATM card to
make a purchase and often withdraw cash |
| Encumberance - An outstanding
liability or charge on a property |
| Enquirer - Person or persons
applying for finance |
| Equity - The amount of
an Asset really owned. eg. Home worth $230,000 and a loan of $100,000 then
the equity is $130,000 |
| Equity loan - A loan usually
secured by the porportion of the home that one has equity in. Usually operates
like an overdraft where the borrower has a set limit they can draw to. |
| Establishment fee - Fee
charged to establish a loan (Viz. Application fee) |
| Exchange of contracts
- The legal point of time when the vendor and purchaser swap documentation
and start enquiries with a view to settlement. |
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| Features (loan)- Any attributes
associated with the loan e.g. redraw facility, combination loan facility,
portability |
| Fixed interest - An interest
rate set for a fixed term. Penalties usually apply if the loan is paid out
before the term expires (Also referred to as an Interest Only Loan). |
| Fixtures - These are the
items that would cause damage to a property if removed. Their removal must
be stipulated in the contract of sale and any damage made good by the seller. |
| Freehold - The dwelling
and the land on which it stands is owned by the owner indefinitely |
-G-
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| Garnishee - to legally
divert whole or part of someone's money to another person. |
| Gearing - The ratio of your own
money and borrowed funds in purchase of a home or an investment. |
| giropost - A facility
allowing you to conduct banking through the post office. |
| Guarantee - A form of
security for a loan where someone else promises/guarantees to repay the
loan if the borrower defaults. This is a poor form of security because of
the bad publicity for the lender if the guarantee has to be exercised. |
| Guarantor - A party who
agrees to be responsible for the payment of another party's debts. |
-H-
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| Holding Deposit
- A refundable deposit based on the goodwill of the buyer to go ahead with
the purchase. |
-I-TOP
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| Indicator Lending Rate
(ILR) - The base rate on which interest rates for variable rate overdrafts
and long term loans are set. |
| Income statement - A statement
of income and expenditure for a period, usually a year. |
| Interest - The lending
body's charge for the use of funds or the return on deposited funds |
| 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. |
| Internet Banking - When
banking transactions such as transfers, payments and other home loan applications
can be made via the Internet |
| Introductory Loan - A
loan is offered a reduced rate for an introductory period (usually no longer
than 15 months) to new borrowers. |
-J-
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| 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" |
-L-TOP
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| Land Tax - A state Government
tax charged to the owner of any property over a stipulated value, unless
it is their principle place of residence. |
| Lease - A document granting
a period of tenancy of a property under specific terms and conditions. |
| Liabilities - A person's
debts. There are also "Contingent Liabilities", which are Liabilities
that are contingent on something happening, e.g where are guarantee is acted
upon through a loan default. In other words the liability may or may not
come into effect. |
| Lien - The right to hold
property as security against a debt or loan. |
| Line of Credit - A flexible
laon agreement with a specified ceiling to be used at a customers discretion. |
| Loan Security duty - Mortgage
stamp duty |
| Loan stamp duty - The
state government stamp duty on the mortgage/ loan. AALson referred to as
"Loan Stamp Duty", "Mortgage Stamp Duty" & "Mortgage
Duty". First Home buyers can be exempt from this duty subject to certain
criteria as per the chart in your "Lending Policy Manual". |
| Loan to Valualtion Rule -
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
$130,00. The answer here is 92.31% |
-M-TOP
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| Margin - This is the difference
between the lender's interest indicator rate(or other reference rate) and
the rate actually charged to borrowers. |
| Mortgage - A form of security
for a loan usually taken. |
| Motgagor - The person
borrowing money in the terms of a mortgage |
| Mortgage discharge fee
- An administration fee to cover the costs (e.g documents) incurred in winding
up a loan. |
| Mortgage Insurance - A
form of insurance taken out be the lender to cover themselves in the event
that the borrower defaults on their loan and the sale of the property is
unable to cover the outstanding amount. Mortgage insurance premiums are
usually payable by the borrower when the amount borrowed is over the 80
percent of the property value and sometimes at a lower loan to valuation
ratio. |
| Mortgage Manager - A company
responsible for managing every facet of a borrowers loan. Often sources
loans from mortgage originators. |
| Mortgage Offset - A non-interest
earning account that is offset against a home loan to reduce the total interest
payable. |
| Mortgage Originator -
Retail and more often wholesale lender who sources securitised funds in
order to package them as loans |
|
Mortgage Protection Insurance - Not
to be confused with mortgage insurance, this covers borrowers loan repayments
in the event that they are not able to meet them through illness or redundancy,
for example.
