Sun, 2008-03-09 22:43
As with most industries the finance industry is filled with a lot of terms and references which can be confusing.
Many of the common terms used within the finance and banking industry are listed with a short explanation in this section.
Acceptance is when purchasers agree to the terms of an offer or contract of sale for a property.
Additional Loan Repayments, extra repayments or lump sum repayments can be made in addition to regular periodic repayments in most home loan products. Beware as some types of home loan products do not allow additional repayments, or place limits on any extra loan repayment amount.
Amortisation is the period of time a loan is calculated over and the term over which a loan is repaid.
Application Fees are charged by most lenders to process a home loan application. Some lenders may waive or reduce this fee for certain home loan products.
Approval in Principle is getting home loan finance approved by a lender before you have made an offer on a property, or even before you have started looking for a property. This allows you to look for properties safe in the knowledge that you can get home loan finance for the pre-approved amount, providing your circumstances have not changed and the property meets the lenders requirements.
Arrears are when repayments are overdue for a home loan payment. When applying for a home loan, the lender will want to know if borrowers have ever been in arrears on any other loans, especially home loans.
Assets are items of value that are owned. When applying for a home loan, lenders will want to know about assets such as real estate, bank accounts, shares, motor vehicles etc.
Average Annualised Percentage Rate (AAPR) is a calculated figure which takes into account the other costs associated with the loan etc, then expresses the result as an average interest rate, to create a method with which to compare like loan product interest rates. Also referred to as the Compulsory Comparison Rate.
Banker's Lien is right of a Bank to retain a customer's securities until a liability to the Bank is discharged.
Bankruptcy is a legal financial state an individual is in when unable to meet their debts . A debtor may be declared bankrupt by the Federal Court at either the debtors or the creditors instigation, and the debtors estate will be placed in the hands of an official receiver who will distribute the estate in accordance to the provisions of the Bankruptcy Act.
BayCorp used to be the company which records and holds credit information on everyone, such as previous loan applications, credit defaults etc. This was originally known as CRAA and still may often be referred to as a CRAA or CRAA Check. Today the company is known as Veda Advantage who can be found online atwww.mycreditfile.com.au
BBSW Australian Financial Markets Association Bank Bill Swap reference rate, BBSW.
Borrower is the person, persons, or entity borrowing money to purchase, payoff, or refinance a product or effect.
Borrowing Capacity is the total amount that may be theoretically borrowed once all income and outgo analysis has been considered for an applicant and then matched against the general lending policies for the available banks and lenders. The main contributing factor to a borrowing capacity result is the applicant’s ability to repay the home loan.
Break Costs are fees or penalties charged by a lender when a customer decides to end or break away from a fixed interest rate home loan before the end of the agreed fixed term.
Bridging Loan is a short term home loan designed to allow you to finance the purchase of a new property before a purchaser has sold an existing property. Bridging home loans are available with or without an end debt.
Building Inspection is an inspection carried out prior to purchasing a property, generally by a qualified builder, to check for any defects or problems in the building. A contract of sale can be made subject to a building inspection, allowing the purchaser to pull out of the contract if problems are found, or negotiate a new price.
Buyer's Agent is a company or person who acts on behalf of a buyer to find and negotiate on properties the buyer wishes to purchase.
Capital is the current value of a person or entities assets, including car, property, business, cash etc.
Capital Gain is the financial gain you get when you sell something for more than you bought it. Maybe subject to the capital gains tax, which is paid on the gained amount.
Capital Gains Tax is a federal tax payable on profits made from the sale of a variety of assets including investment properties. Assets purchased prior to 1985 are exempt. A principal place of residence used as an owner occupied dwelling providing it has never been rented out or used for business purposes is also exempt.
Capped Rate Home Loan is where the interest rate for a home loan is guaranteed not to rise above a certain percent, set as a maximum interest rate cap amount, but the rate may still reduce in the event of an interest rate drop. A capped rate period is normally 6 or 12 months.
Caveat is a notice of warning given to a public authority, e.g. Titles Office, claiming entitlement to an interest in certain land. The caveat is registered and remains on the books as a warning to anyone who contemplates dealing with the property. It therefore prevents any action being taken without the previous notice of the person entering the caveat, the caveator.
Certificate of Title is a document showing amongst other things the ownership of a property and whether there are any home loan mortgages on it.
