Loan Jargon
Explained
A | B
| C | D
| E | F
| G | H
| I | J
| K | L
| M | N
| O | P
| Q | R
| S | T
| U | V
| W | X
| Y | Z
- A -
ABA Australian Bankers' Association
ABIO the 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, creating an enforceable
agreement or contract
accrued interest
interest you have earned on incurred that is yet to be paid
or charged
additional
repayment extra funds paid into the loan
over and above the minimum prescribed repayments
adjustments the process
of allocating expenses (Council, electricity, phone, water
paid for but not used and which the buyer has not used but
will be billed for
agent
a person or body authorised to act on behalf of the client
in the sale, purchase, letting or management of property
all
in one loan a loan, generally variable,
that allows you to deposit all of your income into the loan
account and then withdraw money from the loan account for
all your day to day purchase and transactions. The longer
spare funds stay in the account, the greater the interest
savings
allotment a block of land created out of a larger area
amortisation
period the period of time one has to repay a loan
at the arranged terms
application fees
fees charged to cover of partially cover the lender's internal
costs of setting up a loan approval for a home buyer
appraised value
estimate of the value of a property being used as security
for a loan
appreciation
increase in the value of property caused by certain factors
such as inflation, an excess of demand over supply
arrears
an overdue account yet to be paid
assets
money, property, stocks & shares, bonds and goods owned
auction
public sale of property with ownership going to the highest
bidder, subject to a reserve price being reached
- B -
bad debt a debt with little chance
of being recovered and written off as a loss
balance sheet
a statement of assets liabilities and net equity
for an enterprise at a point of time
balloon payment
a large loan repayment to clear a debt
bank cheque
a cheque that draws money specifically from funds you own
that are held in a bank
bankruptcy
when a debtor has his/her estate placed into the hands of
a receiver who has the responsibility of its distribution
basic variable
a variable home loan at a reduced rate but generally with
fewer features than a standard variable loan
Baycorp Advantage
formerly Credit Reference Association of Australia - the body
which holds credit details on individuals and supplied to
suppliers of credit provided you have given written authority
bearer
person presenting a cheque to a bank
bill of sale
a written agreement whereby ownership is transferred but the
original owner is allowed to retain possession
body corporate
a corporation of the owner of units within a strata building.
They form a self-elected council for the management of the
building and common areas
bond
a sum of money paid by a tenant and held by the Rental Bond
Board to protect against losses from non-payment of rent and
damage done to the rental property.
break costs
costs incurred when a loan is paid off before the end of its
term. Generally applies to fixed loans
bridging finance
a loan that enables you to cover the purchase of a new property
when you are yet to sell your existing property, generally
a short period loan
building regulations
the standards formulated by local councils to control the
quality of buildings
boundary
a surveyed line separating adjoining properties
breach of contract
breaking the conditions of a contract.
- C -
capital
the current value of your long-term assets - 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 bought and sold after September 1985
capitalisation
when interest payable is accrued and added to the total debt
payable
capped loan
a loan where the interest rate is not allowed to exceed
a set level for a period of time but, unlike fixed rate loans,
is allowed to drop
caveat
the latin word for "beware" warns a prospective
purchaser of a property that a third party has some right
or interest in the property
caveat emptor
latin word for "let the buyer beware" this principle
of law requires the buyer to be satisfied with the item they
are purchasing "as is"
certificate of title
A document describing the land dimensions and ownership details
and any encumbrances on it.
chattels
chattels are personal property. There are two types. Real
chattels are buildings and fixtures, personal chattels are
clothes and furniture
cluster housing
detached group of houses which share open space.
combination loans
where various loans come under the same banner to form one
loan. May have a portion variable, fixed or even a portion
as a line of credit. Also known as split loans.
commission
a fee payable to the real estate agent by a vendor, for the
sale of property
common law title
see Old System Title
common property
an area used by many, not an individual. Owned by the tenants
in common (e.g. strata owners)
company title
a property title that applies when owners of units in a block
form a company
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
compound interest
interest that is paid on both the accumulated interest
as well as on the original principal
compulsory acquisition
(resumption) the power of a government authority
to purchase property from an owner without the owner agreeing
to sell.
construction loans
a loan specifically 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 conditions for
the purchase or sale of property
conveyancing
the legal process for the transferral of ownership of real
estate
countersigned
additional signature or signatures to guarantee the validity
of a document
covenant
terms and conditions that specify the usage of a block of
land or the buildings on it
cover note
a note of temporary property insurance before the implementation
of a formal policy
CRAA
(see Baycorp Advantage)
credit
borrowed money to be paid back under an arrangement with a
lender. Also, a sum of money paid into an account
credit limit
maximum amount the borrower can use at any one time
creditor
a party to whom money is owed
crossed cheque
a cheque with two parallel vertical lines across to specify
that the cheque must be paid into an account and cannot be
cashed
- D -
daily interest
interest calculated on a daily basis - therefore varies according
to daily account balance
debit
an account entry to charge a withdrawal to a specified account
debtor
someone who owes money to someone else
deed
a legal document that states an agreement or obligation regarding
a property
default
failure to meet debt payment on a due date
default rate
the rate of a loan rolls/moves to automatically at the end
of any fixed period
deposit
a deposit is normally paid by the buyer at the time of exchanging
contracts. It is normally between 5-10% of the total purchase
price.