|
| Mortgagee - The Mortgagee
is the person borrowing the money |
| Mortgagor - The Lender
of the funds |
-N-
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| Negative gearing - Where
an investment is geared to produces a book loss. This loss can be deducted
from other taxable income. |
-O-TOP
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| Off the plan - The purchase
of a property, often an apartment, before it has been completed i.e after
only having seen the plans, not the finished product. |
| Offer to purchase - A
legal agreement that details a specific price for the purchase of a specific
property |
| Offset account - A savings
account linked to your mortgage in such a way that the interest earned on
your savings is applied to reduce the interes on your mortgage. |
| Old system title - With
old system, there is a separate deed 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 very messy title system, with heavy associated
legal costs. |
| Ombudsman - The Australian
Banking Industry Ombudsman (ABIO) provides and avenue through which customers
can make complaints about their bank and have dealt with independantly. |
| Ongoing fee - Any loan
maintenance fee charged regularly over the life of the loan. |
| Overdraft
- A prearranged limit to which a person can exceed the account balance.
Usually used for business purposes. |
-P-
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| Passed in - A property
is 'passed in' at auction if the highest bid fails to meet the reserve price
set by the vendor. |
| Phone banking - When banking
transactions such as transfers, payments and deposits can be made over the
phone, often by an automated phone system. |
| Portability - Where a
new property may be substituted as a security for an existing loan. |
| Principal - The capital
sum borrowed |
| Principal and Interest
- A loan where both the principal and interest are repaid together on a
regular basis, mostly by monthly instalments.(P&I) |
| Private Sale - The sale
of a property without an estate agent. |
| Private treaty sale -
A property sale where the buyer negotiates on a price set by the seller |
-R-TOP
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| Redraw Facility - A loan
facility whereby you canmake additional payments on your loan, and then
access these extra funds when necessary. They will often have limitations
such as a minimum redraw amount and a fee for each withdrawal. |
| Refinance - To replace
or extend an existing loan with funds from the same institution or another. |
| Rental guarantee - A promise
by the developer guaranteeing a certain level of return on an investment
propety. Usually stated as a percentage of the purchase price. It generally
relates to investment properties purchased off the plan. |
| Repayment maximum/minmum
- The max/min percentage of income which a lender will allow to be committed
to the repayment of a loan. |
| Reserve price - Specified
minimum price acceptable to a seller at auction. |
| Residential investment loan
- A loan granted to purchase aproperty intended for investment purpose
(for example to be rented out) as opposed to owner-occupied purposes. |
-S-
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| Search - (Title Search)
- A request to the Lands Dept to ascertain who owns a specified property,
and what encumbrances are on the title. |
| Securitisation - The process
of taking a pool of diverse assets such as different home loans and converting
them into a tradable security such a bond which investors can then purchase
and trade. |
| Security - An asset that
guarantees the lender their loan until it is fully repaid. Usually property
such as real estate is offered as security. |
| Semi-detached - Two houses
that share a common wall or walls. |
| Settlement date - Date
on which the new owner finalises payment and assumes possession. 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. If first
home buyer in NSW this cost may be deferred subject to certain criteria.
Loans Security duty may also NOT be payabe subject to certain criteria. |
| Standard variable - A
variable home loan, usually with comprehensive features (as opposed to basic
variable). This is often the variable rate fixed rates to roll to at the
end of their fixed term. |
| Strata Title - Similar
to Torrens Title, but usually over units. With Torrens title, the land is
owned plus everyting thereon. With Strata Title, only a particular unit
is owned. |
| Stratum Title - A title
that records your ownership of a unit of a larger property. Unlike strata
title, the owner becomes a shareholder in the company that manages the common
area, not just a member. |
| Survey - A plan that shows
the boundaries and the building position on a block of land. |
-T-TOP
|
| Tenants in common - Where
more than one person is the owner of the property. If one person dies, then
part of the title passes through the estate of the deceased. Also each owner
can have a nominated share of ownership such as 5% or two thirds, etc. |
| Term - The length of a
home loan or a specific portion within that loan. |
| Title fees - Payable to
the states Land Title Office for the title search, transfer of property
ownership, registration of the new mortgage and discharge of the old one. |
| Title search - Process
to ensure that the vendor has the right to sell and transfer ownership. |
| Torrens title - Torrens
title is the most common title in Australia. All previous and current owners
are listed on the one deed, as are all previous mortgagees etc. Also known
as "RPA" standing for "Real Estate Act." |
| Transaction fee - Charged
for any transactions conducted i.e. withdraws, transfers, deposits. |
-V-
|
| Valuation - An independant
report written on behalf of the lending institutions to provide an idea
of the value of the property being used for security. Lenders use outside
valuers and will only accept a valuation from their own valuers. |
| Variable interest rate
- An interest rate that varies during the term of the loan in accordance
with the marketplace. |
| Vendor - Party who offers
a property for sale. |
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| Zoning - Local authority
guidelines as to the permitted uses of land. |
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