Loan Jargon

- 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.