Charge over property is the term used to describe any right established over a borrower's property to secure a debt or performance of an obligation.
Collateral is additional security or supporting security given in addition to the principal security.
Commission is generally a payment for providing a service or selling a product. Real Estate agents receive a commission from the vendor when they sell a property, while Mortgage Brokers receive a commission from a lender when they sell a home loan product.
Company home loan is where a registered company is the purchaser of property and the borrower is also the company. Most banks and home loan lenders represented by brokers are able to accommodate companies that are borrowing funds for a home loan.
Comparison Rates are similar to interest rates when comparing home loans, but give the consumer an indication of the overall cost of a loan. Comparison rates take into account the interest rate for the home loan, other fees and charges incurred during the life of the home loan, such as ongoing monthly account fees and application fees. For example, a home loan may be advertised with an interest rate of 6.99% and a comparison rate of 7.64%. Note that not all fees and charges are included in comparison rates for stamp duty is not included, and fees that are only incurred in certain circumstances such as redraw fees are not included. Some comparison rates are calculated differently such as over different loan terms and care should be taken that these other factors are taken into account. Comparing the total cost of comparable home loans in whole dollar
amounts, with all other factors equal is also an informative way of comparing home loans and how competitive they maybe.
Compulsory Comparison Rate or CCR is the figure expressed as an interest rate that takes into account some of the extra costs of a loan product. The formula used to calculate the CCR is regulated by the Uniform Consumer Credit Code (UCCC) and all Australian lenders are required to use the same formula.
COSL or Credit Ombudsman Service Limited was formerly known as MIOS (Mortgage Industry Ombudsman Service). COSL provides consumers with an alternative to legal proceedings for resolving disputes with Credit Ombudsman Members. The broad aim of the Credit Ombudsman Service is to provide an independent and prompt resolution of disputes in accordance with relevant legal requirements, the MFAA Code of Practice and other recognized Codes of Practice, good practice in the Credit Industry and fairness in all the circumstances.
Construction Loan is home loan finance for people building or renovating. The loan amount is generally drawn down progressively certain stages of construction are completed and builders invoices are received. A valuation of the work may be
required at each draw down stage.
Consumer Credit Code is legislation designed to protect the rights of an individual personal consumer by ensuring banks and other financial institutions all adhere to the same rules when providing personal, domestic or household credit. It should provide borrowers with complete and honest information. Also known as the Uniform Consumer Credit Code or UCCC.
Contract of Sale is an agreement between a vendor and a purchaser outlining the terms and conditions for the sale of a property. The contract will include the purchase price and any conditions such as subject to building inspection and subject to finance for example.
Conveyancing is the process generally undertaken by a solicitor or Conveyancing specialist of transferring property ownership after checking that the sale is legal and the transfer requirements are in order. Conveyancing costs including legal fees, title transfer fees and stamp duty all need to be considered when applying for a home loan.
Cover Note is a temporary property insurance cover used to protect a property prior to taking out a formal insurance policy. Cover notes are often taken out while a property is under contract, and a formal policy taken out when the property settles.
CRAA or Credit Reference Association of Australia was the company which used to record and hold credit information on everyone. Changed it's name to 'Credit Advantage Limited' and more recently BayCorp Ltd. Today the company is known as Veda Advantage who can be found online at www.mycreditfile.com.au
Credit Advantage Limited See CRAA above.
Credit History is always checked when applying for a loan. The lender will check credit history, including any previous loans and credit cards applied for, any history of bad debt or bankruptcy etc. They may also ask other questions such as whether the applicant has been in arrears on other home loans or whether they have exceeded a credit card limit.
CRS or Comparison Rate Schedule is the schedule displayed by a lender that give the annual percentage rate and the respective Comparison Rate, for the lender's loan products for specific amounts over specific terms.
Daily Interest is the interest on a loan calculated on a daily basis which can vary according to the daily account balance.
Debt Agreement is Part IX of the bankruptcy Act and is a method of coming to an arrangement with creditors of unsecured credit to repay the debt through an administrator and avoiding Bankruptcy.
Debtor is a person or entity who owes money to another and can be compelled to perform an obligation.
Deed is a document in writing which is signed sealed and delivered by the parties thereto to prove and testify the agreement of the parties whose deed it is, to the things contained in the deed. (Go figure that one!!)
