Glossary
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accrued interest

Interest you have earned or incurred that is yet to be paid or charged

amortizing or principal & interest (P & I)

Amortizing is another word for loans that are gradually being paid off. Borrowers with an amortizing loan have to make set repayments each month of both principal and interest so that over a certain period of time their loan is paid out. This is sometimes referred to as P&I. Other options are interest only or interest capitalisation. The opposite of an amortising product is a revolving line of credit.

average annual percentage rate (AAPR)

The annual effective rate of the mortgage which is made up of the interest rate, fees and charges that incur during the contract period. (see press release article)
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appreciation

An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.
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asset

Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).
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balance sheet

A financial statement that shows assets, liabilities, and net worth as of a specific date.
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breakcost

Breakcosts are also known as economic costs. They are charged by an institution to recoup interest lost through a borrower refinancing with another institution or paying their loan out early. Break costs are normally only charged on fixed rate loans. It can also be charged well into the variable portion of a honeymoon or introductory rate home loan. Some institutions also charge a flat fee on top of their break cost charge. They may refer to this fee as a "deferred establishment fee".
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certificate of title

A statement provided by an abstract company, title company, or attorney stating that the title to real estate is legally held by the current owner.
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clear title

A title that is free of liens or legal questions as to ownership of the property.
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construction loan

A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.
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consumer credit code

An act of parliament governing the relationship between borrowers and lenders.
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consumer reporting agency

An organization that prepares reports that are used by lenders to determine a potential borrower's credit history. The agency obtains data for these reports from a credit repository as well as from other sources.
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contract of sale

A written agreement outlining the terms and conditions for the purchase or sale of property.
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covenant

A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure.
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cover note

A note of temporary property insurance before the implementation of a formal policy.
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conveyancing

Conveyancing fees (legal fees on the purchase) vary from state to state and will generally be between $400 to $1000 depending on the complexity of the transaction. If you elect to do the conveyancing yourself, the cost of the certificates and other documentation will still be required.
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CRAA

Credit Reference Association of Australia the body which holds credit details on all of us! Also known as Veda.
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credit

An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.
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credit history

A record of an individual's open and fully repaid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.
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debt

An amount owed to another.
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default

Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.
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FID

Financial Institutions Duty state duty on the receipts of financial insititutions.
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guarantor

A party who agrees to be responsible for the payment of another party's debts.
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income statement

A statement of income and expenditure for a period, usually a year.
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joint tenants

Equal holding of property between two or more persons. If one party dies, their share passes to the survivor/s.
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lenders mortgage insurance (LMI)

Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by a mortgage default. Usually required for loans with an LVR of 80.01% or higher. (see press release article)
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loan to value ratio (LVR)

The ratio of the amount of your loan to the appraised value. The LVR will affect programs available to the borrower and generally, the lower the LVR the more favorable the terms of the programs offered by lenders.
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monthly fees

Are the fees charged to cover or partially cover the lender's internal costs of administering the loan each month.
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mortgage

A legal document that pledges a property to the lender as security for payment of a debt.
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mortgagee

The person or company who receives the mortgage as a pledge for repayment of the loan. The mortgage lender.
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mortgagor

The mortgage borrower who gives the mortgage as a pledge to repay.
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negative gearing

Where the return on an investment is insufficient to meet the interest costs of the loan used to fund the investment.
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principal

Amount of debt, not including interest. The face value of a note or mortgage.
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principal & interest loan

A loan in which both the principal and the interest are paid during the term of the loan.
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refinancing

To replace or extend an existing loan with funds from the same institution or another.
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search

An examination of land title documents to confirm the owner (and any other rights holders) of property.
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security

An asset that guarantees the lender their borrowings until the loan is repaid in full. Usually the property is offered to secure the loan.
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tenants-in-common

An undivided interest in property taken by two or more persons. The interest need not be equal. Upon death of one or more persons, there is no right of survivorship.
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title

The evidence one has of right to possession of land.
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title search

An investigation into the history of ownership of a property to check for liens, unpaid claims, restrictions or problems, to prove that the seller can transfer free and clear ownership.
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unencumbered

A property free of liabilities, encumbrances or restrictions.
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valuation

A report as required by the lender, detailing a professional opinion of a property's value.
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vendor

Party who offers a property for sale.
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