Glossary of Terms
Average Annualised percentage rate (AAPR)
Sometimes referred to as the Compulsory Comparison rate, this figure takes into account the other costs associated with the loan, and expresses them as an average interest rate to create a level
field with which to compare similar loan product interest rates.
All-in-one loan
Allows you to deposit all of your income into the loan account and then withdraw money from that account for day-to-day transactions. The longer spare funds stay in the account, the greater the interest savings.
Amortisation period
The period of time a loan is calculated over (and repaid).
Appraised value
Estimate of the value of a property being used for a loan.
Basic variable
A variable home loan at a reduced rate with fewer features than a standard variable.
Break costs
Incurred when a loan is paid of before the end of its term.
Bridging finance
Enables you to cover the purchase of a new property when you are yet to sell your existing property.
Buyer’s agent
Person to act on behalf of the buyer to find and negotiate on properties the buyer wishes to buy.
Capital gain
The financial gain you get when you sell something for more than you bought it. May be subject to the capital gains tax; this is paid on the gained amount.
Capped loan
A loan where the interest rate is not allowed to exceed a set level for a period of time, but is allowed to drop.
Combination loans
Various loans join to form one loan. Also called split loans.
Compulsory Comparison rate (CCR)
See AAPR. The formula used to calculate the rate is regulated by the Uniform Consumer Credit Code which all Australian lenders must use.
Conveyancing
The legal process for transferring ownership of real estate.
Default
Failure to meet debt payment on a due date.
Deferred establishment fee
Is charged when you pay out your loan within a short period of taking it out, such as three years.
Deposit bond
Guarantees that the purchaser of a property will pay the full deposit by the due date.
Depreciation
The accounting practice where the cost of a fixed asset of a business is spread over the life of the asset. Depreciation is a non-cash expense that allows the money to be retained by the business, thus technically allowing the business the capacity to replace the asset over time.
Disbursements
Solicitor’s incidental costs involved when dealing with client on behalf of the lender, eg searches, certificates, pest reports, etc.
Draw down
Act of transferring money from lending institution to the borrower after the loan has settled.
Equity loan
A loan usually secured by the value of equity you hold in your house.
Establishment fees
Fees that may or may not be charged to set up a loan.
Fixed interest (fixed rate)
An interest rate set for an agreed term.
Freehold
The dwelling and the land on which it stands which is owned by the owner indefinitely.
Gearing
The ratio of your own money and borrowed funds in an investment.
Guarantor
A person/s who agrees to be responsible for the payment of another person’s debts.
Holding deposit
A refundable deposit based on the goodwill of the buyer to go ahead with the purchase.
Indemnity
Security against damage or loss; sum paid in compensation for loss incurred.
Interest adjustment
This may be charged to compensate the lender for loss of interest revenue when additional
repayments are made on a fixed loan.
Interest only loans
A loan where the principal is paid back at the end of the term and only interest is paid during the term. These loans are usually for a short period of time, typically one to five years.
Lien
The right to hold property as security against a debt or loan.
Line of credit
A loan arrangement with a specified credit ceiling to which funds are drawn down.
Loan to Valuation Ratio (LVR)
The ratio of the amount lent to the valuation of the property.
Maturity
The date a debt or investment must be paid in full.
Mortgage discharge fee
An administration fee to cover the costs incurred in winding up a loan.
Lenders’ mortgage insurance
This is taken out by lenders, but is paid for by the borrowers, to c over themselves if the borrower defaults on their loan, and
property sale proceeds do not cover the outstanding amount.
Mortgage protection insurance
Different from mortgage insurance and covers borrowers’ loan
repayments in the event that they are not able to meet them, eg through illness or redundancy.
Negative gearing
Gearing your investment so that the costs to maintain it (loan repayments, council rates, maintenance, etc) outweigh the income produced by the investment, leading to a reduction in
taxable income.
Off the plan purchase
Buying a property from the plans only, not the finished product.
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 interest on your mortgage.
Ongoing fee
Any loan maintenance fee charged regularly over the life of a loan.
Portability
Where a new property can be used as security for an existing loan, ie when the loan is transferred to a new security property without needing to repay the loan, reapply or restructure.
Principal
The capital sum borrowed on which interest is paid during the term of the loan.
Principal and interest loan
A loan in which both the principal and the interest is paid during the term of the loan.
Private treaty sale
A property sale where the buyer negotiates directly with the seller, as opposed to an auction sale.
Redraw
Borrower is able to draw on pre-paid funds.
Refinancing
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 property. Usually stated as a percentage of the purchase price, it generally relates to investment properties purchased off the plan.
Reserve price
A specified minimum price acceptable to a seller at auction.
Security
An asset that guarantees the lender their borrowers until the loan is repaid in full. Usually the property is offered to secure the loan.
Stamp duty
A state government tax on the mortgage amount and purchase price
Standard variable
A variable home loan with comprehensive features. This is often the variable rate that fixed rate loans roll to at the end of the fixed term.
Title deed
Registration showing the ownership of property.
