Glossary of terms.
At refinance.center we like to ensure you know everything you need to about your home or investment loan, so we have provided you with the following glossary to help you understand the mortgage jargon. Of course, you can always call us if you need more information.
If this option is available on your home loan, it means that the money you have in your transaction account acts the same as if it was in your mortgage account – it reduces the balance of your loan on which interest is calculated, which in turn reduces your interest repayments allowing you to pay your loan off sooner.
Appraised value is the estimate of the value of a property which is being used as security for a loan.
A body corporate is the corporation controlled by the owners of units within a multiple occupancy building which manages the building and common areas.
The comparison rate helps you compare one loan with another so you know how much you will pay over the life of the loan. While the interest rate is a major component, it’s not only the cost. There are other fees and charges that affect the true cost of the loan. The comparison rate calculates fees associated with setting up the loan, such as establishment and service fees. It doesn't include government charges or early pay out fees.
Contract of sale
A contract of sale is the written agreement outlining terms and conditions for the sale of a property.
Conveyancing is the legal process for the transfer of ownership of real estate.
Cooling off period
This is a period of time, which may vary between 24 hours and 14 days from the time it is signed (depending on the type of contract), when you or your organisation can decide not to continue with a contract. Cooling off periods vary in each state of Australia .
A direct debit is an automatic funds transfer from one account to another. Your can set up a direct debit to make your home loan repayments.
Disbursements are the incidental costs incurred by a solicitor when acting for a client, e.g. searches, certificates, past records, etc.
Draw down refers to the transfer of money from a lending institution to the borrower before or after the loan has settled.
If this feature is available on your home loan, you can make extra repayments that will reduce your interest.
Equity indicates your financial interest in a property or business enterprise, e.g. your equity in your house is the difference between its value and the amount you owe on the house.
The fee charged when applying for a new home loan, payable on drawdown of funds.
Fixtures refers to items that would cause damage to a property if they are removed. If a seller wishes to remove fixtures this must be stated in the contract of sale and damage made good by the seller.
A guarantor is someone who agrees to be responsible for the payment of the loan if the borrower defaults or is unable to pay.
A holding deposit is an amount of money put into a bank account, or left with a person or company, to secure the purchase of an item.
The honeymoon period refers to the first year of a loan when the home loan interest rate is reduced.
Interest only loan
Interest only repayments only cover the interest owing on the loan, so none of the principal will be paid off. You can only request interest only repayments for a set term, usually up to 5 years, and at the end of this term the loan will automatically switch to principal and interest repayments for the remainder of the loan, and these repayments will be higher.
Line of credit
A line of credit is an amount of money that can be borrowed, but on which interest is only paid when some or all of the credit is assessed.
Loan to value ratio
Loan to value ratio (LVR) is the amount of your loan compared to the value of your property or asset purchased with the loan funds, expressed as a percentage. For example, a loan of $400,000 to buy a property worth $500,000 results in a loan to value ratio of 80%. Banks place a limit on the loan to value ratio depending on things such as the type of property, the location and the financial position of the borrower.
A mortgage is a legal document drawn up between a borrower and lender. It gives the lender a conditional right to the property held as security for the repayment of the money lent.
Mortgage insurance insures your lender against non-payment or default on a residential property loan. Mortgage insurance makes it possible for buyers to borrow up to 100% of a property’s value.
The mortgagee is the person or organisation who lends the money to purchase the goods or property.
The mortgagor is the person or organisation who borrows the money to purchase the goods or property.
If this feature is available on your home loan, you can choose to reduce your repayments by up to 50% for as long as 6 months when you have a child. Conditions apply.
If this feature is available on your home loan, you can take your home loan with you when you move to another property.
Principal is the amount of the loan upon which interest is calculated and charged.
If this feature is available on your home loan, you can make progress payments to builders as construction work is completed.
If this feature is available on your home loan, you can access overpaid funds in your home loan for any purpose at any time.
If this feature is available on your home loan, you can reduce your repayments by up to 50% for as long as 6 months during periods of large expenses or reduced income, such as extended holidays or renovations.
If this feature is available on your home loan and you have built up extra funds in your loan, you can stop making repayments for a while.
Security refers to the property the lender can claim if a borrower defaults on their loan. It is usually the property being purchased.
Serviceability refers to your capacity to make and meet repayments on a loan, based on your expenses and income.
Stamp duty is a state government tax paid for 'stamping' of legal documents. The amount varies according to the amount borrowed and the purchase price.
Strata title is a title which identifies the owner of a 'unit' of a larger building which they can sell, lease or transfer at their discretion. It also entitles the owner to be a member of the body corporate.
A title deed is a registration document showing who owns a property.
A title search is a search of records registered at the land titles office to confirm interests in a particular property. A title search shows interests such as proprietor, mortgagees and charges. The search also reveals any restrictive covenants and easements which affect the estate or interest.
Top up is a feature available on some home loans which lets you increase the limit on your existing loan.
The vendor is the person who offers a property for sale.