Default is the failure of a borrower to meet the conditions of a home loan agreement. If the borrower defaults on their home loan, the lender may take possession of the property and sell it to cover the outstanding loan amount.
Deferred Establishment Fee is an establishment fee that is only payable if a home loan is repaid within the first few years, typically 3 to 5 years, of most loan products that incorporate a deferred establishment fee.
Deposit for a home loan is usually required when taking out a home loan. Generally a minimum deposit of 15 to 20% is required, which will mean the Loan to Value Ratio is 80 to 85%, or if lenders mortgage insurance is taken out you may only need a 5% deposit of non genuine savings or even as low as 3% of genuine savings. Some lenders offer no deposit home loans if you have proven cash flow and good credit history although these products may come at a slightly higher interest rate.
Deposit required at the time contracts are exchanged or at the latest before the 5 day cooling off period expires following exchange of contracts is normally 10% of the purchase price. Negotiations may reduce this amount to 5% of the purchase price in certain situations.
Deposit Bond is an insurance bond that can be purchased as a guarantee to the vendor that the sale will proceed or the deposit amount will be paid. Deposit Bonds can be usually arranged for a fraction of the full deposit amount following formal loan approval.
Depreciation is an 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 which allows the money to be retained by the business, thus technically allowing the business the capacity to replace the asset over time.
Direct Debit is where a creditor or lender debits (deducts) a payment from client's bank, credit union or building society account.
Discharge is when a home loan mortgage has been repaid in full. The borrower will receive a discharge document from the lender stating that the mortgage has been repaid.
Discharge Fee charged by the home loan lender to cover the administration costs of finalising and discharging a mortgage.
Discount Rate is a reduced interest rate offered usually for the first year of a home loan, after which the loan will revert to a standard rate.
Disbursements are solicitors incidental costs involved when dealing with client on behalf of a Lender, such as for searches, certificates pest reports, etc.
Dividend is a share from profits that is paid by a publicly listed company to a shareholder. Dividends are an income sources that can generally be used when applying for a home loan.
Draw Down is where money is transferred from lending institution to the borrower after the loan has settled.
DSR or Debt to Service Ratio is a figure that lenders use to determine an applicants ability to repay a home loan. Lenders use a variety of formulas to arrive at a DSR figure, but it is basically a percentage of income that will be used to service all debts.
Early Repayment Fee is a fee lenders and banks charge if a loan or mortgage is repaid early or within a specfic time frame following settlement of the loan. Commonly this term is 3 to 4 years. Caution! some lenders will restart the early repayment fee term if you renegotiate the loan or terms even after an initial ERP fee term has expired or there was no ERP condition previously
Encumbrance is a charge or liability such as a mortgage.
Equity in property is the price a property could be sold for less any amounts still owed on the mortgage. As the borrower pays off the home loan principal, equity in the property will increase. Rising property values will also increase equity.
Equity Home Loan is where an applicant borrows against the value of their house potentially up to 90% of the value, less any outstanding home loan amounts on the property, and the funds are then available for any personal use, similar to a personal loan but at a lower home loan interest rate. Lenders will often also describe line of credit loans as equity loans.
Establishment Fee is a fee charged by a lender to process a home loan application. Some lenders may waive or reduce this fee for certain home loan products.
Estate is an interest in land.
Exchange is the legal point in time when a vendor and the buyer swap documentation with a view to settlement.
Expenses are what a home loan applicant spends, including any loan repayments, credit card repayments, rent, insurance etc. Lenders will need to know monthly expenditure when considering a home loan application.
Fee Simple the estate in fee simple is the highest estate in the land, and it is the closest the law comes to recognising absolute ownership for all practical purposes. However, while we refer to a proprietor of an estate in fee simple (who is the owner for all practical purposes), their ownership is not legally absolute, for absolute legal ownership of all and rest with the Crown.
Fittings are items that can be removed from a property without causing damage to it such as carpet and curtains.
Finance Broking Contract is a contract that should be made available for all instances of consumer lending as detailed by the applicable state governing bodies. NSW office of Fair Trading has a brochure available for download that explains a finance broking contract in more detail.
Fixed Interest Rate is an interest rate set for an agreed term.
Fixtures are items that would cause damage to the property if removed such as ovens, baths sinks etc. Any fixtures removal must be stipulated in the contract of sale, and damage made good by the seller.
First Home Owners Grant or FHOG is a Federal Government subsidy which first home owners may be eligible to receive. The funds received from FHOG can be included in the settlement of your home loan.
