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Finance Glossary

Glossary of lending terms

Want to know what that finance word or phrase actually means? Our comprehensive glossary gives you an A to Z of terms and their meanings.

AAPR: The average annual percentage rate (AAPR) is also known as the 'true rate or mortgage comparison rate. It wraps up interest payments and fees and expresses all these costs in one rate. It is designed to reflect the total annual cost to a borrower of a loan. All lenders must disclose this benchmark rate in their advertising of home loans and personal loans from July 2003. In Australia, the AAPR is officially called the 'Comparison Rate'.
Accelerated Payment: The option to make higher repayments to pay off the home loan faster.
Acceptance: to agree to the terms of an offer or contract.
Account-Keeping Fees: fees charged to cover or partially cover the lender's internal costs of administering the home loan.
Accrued Interest: interest you have earned or incurred that is yet to be paid or charged.
Additional Securities: an asset that guarantees the lender their loan until the home loan is repaid in full. Usually the residential or investment property is offered to secure the loan.
Additional Repayment: extra funds paid into the loan in addition to the minimum monthly or weekly payments. These extra funds reduce the term of the home loan and the interest paid.
Adjustments: the process of allocating expenses e.g. council rates, water rates, etc.
Agent: person or body authorised to act on behalf of a Customer in the sale.
Allotment: a block of land created (subdivided) out of a larger area.
Amenity: a feature of the home or property that serves as a benefit to the buyer but that is not necessary to its use; may be natural (like location, parks, water) or man-made (like a swimming pool or garden).
Amortisation Period: repayment of a mortgage loan through regular installments of principal and interest; the regular monthly payment amount is based on a schedule that will allow you to own your home at the end of a specific time period (for example, 15 or 30 years). Often known as the home loan term.
Application Form: the first step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the credit approval process.
Application Fees: fees charged to cover or partially cover the lender's internal costs of setting up a loan.
Appraisal: a document that gives an estimate of a property's fair market value; an appraisal is generally required by a lender before loan approval to ensure that the home loan amount is not more than the value of the property.
Appreciation: the increase in the value of a property caused by economic factors.
Arrears: an overdue account yet to be paid.
ARM: Adjustable Rate Mortgage; see Variable Rate Mortgage.
Assets: money, property (goods owned) or anything that is of value.
Asset lender: lending institution that lends finance based on the value of the asset, which is held as security.
Assignment: legal reference of a right or a title to a property, to another party.
At Call: a bank account from which money can be withdrawn immediately.
Auction: public sale of property with new ownership going to the highest bidder.

Balance Sheet: A statement of net assets, liabilities and equity.
Balloon Payment: A large loan repayment usually at the end of the loan term.
Bank Account Debits Tax (BAD): State or Territory government tax (except ACT) on withdrawals from accounts on which a cheque may be drawn.
Bank Cheque: A cheque on which the drawer is a bank or other finance institution drawing on itself; no individual or company name appears. The Customer buys the cheque for cash and a small fee and uses it in the same way as cash.
Banker's Lien: The right of a Bank to retain a Customer's securities until a liability to a Bank is discharged.
Lender's Opinion: Enquiries made from one Lender to another to check on a Customer's reliability or credit worthiness.
Bankruptcy: When a debtor has his/her estate placed into the hands of a receiver who has the responsibility for its distribution.
Basic or 'no frills' loans: Many lenders offer a class of home loan which has a lower variable interest rate than their standard variable rate loan. The trade off is that these discount loans generally have less flexibility and fewer features, eg. no extra repayments can be made, the repayment level cannot be varied or no redraw is available.
Basic Rate: Applied to loans commonly called 'No Frills Loans' which are generally cheaper than Standard Variable Rate Loans but do not have features such as a redraw facility or mortgage offset.
Bearer: Person presenting a cheque.
Bill of Sale: A written agreement whereby ownership is transferred but the original owner is allowed to retain possession.
Body Corporate: A corporation of the owners of units within a strata building. They form a self-elected council for the management of the building and common areas.
Borrower: A person, person, or entity borrowing money to purchase, pay off or refinance a product or effect.
Boundary: The line separating adjoining properties.
Breach of Contract: Breaking the conditions of a contract.
Break Costs: Relates to the penalty fees charged when a borrower terminates a fixed-rate loan contract before the expiry of the fixed-rate period.
Bridging Finance: A short-term home 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: 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 the 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.
Building society: Institutions operating in a similar fashion to banks. Customers are 'members'.
Buyers Agent: Person who acts on behalf of the buyer to find and negotiate on properties the buyer wishes to purchase.