Valuation
A report as required by the lender, detailing a professional opinion of a property’s value.
Variable interest rate
A rate that changes in accordance with the rates in the market place.
Vendor
Person selling a property who is its current owner.
interest
Comparison rate
All non-statutory up front fees (establishment, valuation and legal) and ongoing fees are included with the normal interest rate, and will be expressed as a comparison “interest” rate.
Default product/ interest rate
The rate of product which the loan rolls to after the initial fixed or capped period ends, if the loan is not re-fixed. Often this rate/ product is the standard variable rate (SVR).
Initial interest rate
Minimum interest rate charged to new borrowers for the
nominated period.
Introductory period
The short period at the beginning of a loan with a reduced or discounted interest rate.
Type of introductory rate
Whether the introductory interest rate is a fixed, fixed discount or variable rate.
features
Additional repayments permitted
Whether you can make additional repayments above the regular repayments on your loan without an interest adjustment
calculation. The maximum can be an amount per period, a total amount during the term of the loan or a percentage of the principal.
All-in-one/ 100% offset account
Loans where borrowers can put all their income into the loan (A) or a linked account (O) and use it as their core financial product.
Combination/ portability
Whether this loan can be used in combination (C) with another loan (ie half the loan at a fixed rate, half at a variable rate), and whether the loan is portable (p) meaning it can be transferred to
another property if you move homes.
Free transactions per month
The number of free withdrawals or transfers to the loan account per month (excludes transactions from another institution’s ATMs, where charges usually apply).
Redraw and free redraws per year
Whether borrowers can draw on any additional funds within the loan, and how many redraws granted per year without charge.
Roll to non-SVR
If an introductory rate loan is able to revert to a product other than the standard variable rate.
fees
Break fees
Fee charged for the early termination of a loan.
Cheque-book/ credit card/ EFTPOS access
Whether funds can be drawn on using a cheque book, credit card or EFTPOS.
Discharge fee
Fee that covers the legal and administrative costs at the end of a mortgage.
EFTPOS/ phone/ tax/ internet fees
Amounts charged for using EFTPOS, phone, fax and internet transfer services.
Establishment fee
Application/ establishment fee charged on this loan.
Fee per cheque
Amount charged per cheque.
GiroPost withdrawal fee
Amount charged to access funds using GiroPost facilities in a post office.
Internet/ phone banking available
Whether telephone or the internet can be used to transfer funds to and from the loan account.
Ongoing fee
Any ongoing loan maintenance fee (eg 3/m = $3 per month).
OTC withdrawal fee
Amount charged for making a withdrawal over the counter.
Redraw fee
Amount charged to draw on additional repayments.
terms
Credit limit
This is the maximum amount at which the credit limit can be set, usually expressed as a percentage of the property’s value.
Default product redraw or offset/ all-in-one
Whether the product that the loan reverts to after the fixed or introductory period offers redraw or offset/ all-in-one facilities.
Evergreen (Line of credit)
Ongoing – ie no set term.
Interest-only available
Whether borrowers have the option of making interest only type repayments during the loan period.
Loan purpose
Either oo = owner-occupier housing loan, inv = residential
investment housing loan, or both.
Maximum % capitalized interest
The percentage maximum of a borrower’s credit limit which can be used to accumulate interest before repayments must be made.
Maximum additional repayments
The maximum amount you are able to pay above the regular repayments on your loan.
Maximum lend amount
Lender’s maximum preferred loan amount.
Maximum LVR %
The maximum percentage of the property value the lender will consider with the borrower paying the lender’s mortgage
insurance. Percentages marked with an asterisk (*) refer to the maximum LVR for owner-occupiers, with the maximum purposes being less than that listed.
Maximum term
Longest period of time in years the borrower has to repay the loan.
Minimum lend amount
Lender’s minimum preferred loan amount.
Minimum redraw amount
The minimum amount which can be redrawn in one transaction.
Repayment minimum
The minimum repayment you can make each month on a line of credit.
Repayment type
io = interest only: you only pay interest on the amount borrowed and at the end of the loan you repay the principal. pi = principal and interest: you repay some principal as well as interest with every payment.
abbreviations |
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a = Annual A = All-In-One adv = Advance arr = Arrears ATM = Automatic Teller Machine c = Combination loan available EFTPOS = Electronic Funds Transfer At Point Of Sale fp = Fixed period fx = Fixed fx dis = Fixed discount HL = Owner – occupied housing loan inc = Income int = Interest intro = Introductory product for new borrowers inv = Investment loan io = Interest only K = Thousand lc = Legal costs LOC = Line of credit LVR = Loan-to-valuation ratio m = Monthly M = Million |
min = Minimum max = maximum n = No n/a = Not applicable n/l = No limit NR = Not required 0 = 100% offset account available oo = owner=occupied loan OTC = Over-the-counter pa = Per annum pi = Principal and interest prin = Loan principal q = Quarterly R = redraw facility available RI = Residential investment housing loan val = Property valuation var = variable wd = Withdrawal y = Yes yr = Year/s * = Contact lender for more information |
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