Fixed Rate Home Loan is a home loan where the interest rate is fixed for a set period, ranging from 1 to 15 years. This means the home loan interest rate won't fluctuate as it does with a variable interest rate home loan. Generally, the longer a home loan is fixed, the higher the interest rate will be.
Formal Loan Approval is usually where a lender has finalised all required checks and is ready to officially offer the loan applicant a loan. Following formal loan approaval the loan offer or loan contracts are prepared and sent to the loan applicants for signing. Some lenders refer to formal apprval as unconditional loan approval.
Funding Position is a combination of calculations to establish the total amount of funds required to purchase a property. A funding position includes costs such as the purchase price, duties and taxes, legal costs, building and pest reports, deposit available, first home owners grant if available, cost of lenders mortgage insurance if required and home loan application fees etc.
Garnishee Order is a court order taken out by a creditor on a person's employer or banker for the deduction of funds from his wages or bank account to repay a debt.
General Law System is whereby all dealings on a property are made in the form of conveyances, whether the transaction is a sale, a mortgage, a reconveyance, etc. Under this system the mortgage is in fact a transfer of ownership. When a conveyance is prepared it forms part of the chain of title and must be carefully preserved in order to prove the "root? to title.
General Lien sets out in writing the Bank's right to retain property until a debt is paid. Includes Power of Attorney and other clauses generally contained in Bank security forms.
Government Fees are state and government charges at the time of settlement, e.g. stamp duty.
Gross Income is profit or income from a person or company, before tax, superannuation or payroll deductions.
Guarantor is a person who guarantee's to pay out a home loan for an applicant in the event they are not able to make the repayments. A lender may require someone to guarantee your loan as a guarantor if they would not be eligible for the loan in normal circumstances. Other home loan products are now available that limits the amount of exposure a Guarantor has to a home loan they are guaranteeing.
Holding Deposit is a refundable deposit based on the goodwill of the buyer to go ahead with the purchase.
Income is any earnings, including salary or wages, overtime payments, interest and dividends, rental income etc. Lenders will need to know all income when applying for a home loan.
Indemnity is security against damage or loss. A sum paid in compensation for loss incurred.
Instalment is a regular repayment that the borrower makes to pay off a home loan. These repayments will typically be made at monthly, fortnightly or weekly intervals.
Instrument is a formal legal document in writing such as a deed of conveyance.
Interest is a Lender's charge for the use of funds or the return on deposited funds.
Interest in Advance Payments are made to cover upcoming interest charges, usually on an investment home loan with interest only repayments.
Interest Only Repayments are made on home loans which only cover interest charges and no actual payments are made to reduce the principal home loan amount. This is generally only used for investment home loans, and the period of interest only payments is usually set from between 1 to 5 years.
Interest Rate is the rate as a percentage at which interest will be charged on a home loan. Interest rates vary between lenders and between various types of home loans. Interest rates change reasonably frequently due to competition between lenders and the economy, which in turn changes the required repayment amount. Most lenders offer home loan products allowing borrowers to set a fixed interest
rate if they desire.
Introductory Interest Rate is a reduced interest rate offered usually for the first year of a home loan, after which the home loan will revert to a standard rate.
Investment Home Loan is a usually a home loan taken out for the purpose of buying an investment property. Investment home loans often have features which would not normally be useful on an owner occupied home loan, such as making interest only payments or paying interest in advance.
Joint and Several Liability is the Bank's joint account authorities, guarantee forms, etc are framed to ensure that joint account holders with debts due to the Bank of joint guarantors liable to the Bank shall be severally liable, (i.e. individually), as well as jointly. With Joint and Several Liability a creditor has as many rights of action as there are debtors; he can sue them jointly or severally until he has obtained payment, and an unsatisfied judgment against one debtor will not be a bar to an action against the others.
Joint Tenancy is where property in the names of two or more persons, where all persons have an equal interest in the whole property. When one person dies his interest passes to the survivor(s). They are known as Joint Tenants or Joint Proprietors of that property.
LMI or lenders mortgage insurance protects the lender against potential losses should you default on your home loan, and the proceeds from the sale of the property not cover the remaining home loan amount. A lender will often require you to take out Mortgage Insurance if you wish to borrow more than 80% of the value of the property. It is usually a one off fee payable when the home loan settles.