deposit bonds
institutions providing deposit bonds act as guarantor that
payment of a deposit will be made by the purchaser of a property
by the due date. Often used when a cash deposit isn't readily
available.
disposable income
any income left over after all known expenses have been met,
e.g. living expenses, mortgage payments, credit card payments
draw down
to access available loan funds, especially referring to lines
of credit where the limit is set and you can use the funds
as required
dual occupancy
zoning of a property which allows two separate living arrangements
either attached or detached
- F-
features
any attributes associated with the loan e.g. redraw facility,
combination loan facility, portability
FID
(financial institutions duty) state duty on the receipt of
financial institutions
fittings
items that can be removed from a property without causing
damage to it
fixed interest
an interest rate set out for an agreed term
fixtures
these are 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. Examples are built in
cupboards, bath, toilets,etc.
freehold
the dwelling and the land on which it stands is owned by the
owner indefinitely
free standing
a dwelling/structure which stands independently of others
and is not adjoined to another structure
frozen account
an account in which all transactions have been suspended
- G -
garnishee
to legally divert part or whole of someone's money or property
to someone else
gearing
the ration of your own money and borrowed funds in an investment
giro post
a facility allowing you to conduct banking transactions through
the post office
guarantee
a promise made as bound by the terms of a contract
guarantor
a party who agrees to be responsible for the payment of another
party's debts
gazumping
a name given to the process where a purchaser who has an offer
accepted on a property looses the proposed purchase of the
property to another purchaser who offers a higher price, before
contracts are exchanged.
- H -
highest bid
the price offered by a bidder at auction. If the reserve price
is not reached and the property is passed in, the highest
bidder is given the first option to negotiate with the vendor.
holding deposit a refundable
deposit based on the goodwill of the buyer to go ahead with
the purchase

- I -
inclusions
items included with the property, e.g. light fittings, stoves
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 adjustment
when additional repayments are made on a fixed loan, an interest
adjustment cost is sometimes charged to compensate the lender
for loss of interest revenue
interest only
payments are made on the interest only, not the principal.
Generally loans roll over into principal and interest repayments
after the interest only term ends.
internal rate of return
a measure of the return on an investment (or loan) which takes
into account the time value of money by showing the rate of
interest at which the present value of future cash flows is
equal to the cost of the investment or loan
internet banking
when banking transactions such as transfers, payments and
often home loan applications can be made via the internet
introductory loan
a loan offered at a reduced rate for an introductory period
(usually no longer than 12 months) to new borrowers
inventory
a list of items included with the property, e.g. furniture,
moveable items.
- J -
joint tenants
equal holding of property between two or more persons. If
one party dies, their share passes to the survivors.
- L -
land
tax a State government tax charged to the
owners of any property over a stipulated value, unless it
is their principal place of residence.
land transfer
registration a State Government tax assessed on the
selling price of the property
lease
a document granting a period of tenancy of a property under
specific terms and conditions
liabilities
someone's debts or obligation
lien
the right to hold property as security against a debt or loan
line of credit
a flexible loan arrangement with a specified ceiling to be
used at a customer's discretion
loan security duty
mortgage stamp duty
loan to value ratio
(LVR) the ratio the ratio
of the amount lent to the valuation of the security property
lender's mortgage
insurance (LMI) insures the lender against
loss for the shortfall of funds on the sale of a property
(usually a mortgagee sale). The mortgage insurer will then
pursue the borrower for the shortfall. LMI premiums are usually
paid by the borrower for loans where the LVR is over 80% for
full document loans, or over 60% LVR for low-loc loans.
- M -
margin
this is the difference between the lender's interest indicator
rate (or other reference rate) and the rate actually charged
to borrowers.
maturity
the date a debt or investment must be paid in full
mortgage
a form of security for a loan usually taken over real estate.
The lender, the mortgagee, has the right to take the real
estate if the mortgagor fails to repay the loan
mortgagee
the lender of funds
mortgagor
the person or body borrowing money in the terms of a mortgage
mortgage broker
a person or organisation marketing numerous loans from a panel
of lenders.
mortgage discharge
fee an administration fee to cover the costs
(e.g. documents)
incurred in winding up a loan
mortgage insurance
(see lenders mortgage insurance)
mortgage manager
a company responsible for managing every facet of a borrower's
loan. Often sources loans from mortgage originators.
