Glossary of Terms and phrases

Amortization
Repayments to a loan which lead to its reduction over a predetermined period.

Assets
Things which are owned (either phsyical or intangible) which have a value attached to them.

Austrac
The government agency that administers the standards for the 100 points identity check.

Building Insurance
Insurance to cover the building itself - not the contents. All lenders require this before they will extend credit to purchase a dwelling.

Capital Gain
The profit made when an asset is sold for more than the original purchase price.

Commercial Loan
A loan made to an individual or a business for the purpose of making an investment. It is not covered by the Consumer Credit Code.

Comparison Rate
The full cost of a loan (including service fees, application fees etc.) expressed as an annual percentage rate. It can often be higher than the advertised interest rate. The Comparison Rate allows different types of loans to be compared on an equal basis.

Consumer Credit Code
A set of laws followed by brokers and by lenders designed to protect the individual when they are borrowing money. It creates extra safeguards for the consumer.Visit The Consumer Credit Code.

Collateral
The security or property being used to guarantee a loan.

Consolidation Loans
A loan which is used to pay out other loans or debts and consolidate them into one, smaller payment.

Conveyancing
The legal process of transferring the ownership and title of a property.

Construction Loan
A loan specifically designed for people who are building a house. It enables funds to be drawn down in stages.

Credit Reporting Agencies
These are private agencies that hold credit information on individuals and businesses. One agency is Bay Corp Advantage.

Depreciation
The amount by which an asset has decreased in value over a period of time.

Defaults
A person or business who has failed to pay a bill may have a default placed against them.

Disbursements
Another name for costs, expenses and fees.

Drawdown
When the bank advances funds to the borrower for a construction loan, it will usually be paid in several instalments called draw downs.

Equity
The value of your home that you own. That is, the difference between what you owe on your home and what it is worth.

Favorable Purchase
A sale of property, usually between families, where the sale price is less than valuation would be.

First Home Owners Grant
A grant of money from the Government to assist first home owners to purchase a home. Restrictions apply. Visit Revenue SA to find out more.

Fixed Rate Loan
A loan which has had the interest rate fixed for a fixed period of time. Usually at the end of the period, the rate reverts to a variable rate.

Freehold Ownership
Absolute ownership of land without any encumbrances, as distinct from leasehold, pastoral lease, etc.

Guarantor
A third party whose assets are used to secure a loan when the assets or income of an applicant are insufficient to meet the lenders criteria. In most cases they must be on the Property Title.

Interest Only Loans
A type of loan where the owner is required to pay the interest only part of the loan (usually for a specific term) and the original amount borrowed is not reduced.

Joint Tennants
The holding of property by two or more individuals. If one person dies their share automatically passes to the survivor, eg. married or defacto couples.

Land Tax
Based on the property value, it is a state government tax payable by the owners of the property. Exemptions may apply in some states.

Lenders Mortgage Insurance (LMI)
Insurance which lenders will require borrowers to obtain if the borrower is borrowing more than (usually) 80% of the value of the property. The insurance protects the lender, not the borrower.

Loan to Value Ratio (LVR)
The value of the loan expressed as a percentage of the value of the property.

MIAA
The Mortgage Industry Association of Australia. An industry body formed to raise and maintain high standards of conduct amongst its members. Visit MIAA

Mortgage
A legal document pledging property as security for the repayment of a loan.

Mortgagee
The party in a mortgage who lends the money, eg. bank, credit union, building society etc.

Mortgagor
The party in a mortgage who borrows the money. Usually the name on the title of the property.

No Frills Home Loan
A type of loan offered by some lenders which is a basic product with no credit cards or other services attached. It usually has a lower interst rate.

Principal and Interest Loans
A type of loan where the owner is required to make payments which pay amounts from both the interest and principle in regular instalments. This is also called a reducing mortgage.

Progress Inspection Fees
Fees which are paid to a lender to send out an inspector each time that the builder asks for money and before payment is made.

Progressive Payments
The way in which a loan is paid at specific stages of construction, eg. on settlement of the land, on the slab being laid etc.

Redraw Facility
If a borrower makes additional payments into their mortgage above the minimum amount, some lenders will allow them to withdraw the additional amounts that they have paid. Terms and conditions usually apply.

Refinancing
Borrowing money against the equity that you already have in a property. If the value of your property has increased substantially since you purchased it, you may be able to borrow more than you paid for it.

Regulated Loans
Owner occupied home loans that are covered by the Consumer Credit Code.

Security
The collateral or property being used to guarantee the loan.

Service Fees
A fee, usually monthly, charged by the lender to the borrowers mortgage account.

Serviceability
The ability of the borrower to meet the new mortgage commitments and still maintain a standard of living. That is, a borrowers ability to service a debt. Each lender has its own criteria.

Settlement
A meeting of representatives of all parties involved in the transaction to complete the sale. Monies are tendered in exchange for relevant documents, keys etc and the purchaser can then legally take possession.

SIS
The 100 point identification form.

Split Loans
Loans with more than one interest rate (eg. part fixed, part variable) OR a loan composed of two different types (eg. part line of credit, part rate saver).

Stamp Duty
A tax charged by the state or federal government (depending upon state) each time a property is purchased or a mortgage created.

Tennants in Common
The holding of property by two or more persons, either in equal shares or unequal shares. If one person dies the property is dealt with in accordance with the law. The share is not automatically inherited by the other party(s).

Title Search
A search carried out in the records of the Land Titles Office to determine registered details such as mortgages, caveats, easements etc which may be associated with a property.

Trade Practices Act
The part of law that controls the conduct of businesses. Loans which are not governed by the Consumer Credit Code (eg commercial or investment loans) are governed by the Trade Practices Act.

Unregulated (or Uncoded) Loans
Loans which are not governed by the Consumer Credit Code. Usually business or investment loans. They are governed by the Trade Practices Act.

Valuation
A report written by a Licenced Valuer estimating the value of a property.

Valuation Fees
The fee charged by the lender or the valuation firm to inspect and value a property.

Variable Rate Loan
A loan in which the interest rate changes in accordance with prevailing economic conditions.

Zoning
Specific uses assigned to areas and properties by Local Council eg rural or residential uses.



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