Liabilities are debts and anything that is owed. When applying for a home loan, lenders will want to know about all liabilities such as existing home loans, personal loans, hire purchases, credit card limits etc.
Line of Credit is a home loan that allows borrowers to obtain funds and use those funds for any personal use. Repayments are usually very flexible, meaning repayments can be made whenever and for any amount, providing the credit limit is not exceeded. A line of credit home loan is usually ongoing, with no fixed term.
Loan is an advance of funds from a lender to a borrower on the agreement that the borrower pays interest on the loan, plus paying back the initial amount of the loan at or over an agreed time.
Loan Administration Fee is a monthly fee charged by a lender for maintaining and administering a home loan. Most lenders have a variety of home loan products, some with monthly fees and some without.
Loan Approval Fee is a fee charged by the lender to process a home loan application. Some lenders may waive or reduce this fee for certain products.
Loan Maintenance Fee is a monthly fee charged by a lender for maintaining and administering a home loan. Most lenders have a variety of home loan products, some with monthly fees and some without.
Low Deposit Home Loan is a home loan that can be applied for with less that the normal 15 to 20% deposit amount. Low deposit home loans normally require either 5% non genuine savings, this 5% can be a gift etc, or 3% genuine savings and the 3% generally needs to be proved as genuine savings by way of bank account statements etc demonstrating that the 3% has been saved over a period of time. Lenders Mortgage insurance is required for low deposit home loans.
Low Doc Home Loans are offered by some lenders to borrowers who lack the normal income statements or tax records to prove their income. Low doc home loans may be of use to people who are self employed or who have irregular cash flow. The lender will still require proof that the home loan can be serviced.
LVR or loan to value ratio is one of the figures used by lenders when appraising a home loan application. It is calculated by expressing the home loan amount as a percentage of the property value. For example, for a home loan application of $240000 on a property worth $300000, the LVR would be 80%. As a guide, most lenders will lend amounts up to 80% LVR, or higher with mortgage insurance - these figures will vary between lenders and between home loan products. An example of loan to value ratio, LVR at this finance broker website
Maturity is the date a debt or investment must be paid in full.
Mortgage is an agreement between a borrower and a lender, with the borrower providing security such as property for a home loan from the lender. If the borrower can not honour the mortgage agreement by meeting the home loan repayments for example, the lender may sell the security property to recover their costs.
Mortgage Insurance, or Lenders Mortgage Insurance, protects the lender against potential losses should you default on your home loan, and the proceeds from the sale of the property not cover the remaining home loan amount. A lender will often require you to take out Mortgage Insurance if you wish to borrow more than 80% of the value of the property. It is usually a one off fee payable when the home loan settles.
Mortgage Offset Account allows borrowers to offset the funds they have in an account against their home loan, which may have an effect of reducing the interest paid on a home loan i.e. if your home loan amount is $480000, and you currently have $8000 in your savings account, you theoretically only pay interest on $472000.
Mortgage Protection Insurance is insurance taken out by a borrower to ensure they have sufficient funds to meet their home loan repayments in the event of sickness or loss of job. Mortgage Protection Insurance can also be known as income insurance. If considering home loan Mortgage Protection Insurance you should seek independent and professional financial advice from your accountant or a financial planner.
Mortgage Registration Fee is a fee charged to register a mortgage with the State Government. Fees will vary from state to state. The fee will be part of the up front settlement costs of a loan along with stamp duty, transfer fees etc.
Mortgagee is the lender of money, with the home loan secured by the borrowers, mortgagors, property as agreed to in the mortgage document.
Mortgagor is the person who borrows money from a lending institution, the mortgagee, and provides property as security for a home loan, as agreed to in the mortgage document.
Negative Gearing occurs when home loan funds are borrowed for investment purposes such as to purchase an investment property, and the costs of the investment including interest charges exceed the returns from the investment. The loss may then be claimed as a tax deduction, depending on the circumstances of the investment - if considering negative gearing, ensure you seek independent and professional financial advice first.
Net Income is the income received by an individual after tax has been deducted.
Net Profit is the profit remaining in a business after all expenses have been taken out, but before tax has been calculated and deducted if required.
No Deposit Home Loan some lenders offer no deposit home loans, enabling purchasers to borrow 100% of the property value. With this type of home loan, an unblemished clean credit history and proof of good income and the ability to service the home loan is required. The interest rate for No Deposit Home Loans may also be higher than for a standard home loan.
