First Home Loans Finance Appendix – L
L
- Land Tax
- A State Government tax charged to the owners of any property over a stipulated value.
- Liabilities
- Someone’s debts or obligations.
- Line of Credit
- A fully functional transaction account that has a credit limit attached to it. The borrower can generally withdraw funds at any time, up to the credit (or facility) limit. (If the credit limit is attached to more than one account, the borrower may only be able to draw up to the account limit on each account.) There is usually no fixed repayment schedule; however, the borrower is usually required to make payments to at least cover the interest and fees on the loan.
- Lenders Mortgage Insurance (LMI)
- Lenders Mortgage Insurance. A one off payment by the borrower to the lender to insure the loan. nsurance taken out by the lender to protect itself from default by the borrower. Generally required for Home loans with a Loan to Value Ratio (LVR) above 80%.
- Loan to Valuation Ratio (LVR)
- The total amount of the loan divided by the appraised value of the property. For example, if a property is valued at $300,000 and the loan amount is $240,000 then the LVR is 80%.
- Low-Doc Loans
- A loan process generally for self-employed people who do not have the standard financial statements required to obtain a loan.
- Lump Sum Repayment
- An extra repayment made to a loan, outside of the scheduled repayments.
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First Home Loans Finance Appendix – J
J
- Joint Tenants
- Equal holding of property between two or more persons. If one party dies, the property passes to the survivors
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First Home Loans Finance Appendix – I
I
- Income Statement
- A statement of income and expenditure for a period.
- Indemnity
- Security against damage or loss; sum paid in compensation for loss incurred.
- Inflation
- A sustained increase in the general level of prices so that a given amount of money buys less and less. The number of dollars in circulation exceeds the amount of goods and services available for purchase, resulting in a decrease in the dollar’s value.
- Installment
- The regular periodic payment that a borrower agrees to make to the lender.
- Interest Only Loan
- The borrower only has to pay the interest that is accrued on the loan and no principal payments for a specified time period.
- Interest Rate
- The amount of interest charged on a monthly loan payment. Usually expressed as a percentage.
- Introductory Rate
- A low interest rate offered at the start of a loan. At the end of the specified time period the interest rate converts to a standard rate.
- Investment Loan
- Loans used for investment purposes, such as the purchase of an investment property.
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First Home Loans Finance Appendix – H
H
- Home Equity Loan
- A home equity loan gives you a revolving line of credit secured by the equity in your house. This allows you to use the funds for any other purpose, such as the purchase of a second property, shares or other investments. The interest rate is generally higher than a standard variable rate, and these accounts are not suitable for everyone
- Home Inspection
- An examination of the structure and mechanical systems to determine a home’s safety. Makes the potential home buyer aware of any repairs that may be needed.
- Home Loan
- A Home Loan requires you to pledge your home as the lender’s security for repayment of your loan. The lender agrees to hold the title or deed to your property until you have paid back your loan plus interest.
- Home & Contents Insurance
- An insurance policy that combines protection against damage to a dwelling and its contents with protection against claims of negligence, i.e. inappropriate action that results in someone’s injury or property damage
- Honeymoon Rates
- “Honeymoon” or introductory rates are a low interest rate offered at the start of a loan. At the end of the specified time period the interest rate converts to a standard variable rate.
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First Home Loans Finance Appendix – G
G
- Gearing
- Ratio of your own money and borrowed funds in an investment.
- Gross Income
- Income from a person or company, before tax, superannuation or payroll deductions.
- Guarantee
- A promise by a third party to meet a borrower’s payment obligations if they are unable to pay.
- Guarantor
- A party who agrees to be responsible for the payment of another party’s debts, should it default.
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First Home Loans Finance Appendix – F
F
- FBAA
- Finance Brokers Association Australia.
- First Home Owners Grant
- A grant from the Federal and State Governments. It was introduced as compensation for the increased cost of housing after implementation of the Goods and Services Tax (GST) on 1 July 2000. It’s only for buyers that have not previously bought property in Australia.
