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Home Loan Glossary

Acceptable Referee	Includes accountants, Solicitors, magistrate, Doctor & Justice of the Peace
Acceptance	To agree to the terms and conditions of an offer or contract
Additional Repayment	Extra funds paid into the loan over and above the minimum prescribed payments
Allotment	The area of land that is subdivided into smaller portions of land, which are known as Allotments
Amortisation	To pay off principal and interest under a loan over a period of time, usually by instalments.
Application Fee	The fee that is charged by a lender when you lodge a loan application
Appreciation	When the value of the property increases from its original value
Body Corporate Levy	The fee paid to a Body Corporate to cover various administrative cost relating to the common property
Bridging Finance	A shorter term loan that is taken out to purchase a new property before selling your existing property
Break Cost	Relates to fixed rate loans where the borrower terminates the loan contract before the expiry of the fixed rate period
Capital Gain	The amount by which proceeds from the sale of property exceeds the original purchase price.
Certificate of Title	This document details the land dimensions and ownership details, and whether there are any encumbrances it.
Certificate of Currency	A certificate issued by an Insurance Company showing that a building is insured
Company Title	The title where the unit holders are Shareholders in a private company
Comparison Rates	A comparison rate is a tool to help consumers identify the true cost of a loan. It is a rate which includes both the interest rate and the ascertainable fees and charges relating to a loan, reduced to a single percentage figure.
Contract of Sale	A written agreement outlining the terms and conditions for the purchase or sale of property.
Cooling off Period	5 day period after exchange of contracts during which time the contracts may be cancelled
Default	Failure to meet debt payment on due date
Deposit	A deposit of usually 10% is paid by the buyer at the time of exchanging contracts on the purchase of a property
Depreciation	The value of the property decreases
Debt Service Ratio	Maximum of the applicants weekly, fortnightly or monthly wage which will support loan repayments over the agreed loan term. Usually expressed as a percentage – most lenders set a maximum DSR between 30% to 33%
Drawdown	Debiting of loan funds at settlement
Early Termination Fee	Fee imposed by some lenders where the borrower has sought refinance with another lender within the first few years of the loan
Equity	The difference between what you owe and what your property is currently worth
Exchange of Contracts	An exchange of contracts is when the buyer and seller enter into a binding contract that commits them to the purchase/sale of the property.
Financial Institutions Duty	FID is State duty on the receipts of financial institutions
Fixed Interest rate	An interest rate that allows you to lock it in for a set time period.
Formal Approval	Is when the lender formally approves your loan application and offers you unconditional approval
Gross Income	Total income before tax
giroPost	A facility allowing you to conduct banking transactions through the post office
Home Equity Loan	A home equity account gives you a revolving line of credit secured by the value of your house. This allows you to use the funds for any other purpose such as the purchase of a second property, or shares or other investments. The interest rate is generally higher than a standard variable rate, and these accounts are not suitable for everyone.
Honeymoon rate	Colloquial term applied to Introductory Loans. The rate can be fixed, capped or variable for the first 12 months of the loan. At the end of the term the loan reverts to the standard variable rate. Capped Rate The rate applied to Honeymoon (Introductory Loans) which is capped at a rate that will not rise above the prevailing Standard Variable Rate, but may fall. Fixed Rate The rate applied to Honeymoon (Introductory Loans) which is fixed at a set rate which will not change for the duration of the honeymoon rate period. Variable Rate The rate applied to Honeymoon (Introductory Loans) which is variable and usually set at a discount below the Standard Variable Rate.
Interest Only Loan	Usually a short term arrangement whereby payments are made on the interest only, not the principal.
Joint Tenants	The holding of property by two or more people in equal shares.
Loan to Valuation Ratio (LVR)	(LVR). Refers to the maximum amount lenders will approve against the value of any property taken as security for your home loan.
Mortgage Insurance	Some lenders may provide up to 95% of funds for a loan if you agree to take out mortgage insurance (MGI). This figure is a one off payment usually made at the time of settlement. The figure is not easy to calculate being based on variables such as the loan amount, the value of your property and the exact LVR (i.e. the figure between 80% & 95%). This payment allows the lender to recoup the unpaid principal in the event of default and the borrowers debt is transferred to the Mortgage Insurer.
Mortgage Offset	Offset accounts can help reduce your tax bill by offsetting taxable income from deposit accounts against interest paid in after tax dollars on mortgage repayments. However, not all offset accounts are equal, with many not paying the same interest as you are charged on your mortgage.
Mortgagee	The lender who lends the money
Mortgagor	The person who borrows the funds
Negative Gearing	where the return on an investment is insufficient to meet the costs of the investment, leading to a reduction in assesable income for taxation purposes.
Net Income	Gross income less tax
Ombudsman	The Australia Banking Industry Ombudsman provides an avenue through which customers can make complaints about their bank and have them dealt with independently.
Portable Loans	A portable loan allows you to sell your house and move to a new one without having to refinance. The main benefits of portability apart from not having to refinance is utilisation of stamp duty and not having to pay break costs if you are on a fixed rate. Most lenders however insist that the loan amount is the same or less. Make sure you know the terms of your loan.
Pre Approval	When a lender advises you in writing how much they will lend you, subject to lending terms and conditions
Principal & Interest Loans	A loan in which both the principal and interest are paid during the term of the loan.
Redraw Facility	A redraw facility allows you to make additional repayments on your mortgage, and then have access to the additional repayments if you need to. Make sure you understand the conditions attached to the redraw facility that can include a minimum amount and a fee every time you use it.
Refinancing	To move your loan from one lending institution to another
Settlement	Is the completion of the sale transaction. Final payments are made at settlement in exchange for the relevant documents. The purchaser can then take ownership of the property.
Service Fee	Usually a monthly fee levied to cover bank cost of administering & maintaining the loan account i.e. fixed and variable costs such as staff, IT software / hardware
Stamp Duty	Stamp duty is a state government tax which is calculated on the sale price of the property. Stamp duty is also payable on mortgage documents and is calculated on the amount borrowed.
Standard Variable Rate	The rate which lenders apply to their ‘premium’ home loan product. Carries features such as a redraw facility, portability, salary account and mortgage offset.
Strata Title	Title that is commonly used for units, which forms part of the owners corporation.
Switching Fee	The lender may impose a switching fee where an existing borrower wishes to change from one loan type to another e.g. Variable Rate Loan to Fixed Rate Loan
Tenants in Common	The holding of property by 2 or more people in equal or unequal shares
Torrens Title	Title that grants ownership of land.
Transfer	A document registered in the Land Titles Office recording the change of ownership.
UCCC	The Uniform Consumer Credit Code Legislation – a Federal act of Parliament to ensure uniformity amongst all credit providers. E.g. all loan contracts must now adhere to a uniform format as specified by the act. It must set out all fees / charges that the borrower (and, if required, guarantor) are liable for under the loan contract.
Valuation	A report as required by the lender detailing a professional opinion of the property's value.
Valuation fee	Fee which may be charged if the lender seeks to cover the cost of valuing the property taken as security for the loan.