No Doc Home Loans are similar to a low doc home loan, but require no proof of income. Instead the borrower will be required to sign an agreement certifying that they will be able to service the home loan. The maximum LVR with a No Document home loan is usually lower than most other home loans.
Non-conforming home loans are where the standard home loan criteria such as proof of employment, proof of income etc are not met. Low doc and no doc home loans can be described as non conforming home loans.
Off the Plan Purchase is buying a property from the plans only, not the finished product.
Ongoing Monthly Fee is monthly fee charged by a lender for maintaining and administering a home loan. Most lenders have a variety of home loan products, some with monthly fees and some without.
Pest Report is similar to a building report but carried out generally by a qualified person to check that the building is not infested and at risk of damage from any pests such as termites, white ants, rodents, borers etc.
Portable Home Loan allows a borrower to take a home loan from one property to the next without having to go through the full approval process. This can avoid some of the fees associated with setting up a home loan.
Power of Attorney is a written authorisation to another person, or persons, to perform certain acts for the signer, as if they were the signer.
Pre-approved Home Loan is getting finance approved by a lender before you have made an offer on a property, or even before you have begun looking for a property. This allows you to look for properties safe in the knowledge that you can get finance for the pre-approved amount, providing your circumstances have not changed and the property meets the lenders requirements.
Principal is the amount borrowed from a lender, upon which interest is charged. As home loan repayments are made the principal decreases.
Principal and Interest Loan or P and I is a loan in which both the principal and the interest are paid during the term of the loan as opposed to an interest only loan.
Professional Package is a discounted home loan package offered by many lenders to borrowers with a total home loan amount that is above a predetermined home loan amount. For example a bank may offer a 0.5% discount off a home loan amount over $150000 and 0.6% discount over $350000 home loan amounts and 0.7% discount off home loan amounts over $750000.
Progress Draws are draw downs on a construction home loan made when payments to the builder are due. As construction proceeds, a builder will require payment when certain stages are met, at which time the borrower draws down a portion of the home loan, until construction is finished and the final draw down occurs.
Property is a person's or entities property and is "what is he or she owns to do what they like with." It may be tangible or intangible, and may be given a monetary value such as a house, car or goodwill. Property may be classed 'real' which relates to land or interests in land (except leaseholds) and buildings, etc or 'personal', which relates to other kinds of property such as cars, bank accounts, leasehold interests in land.
Rate Lock is where home loan applicants applying for a fived interest rate home loan take the option of locking in the current interest rate to avoid increases to the interest rate that may occur prior to settlement of the loan. Most lenders charge an additional fee to rate lock a fixed interest rate. Most lenders aloow for the interest rate to lower if rates fall but avoid further interest rate increases which may occur prior to settlement.
Redraw Facility is found on many home loan products, and allows you to redraw funds from your home loan that you have paid in advance. For instance, if you have been making extra repayments on your home loan and are $20000 in advance with your repayments, with a redraw facility you would be able to take up to the $20000 out of your home loan. Restrictions may apply and you may be charged a fee for redrawing.
Refinance is when a home loan is taken out and some or all of the funds are used to pay off another existing home loan. The new home loan may or may not be with the same lender. Refinancing is often used to access built up equity in a property, or simply to move to a cheaper home loan.
Relocation loan is similar to a bridging loan.
Repayment frequency is the frequency with which you make your home loan repayments. You will normally have a choice of making weekly, fortnightly or monthly repayments, depending on the lender and the home loan product.
Reverse Mortgage home loans are aimed at seniors. Reverse mortgages or equity release home loans allow the borrower to take out a mortgage against their property and not make any repayments until the property is sold, or the borrowers move from the home, or the borrowers are deceased.
Search is an examination to confirm that the vendor is in a position to sell the property and that there are no encumbrances on the property.
Securitisation is the packaging of cash flow producing assets into a marketable security, e.g. property, roads, bridges, etc. The process where mortgage backed securities (in the form of bonds) are sold directly into the capital markets. Investors in the bonds comprise of Superannuation funds as well as other major institutions.
Security is assets that will be required to secure a home loan. On most standard home loans, the security will be the property being purchased. In some circumstances more than one property may be required to secure a home loan.
