Z

Zoning

Local government authority guidelines as to the permitted uses of land and buildings on that land

V

Valuation

A report required by the lender detailing a professional opinion of a property’s value

Valuation fee

A fee which may be charged if the lender seeks to cover the cost of valuing the property taken as security for the loan

Variable interest rate

A rate that varies in accordance with the money market rates

Variation

A change to any part of a loan contract

Veda Advantage

Australian credit files are held by Veda Advantage Limited

Vendor

The party who offers a property for sale

U

Unencumbered

A property free of liabilities, encumbrances or restrictions

Underwriting

The process of analysing a loan application to determine the amount of risk involved in making the loan. It includes a review of the potential borrower’s credit history and a judgment of the property’s value.

Uniform consumer credit code (UCCC)

Legislation to ensure uniformity amongst all credit providers across Australia.

T

Tenants in Common

The equal or unequal holding of property by two or more persons. If one party dies the share of the property forms part of the estate rather than passing to the other tenant/tenants.

Term

The length of a home loan or a specific portion within that loan. The term is usually written in months.

Title Deed

A document disclosing the legal description and ownership of a property.

Title Fees

Fees payable to the State Titles Office for title search, transfer or property ownership, registration of the new mortgage and/or discharge of an old mortgage

S

Security

An asset that guarantees the lender their loan until the loan is repaid in full. Usually the property is offered to secure the loan.

Service Fee

Usually a monthly fee levied by the lender to cover costs of administering and maintaining the loan account.

Settlement Date

A date on which the new owner finalises payment and assumes possession of a property.

Settlement Period

A period after contracts exchange and before the settlement date. This period allows the buyer time to organise finance, if needed, and to conduct searches surveys and other formalities. The settlement period usually lasts six to eight weeks, depending on a range of factors, including the state.

Split Loan

A combination of loan types forming one loan, such as a partial fixed/variable interest rate loan.

Stamp Duty

State Government tax assessed on the selling price of the property. Each state has different rules and calculations.

Standard Variable Rate

The rate which lenders apply to their “premium” home loan product. Carries features such as a redraw facility, portability, salary account and mortgage offset.

R

Real Property

Land, with or without improvements (e.g. a house).

Redraw Facility

Allows you to make additional repayments on your mortgage, and then have access to the additional repayments if you need to. It is important to understand the conditions attached to the redraw facility as they can include a minimum amount and a fee for every time you use it.

Redraw Fee

Fee charged to cover or partially cover the lender’s internal costs of allowing the borrower to redraw money from repayments.

Refinancing

Replace or extend an existing loan with funds from the same institution or another lender.

Reserve Price

A specified minimum price acceptable to a seller at auction.

P

Passed In

A property is “passed in” at auction if the highest bid fails to meet the reserve price set by the vendor.

Pre-Approve

Lender commits to lend to a potential borrower. Commitment remains as long as the borrower still meets the qualification requirements at the time of purchase.

Prepayment

Any amount paid to reduce the principal of the loan before the due date, or any amount in addition to the minimum repayment. May be subject to a prepayment penalty.

Pre-Qualify

A lender informally determines the maximum amount an individual is eligible to borrow.

Principal

A capital sum borrowed from a lender on which interest is paid (doesn’t include the interest or additional fees).

Principal and Interest Loan

A loan in which both the principal and the interest are repaid during the term of the loan.

O

Offset Account/Mortgage Offset

Helps reduce interest costs on a loan by linking the loan to a transaction or deposit account. The balance in the transaction account ‘offsets’ the loan principal. Interest is then calculated on the loan principal minus the balance in the account. For example, if the principal on the loan is $180,000 and there is $5000 in the transaction account, then interest is only calculated on $175,000.

Official Cash Rate

The Official Cash Rate is the interest rate set by the Reserve Bank of Australia and used to influence the general level of interest rates in banking and the economy. Changes to the cash rate, also termed “official interest rates”, usually flow on to variable home loan, personal loan and credit card rates within weeks.

Origination Fee

A fee for originating the loan charged by the lender. Also called an application fee.

Overdraft

A pre-arranged limit to which a person can exceed an account balance.

N

Negative Gearing

Where the return on an investment is insufficient to meet the interest costs of the loan used to fund the investment. This amount can usually be claimed as a tax deduction

Net Income

Gross income less expenses, including taxes and insurance, but before depreciation, or distribution of earnings

Non-Conforming Loans

Loans that cater for those who can’t meet the standard income verification and credit history criteria that mainstream lenders like banks and Mortgage originators use for ordinary borrowers.

M

Margin

The difference between the lender’s interest indicator rate (or other reference rate) and the rate actually charged to borrowers

Maturity

The date by which a debt or investment must be paid in full.

MFAA

Mortgage & Finance Association Australia

Monthly Service Fee

A fee which may be payable each month on a loan account. The fee varies depending on the type of loan.

Mortgage

A document which creates a security interest over a property to a creditor as security for a loan.

Mortgagor

A person who gives a Mortgage. For example, a borrower who provides a mortgage over their house as security for a loan is a mortgagor.