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 borrower's loan repayments in the event
they are not able to meet them through illness or redundancy.
mortgage registration
fee a State Government fee for the registration
of a mortgage.
- O -
off the plan
the purchase of a property, often an apartment, before it
has been completed
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
interest on your mortgage
Old System Title
(common law title) consists of a "chain' of the document
stretching back to the original owner.
ombudsman
the Australian Banking Industry Ombudsman (ABIO) provides
an avenue through which customers can make complaints about
their bank and have them dealt with independently.
ongoing fee
any loan maintenance fee charged regularly over the life of
a loan
option to buy
a legally binding document which gives a person, for a fee,
the right to buy something usually within a specific time
fame at a specific price
overdraft
a pre-arranged limit to which a person can exceed an account
balance
- P -
passed in
a property is 'passed in at auction if the highest bid fails
to meet the reserve price set by the vendor.
payee
the person or entity to which a cheque is payable
phone banking
when banking transactions such as transfers, payments
and deposits can be made over the phone, often by an automated
phone system
plan detail
illustration of a house that shows the internal layout and
dimensions and the position of the house on the land
portability
where a new property may be substituted as security for an
existing loan
principal
the capital sum borrowed on which interest is paid
principal and interest
loan a loan in which both the principal and
the interest are paid during the term of the loan
private sale
the sale of a property without an estate agent
private treaty
sale the sale of a property through an estate agent
where the price is set by the vendor and negotiated with the
buyer rather than an auction
progress payments
a lender pays instalments to a builder at the completion of
various stages of construction, as defined in the builder's
contract
property management
the management of finding a tenant for an investment property,
collecting the rent and organising the maintenance on behalf
of the owner.
- R -
rates
the amount charged by the local council or water authority
to provide services to a property.
redraw facility
a loan facility whereby you can make additional repayments
on your loan and then access these extra funds when required.
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 form 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.
repayment maximum/minimum the maximum or
minimum 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 a property
intended for investment purposes (for example, to be rented
out) as opposed to owner-occupied purposes
rise and fall clause
a building contract clause that allows the final pricing to
move up or down according to the fluctuations of material
prices or wages
- S-
search
an examination to confirm that a vendor is in a position to
sell a property and that there are no encumbrances on it
securitisation
the process of taking a pool of diverse assets such as different
home loans and converting them into a a single tradeable security
such as a bond which investors can then purchase and trade
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
semi-detached
two houses that share a common wall or walls
settlement date
date on which the new owner finalises payment and assumes
possession
signatory
a person authorised to utilise an account
sinking fund
an accumulating fund to which strata-owners contribute to
cover future maintenance, upgrades or repairs to the building
stamp duty on loan
amount a State government tax on mortgage
amount
stamp duty on lenders
mortgage insurance premium a
State Government tax on the premium paid for mortgage insurance
stamp duty on property
purchase a State Government tax on the purchase
price of a property
standard variable
a variable home loan usually with comprehensive features (as
opposed to a basic variable). This is often the variable rate
fixed rates roll into at the end of the fixed term.
stepped
a stepped account is one in which different amounts of interest
are paid on different portions of the account e.g. 2 percent
on the first $1,000 and 3 percent on the second $1,000.
strata title
this title gives you ownership of a 'unit' of a larger
building which you may sell, lease or transfer at your discretion.
Also entitles you to membership of the body corporate.
stratum title
a title that records your ownership of a 'unit' of a larger
property. Unlike a 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 dimensions and boundaries of, and the
position of buildings on, a block of land.
- T -
tenancy
the right to occupy land or buildings as provided by the terms
of a lease or other agreement.
tenants in common
the specified equal or unequal holding of property by two
or more persons. If one party dies, the property is divided
according to law (e.g. probate).
term
the agreed length in time that the loan may continue until
repaid.
term deposit
often called a fixed interest account. A type of savings account
where the size of the deposit, the interest rate and the length
of time the money is deposited for are all fixed.
terrace
one of a row of houses joined together with common walls
title fees
payable to the state 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
records your ownership of a piece of land. You are lawfully
entitled to lease, sell or dispose of the property as you
desire. Also known as Certificate of Title.
town house
usually a two storey dwelling registered under a strata title.
transaction fees
charges for any transactions conducted, i.e. withdrawals,
transfers, deposits
transfer
a document registered with the Land Titles Office that confirms
the change of ownership as noted on the Certificate of Title.

- U -
unencumbered
a property free of liabilities, encumbrances or restrictions
- V -
valuation
a report as required by the lender detailing a professional
opinion of the property value
variable interest
rate a rate that varies in
accordance with the rates in the marketplace
vendor
party who offers a property for sale
vendor statement
a statement by the seller to the buyer detailing material
particulars regarding the property in question.
villa
single-storey dwelling usually registered under strata or
community title.
- Z -
zoning
local authority guidelines as to the permitted uses of land.
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