Settlement Date is the date on which the funds from your home loan are distributed. If you are purchasing a property this is the date at which the vendor will be paid and you are able take possession of the property. Payments of fees such as stamp duty and mortgage registration is also required on the settlement date.
Settlement is finalisation of payment by the new owner, and assumption of possession. When you pick up the keys and begin unpacking all those boxes!
Serviceability is a calculation that lenders use to determine an applicants ability to repay a given home loan. Lenders use a variety of formulas to arrive at a serviceability figure, but it is basically a percentage of income that will be used to service all liabilities. Most lenders and even home loan products have differing policies on the percentages of income type’s and the amounts that are acceptable.
Surety is a person who makes themself responsible for another's payment of debt, also knows as the guarantor.
Split Home Loan is where certain lenders allow you to split your home loan into a fixed interest rate component and a variable interest rate component for example, giving the borrower a combination of the security of a fixed interest rate home loan and the flexibility of a variable interest rate home loan.
Stamp Duty concessions, waivers or discounts are available in certain circumstances such as for first home buyers. The amount of the concession will vary from State to State.
Stamp Duty on a home loan is a State Government tax paid on the home loan amount. It will vary from State to State, and may be discounted in certain circumstances such as for first home buyers. Some state governments have begun abolishing mortgage stamp duty altogether.
Stamp Duty on property is a State Government tax paid on the value of the property. It will vary from State to State, and may be discounted in certain circumstances such as for first home buyers.
Survey is precise plan of a property, showing the positioning of the property boundaries easements, services running through the property and any building on the land. A surveyor can use the plan to check the boundaries of a property
prior to purchase.
Tenants in Common is property in the names of two or more persons and in which each has a separate and distinct share. When one person dies his share is not passed to the survivor(s) but becomes part of his estate for disposal according to his will.
Term or duration of a home loan, a term of 25 or 30 years is fairly standard and 40 years is an option. Home loan terms will also often be referred to as a number of months for example a 30 year home loan can be expressed as 360 months.
Third Party Security is security provided for a mortgage by a third party (some one different from actual borrowers) who is legally different from the borrower or debtor.
Title Deed is a registration showing the ownership of property.
Title Search is a search of the State Government's Titles database that is undertaken by the legal representative of a borrower purchasing a property. The search will provide details of who owns the property, as well as who has an interest in the property such as any lender who holds a mortgage over the property.
Title Transfer Fee is a State fee charged when you purchase a property, and covers the transfer of the title deed for that property.
Torrens System is a system whereby ownership and all dealings on a property are detailed on the one document, i.e. a Certificate of Title or Deed of Grant. Under this system a mortgage is a charge or encumbrance on the title. Registrations is compulsory to effect legal transfer of an interest in property and each time the property is sold, mortgaged, or a mortgage discharged, the transaction is recorded on the Certificate of Title.
Trust home loan is where a trust is the purchaser of property and the borrower is also the trust. Most banks and home loan lenders represented by brokers are able to accommodate trusts that are borrowing funds for a home trust loan.
Uncommitted Income is the net income that is available once all expenses are deducted. Expenses may include home loan repayments, personal loan repayments, credit card repayments and any other payments or general living expenses. Most lenders will require that applicants have a certain level of uncommitted income before they offer a loan.
Uniform Consumer Credit Code, UCCC is legislation designed to protect the rights of an individual personal consumer by ensuring banks and other financial institutions all adhere to the same rules when providing personal, domestic or household credit. It should provide borrowers with complete and honest information.
Unconditional Loan Approval is usually where a lender has finalised all required checks and is ready to officially offer the loan applicant a loan. Following formal loan approaval the loan offer or loan contracts are prepared and sent to the loan applicants for signing. Some lenders refer to formal apprval as formal loan approval.
Unencumbered is property free of liabilities, restrictions or mortgages.
Upfront Costs are the various fees and charges that a required when a home loan settles, including stamp duty, legal fees, mortgage registration fees etc.
Valuation is a report that outlines the value of a property and how the figure was reached. When purchasing a property, the lender will require a valuation from a valuer before approving the home loan. The borrower is often responsible for paying the valuation fee, even if the home loan does not proceed.
Variable Rate Home Loan is a home loan where the interest rate varies with fluctuations in the mortgage market and changes in official interest rates by the Reserve Bank of Australia. As the interest rate changes, so do the minimum repayment obligations.
Variation is changing any part of an original loan contract.
Vendor is a person selling any property who is the current owner.