- Fittings
- Items not intended to be removed from a property when it’s sold, for example fixed carpets, lights, curtains and stoves.
- Fixed Interest
- An interest rate set for a fixed term. Penalties may apply if the loan is paid out or additional repayments made before the term expires.
- Fixed-Rate Mortgage
- A fixed interest rate that applies to a loan for a set term. Both the interest rate and loan repayments are fixed for the agreed term, regardless of any interest rate variations in the Home Loan market
- Fixtures
- 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 (e.g. carpets , stoves, dishwashers etc)
- Foreclosure
- A legal process in which mortgaged property is sold to pay the loan of a defaulting borrower.
- Freehold
- The dwelling and the land on which it stands is owned by the owner until they choose to sell.
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First Home Loans Finance Appendix – E
E
- Early Termination Payment
- The cost applied when paying out a loan early.
- Electronic Funds Transfer (EFT)
- Electronic transfer of funds from one account to another.
- Encumbrance
- An outstanding liability or charge on a property.
- Equity
- The portion of something – asset, house or company – which you own. Equity is the difference between the market value and the current amount of money still owing on the loan, ie Assets – Liabilities = Equity.
- Equity Finance Mortgage
- An Equity Finance Mortgage (EFM) is a type of Home Loan that effectively boosts your potential borrowing capacity by anything up to 25%.
- Equity Loan
- A loan usually secured by the proportion of the value of your house which you own.
- Equity Mortgage
- A loan secured by the part of the value of an asset (usually a house) which you own.
- Escrow
- Money, property, a deed or a bond put into the custody of a third party for delivery to a grantee only after the specified conditions are fulfilled.
- Establishment Fees
- Lending body fees which may or may not be charged to set up a loan.
- Estate
- The whole of one’s possessions, especially all the property and debts left by one at death.
- Exchange of Contracts (or Exchange)
- The legal point of time when the vendor and purchaser swap documentation and start inquiries with a view to settlement.
- Exit Fee
- A fee imposed by some lenders when the loan is paid off before the end of it’s term. Fees most generally apply to fixed rate loans.
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First Home Loans Finance Appendix – D
D
- Daily Interest
- Interest calculated on a daily basis therefore varies according to daily account balance.
- Debt Service Ratio (DSR)
- Maximum of a loan applicant’s weekly, fortnightly or monthly wage which will support loan repayments over the agreed loan term. Usually expressed as a percentage.
- Debt-to-Income Ratio
- A comparison of gross income to expenses.
- Deed
- A legal document that states an agreement or obligation relating to a property.
- Default
- Failure to meet debt repayment by a due date. A failure to make loan repayments may result in the mortgagor taking legal action to repossess the mortgaged property. Defaults can be registered against you for non repayment of any bill such as Telecommunications, Utilities companies, etc.
- Delinquency
- Failure of a borrower to make timely mortgage repayments under a loan agreement.
- Deposit
- A deposit is normally paid by the buyer at the time of exchanging contracts. Normally a minimum of 5 – 10% of the total purchase price is required, but a 20% deposit would be recommended if possible.
- Deposit Bonds
- A guarantee that the purchaser of a property will pay the full deposit by the due date. Institutions providing deposit bonds act as guarantor that payment will be made.
- Depreciation
- The periodic cost assigned for the reduction in usefulness and value of a long term tangible asset.
- Direct Debit
- Regular electronic debiting of funds from a customer’s nominated cheque or savings account.
- Disbursements
- Miscellaneous fees and charges incurred during the conveyancing process, including search fees and charges paid to government authorities.
- Discharge Fees
- An administration fee to cover the costs incurred in finalising a loan account.
- Discharge of Mortgage
- A document signed by the lender and given to the borrower when a Mortgage Loan has been repaid in full.