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: the current value of your long-term assets.
Capped Loan: loan where the interest rate is not allowed to exceed a set level for a period of time, but unlike fixed rate loans, can fall.
Caveat: Latin for "beware". A notice of warning given to a public authority, eg: 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 thereby prevents any action being taken without the previous notice of the person entering the caveat (the caveator).
Caveat Emptor: Latin for "let the buyer beware".
Certificate of Title: A document 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: are personal property. There are two types. Real chattels are buildings and fixtures. Personal chattels are clothes and furniture.
Clear title: A seller has a clear title when there are no restrictions (such as an outstanding mortgage) preventing the sale, and when ownership of the seller has been established.
Cluster Housing: Group of houses that share common space.
Collateral Security: Additional or supporting security given in addition to the principal security.
Commission: Fee payable to a real estate agent for services.
Comparison rate: All lenders must disclose a benchmark comparison rate in their advertising of home loans and personal loans since July 2003. 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).
Consumer Credit Code: An Act of Parliament governing the relationship between borrowers and lenders. The legislation is designed to protect the rights of the individual by ensuring finance institutions all adhere to the same rules when providing personal, domestic or household credit. It should provide borrowers with complete and honest information.
Contract of Sale: A written legally enforceable agreement outlining the terms and conditions for the purchase or sale of property.
Conveyance: The transfer of ownership of property from the seller's name to the buyer's name.
Conveyancing: The legal process for the transfer of ownership of real estate.
Cover note: A guarantee of temporary property insurance before the implementation of a formal policy.
Company Title: A property title that applies when owners of units in a block form a company.
Compound interest: Interest that is paid on both the accumulated interest as well as on the original principal.
Consumer Credit Code: An Act of Parliament governing the relationship between borrowers and lenders. The legislation is designed to protect the rights of the individual by ensuring finance institutions all adhere to the same rules when providing personal, domestic or household credit. It should provide borrowers with complete and honest information.
Conveyance: The transfer of ownership of property from the seller's name to the buyer's name.
Conveyancing: The legal process for the transfer of ownership of real estate.
Countersigned: Additional signature or signatures to guarantee the validity of a document.
Covenant: Terms and conditions that specify the usage of a block of land or the buildings on it.
Cover note: A guarantee of temporary property insurance before the implementation of a formal policy.
Credit: Borrowed money or other finance (eg. Hire purchase) to be paid back under an arrangement with a lender.
Credit History: history of an individual's debt payment; lenders use this information to gouge a potential borrower's ability to repay a loan.
Credit Limit: maximum amount a borrower can use at any one time.
Credit Reference Limited: (previously called Credit Reference Association of Australia or CRAA) holds details of the credit history of all Australians.
Credit union: A cooperative which operates similarly to a bank, but is owned and controlled by people who use its services.
Creditor: A party to whom money is owed.
CRAA: The company which records and holds credit information on everyone. CRAA is now known as 'Credit Advantage Limited'.

