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Application Fee
A once-off fee paid to the lender for setting up a home loan. It’s also called an establishment fee, up-front fees or start-up fees and is usually non-refundable.
Arrears
Amounts of money that are overdue after missing one or more required payment.
Assets
An asset is anything a person or company owns that has value such as real estate, superannuation, savings accounts, vehicles, personal items, etc
Basis Points
Unit of measure for interest rates. One basis point equals 0.01% interest so 25 basis points equals 0.25%.
Bridging Finance
A short-term loan that covers the financial gap between the buying your new home and selling your old one.
Budget
An estimation of your income and expenses over a specified period of time. Usually reviewed on an annual basis.
Capital Gains
The profit you make when you sell your property for more than you paid for it. If it’s an investment property, that gain counts towards your assessable income and you will need to pay Capital Gains Tax.
Certificate of Title
Legal record about a piece of land including the location, dimensions, current ownership and what can be done on or with the land.
Comparison Rate
A rate that is calculated by adding together the interest rate plus any additional fees and charges so that you can understand the true cost of your loan. It also helps to compare loans from different lenders, particularly as some may offer a lower rate but include higher fees (and vice versa).
Note: The criteria for comparison rates was set in 2003. Advertised comparison rates are based on a $150,000 loan over a 25-year term, so they may not accurately reflect your loan. It’s important to look at your actual rate and fees on the loan to understand the truest cost.
Conditional Loan
(also called Pre-Approval)
Letter from a lender stating how much you could borrow, pending specific conditions are met.
Construction Loan
Loan specifically for financing a new real estate build or renovation.
Conveyancing
Legal work to transfer the title of a property from one person to the other.
Credit Limit
The maximum amount you can borrow under your home loan contract
Credit Reference or Credit Report
Report submitted to lender that shows the credit history of loan applicants.
Daily Interest
Sum of loan balance multiplied by interest rate and then divided by 365 days.
Deposit
Your initial contribution to the purchase price of a property.
Depreciation
Tax deduction claimed for the natural wear and tear of an income-producing building and its assets over time.
Equity
The difference between the market value of your property and the balance of your home loan.
Equity Loan
Type of loan in which the borrower uses the equity of his or her home as collateral.
First Home Buyer Grant (FHOG)
The First Home Owner Grant (FHOG) scheme was introduced on 1 July 2000 to offset the effect of the GST on home ownership. It is a national scheme funded by the states and territories and administered under their own legislation.
Under the scheme, a one-off grant is payable to first home owners that satisfy all the eligibility criteria.
Fixed Interest Rate
Loan where your interest rate is fixed for a certain period, typically between one and ten years.
Funds to Complete
The total amount of money you need to buy your property or complete the transaction. This can include the deposit plus fees such as stamp duty, legal and bank fees.
Guarantor
Person who helps the borrower obtain finance by Person who agrees to be responsible for the home loan debt of another person.
Lender
A person or organisation who lends money with the expectation that the funds will be repaid.
Interest Only
Loan where you only pay the interest portion of the loan for a set period.
Introductory (Honeymoon) Rate
Special, low interest rate offered for a specified period of a loan, usually the first twelve months
Lenders Mortgage Insurance (LMI)
A form of insurance that protects the lender in the event that you default on your home loan and there’s a shortfall. LMI is typically required when a borrowers home loan deposit is less than 20% of your property’s value.
Loan to Valuation Ratio (LVR)
Percentage of money you borrow for a home loan compared to the value of the property.
Low Documentation (Low Doc) Loan
Loans available for self-employed workers or applicants who may not be able to provide traditional proof of income like regular pay slips.
Mortgage
Loan from a bank or or other financial institution that helps a borrower purchase a home. The lender (mortgagee) uses the home as security and can take it from the borrower if they fail to repay the loan.
Mortgagee
A bank or financial institution that lends a borrower funds to purchase real estate.
Mortgagor
A person who borrows money from a lender in order to purchase real estate.
Non-conforming Loans
Loans for borrowers who don’t meet the standard lending criteria of their lender (e.g. a person with no credit history)
Offset Account
A transactional account linked to your home loan. The money in your account offsets the loan balance, helping to reduce the interest paid and term of the loan.
Principal
The amount a person borrows from a lender.
Principal & Interest (P&I)
A loan in which both principal and interest are paid with each repayment during the term of the loan.
Redraw Facility
Allows you to redraw any additional home loan repayments you have made when necessary.
Refinance
Switching your existing loan to a different lender or changing your loan product, usually to get a better interest rate or conditions.
Security / Secured Loan
Property being purchased is offered as security for the loan.
Settlement
Process for transferring ownership of a property from the seller to the buyer.
Stamp Duty
Amount of tax you will pay on a property purchase.
Standard Variable Loan
Loan where the interest rate fluctuates over the term of the loan.
Title Search
Research of public records to determine who legally owns the property and find out any other encumbrances affecting the land.
Unencumbered
A property free of encumbrances (mortgages) or restrictions
Unsecured Loan
A loan in which no property is held as security, generally attracting a higher rate of interest due to increased risk on the part of the lender
Valuation
An estimation of the value of the property prepared by an independent valuer.
Variable Interest Rate
Loan where the interest rate fluctuates over the term of the loan.
Vendor
The person selling their property.