- Disposable Income
- Any income left over after all known expenses have been met (e.g. Home Loan repayments, bills, other commitments)
- Downpayment
- The portion of a home’s purchase price that is paid in cash and is not part of the Mortgage Loan
- Draw Down
- To access available loan funds.
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First Home Loans Finance Appendix – C
C
- Capital
- The current value of your long-term assets.
- 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 (excluding your primary residence) bought and sold after September 1985.
- Capital Growth
- The positive increase in value of an asset or investment ie the difference between the current value and the original purchase price.
- Capitalised Interest
- Interest payments which are added to the principal of the loan.
- Capped Loan
- A loan where the interest rate is not allowed to exceed a set level for a period of time. Unlike fixed-rate loans, the interest rate is allowed to drop.
- Caveat
- Latin for “beware”. A notice of warning given to a public authority. Usually a caveat is in the form of a contract clause that stipulates a particular requirement.
- Certificate of Title
- A document that details the land dimensions and identifies the ownership of land. It shows who owns the land and whether there are any mortgages or other restrictions on it. This document (if issued) is usually held by the lender as security for a loan.
- Charge
- The term used to describe any right established over a borrower’s property to secure a debt or performance of an obligation.
- Chattels
- Personal property. There are two types. Real chattels are buildings and fixtures, while personal chattels are clothes and furniture.
- Cluster Housing
- A group of houses that share common space.
- Collateral Security
- Additional or supporting security given in addition to the principal security.
- Commission
- The fee payable to an “agent” for services.
- Company Title
- A property title that applies when owners of units in a block form a company.
- Comparison Rate
- Since July 2003, all lenders must disclose a benchmark comparison rate in their advertising of Home Loans and personal loans. This comparison rate is designed to reflect the total annual cost to a borrower of a loan. It wraps up interest payments and fees and expresses all these costs in one rate, or the average annual percentage rate (AAPR).
- Compound Interest
- Interest that is paid on both the accumulated interest and the original principal.
- Consumer Credit Code
- An Act of Australian Parliament governing the relationship between borrowers and lenders. The legislation is designed to protect the rights of the individual by ensuring finance institutions adhere to the same rules when providing personal, domestic or household credit.
- Contract of Sale
- A written, legally enforceable agreement outlining the terms and conditions for the purchase or sale of a property.
- Conveyance
- The transfer of ownership of a property from the seller’s name to the buyer’s name.
- Conveyancing
- The legal process for the transfer of ownership of real estate.
- COSL
- Credit Ombudsman Service Limited.
- Covenant
- Terms and conditions that specify the usage of a block of land or the buildings on the land.
- Cover Note
- A guarantee of temporary insurance before the implementation of a formal policy
- Credit History
- A history of an individual’s debt repayment. Lenders use this information to gauge a potential borrower’s ability to repay a loan.
- Credit Limit
- The maximum amount of credit the borrower can use at any one time.
- CRAA
- CRAA is a term often used by Brokers and Lenders. CRAA became “Credit Advantage Limited”, then Baycorp Advantage and then Veda Advantage and My Credit File. Veda Advantage is the company which records and holds credit information on everyone in Australia.
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First Home Loans Finance Appendix – B
B
- Body corporate
- All the unit owners within a strata building. The owners elect a council responsible for the management of the building and it’s common areas.
- Bridging Loans
- A short-term loan often used to cover a finance gap between the purchase of a new property and the sale of an old property. Higher interest rates are usually charged for this form of finance.
- Building inspection
- An inspection generally carried out prior to the purchase of a property to ensure the building is structurally sound. Contracts of sale can be made subject to a satisfactory building inspection.
- Building Regulations
- Rules of a legal or statutory nature by which local councils control the manner and quality of buildings. They are designed to ensure public safety, health and minimum acceptable standards of construction.
- Buyers’ Agent
- Person who acts on behalf of the buyer to find and negotiate on properties the buyer wishes to purchase.
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