Daily Interest: Interest calculated on a daily basis - therefore varies according to daily account balance.
Debt-to-income ratio: a comparison of gross income to expenses.
Debit: An account entry to charge a withdrawal to a specified account.
Debtor: Someone who owes money to someone else.
Deed: Legal document that states an agreement or obligation regarding a property.
Default: Failure to meet debt payment on a due date. A failure to make loan payments (defaulting on a loan) may result in the mortgage holder taking legal action to repossess the mortgaged property.
Delinquency: failure of a borrower to make timely mortgage payments 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.
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 a 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 payments from a Customer's nominated bank/building society 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 (eg. loan payments, bills, other commitments).
Down payment: 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 home loan funds, might refer to a staged loan for property constructions, or lines of credit where the limit is set and the borrower can use the funds as required or the act of transferring money from lending institution to the borrower after the loan has settled.
DSR: Debt Service Ratio - 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.
Duty (or Stamp Duty): State Government tax on finance transactions. For the purchase of real estate, it is calculated according to the property value. It also applies to the amount of the mortgage and the amount differs form state to state.

Early Termination Payment: The cost of winding up a home loan early. These costs should be detailed in the loan contract.
Easement: A right to use a corridor or passage of land which is owned by another.
Electronic Funds Transfer (EFT): Electronic transfer of funds from one account to another.
Encumbrance: An outstanding liability or charge on a property.
Endorse: To sign the back of a cheque to confirm or transfer its ownership to someone else.
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 house) which you own.
Equity: The part of something - asset, house or company - which you own. You also have equity in that part of the value of your house above the amount borrowed from the lender which has the mortgage over your house. (Assets - Liabilities = Equity)
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 enquiries with a view to settlement.
Exit Fee: Fee imposed by lenders when the loan is paid off before the end of it's term.

Fee Simple: Private ownership of real estate in which the owner has the right to control, use, and transfer the property at will.
Fair market value: the hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with complete knowledge of the situation.
Finance Institutions Duty (FID): State duty on the receipts of finance institutions.
First Home Owners Grant: The First Home Owners Grant is a grant from the Federal Government which is available to first home buyers that meet criteria as compensation for the increased cost of housing after implementation of the Goods and Services Tax (GST) on 1 July 2000.
Fittings: Items that can be removed from a property without causing damage to it (e.g.: Carpets & Curtains).
Fixed Interest: An interest rate set for an agreed term regardless of any variations in the market.
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).
Flood insurance: Insurance that protects homeowners against losses from a flood; if a home is located in a flood plain, the lender will require flood insurance before approving a loan.
Foreclosure: a legal process in which mortgaged property is sold to pay the loan of the defaulting borrower.
Freehold: The dwelling and the land on which it stands is owned by the owner until they choose to sell.
Frozen Account: An account in which all transactions have been suspended.

Garnishee: To legally divert a part or whole of someone's money or property to someone else.
Garnishee Order: 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.
Gearing: Ratio of your own money and borrowed funds in an investment.
General Law System: The system whereby
General Lien: The lender's right to retain property until a debt is paid. Includes Poser of Attorney and other clauses generally contained in Lender security forms.
GST: Goods and Services Tax.
Government Charges: State and government charges at the time of settlement, e.g. stamp duty
Gross Income: Income from a person or company, before tax, superannuation, or payroll deductions.
Guarantee: A promise made as bound by the terms of a contract.
Guarantor: A party who agrees to be responsible for the payment of another party's debts should it default.

High Start Loan: A home loan where the initial repayments are high and decrease over the term of the loan.
Highest Bid: The top price offered by a bidder at auction. If the reserve price is not reached and the property is passed in.
Holding Deposit: A refundable deposit demonstrating the goodwill of the buyer to go ahead with the purchase.
Home Equity: The value of a homeowner's unencumbered interest in their property(s). Equity is the difference between the home's fair market value and the unpaid balance of the mortgage and any outstanding debt over the home. Equity changes as the mortgage is paid or as the property appreciates or depreciates.
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 homebuyer 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 result in someone's injury or property damage.
Honeymoon Rates: "Honeymoon" or introductory rates are offered to entice borrowers with a low advertised rate that may be as much as 2 percentage points below the standard home loan rate and therefore look very attractive. The rate can be fixed, capped or variable for the first six to 12 months of the loan. Then they automatically revert to the standard rate offered by that lender.

Inclusions: Items included with the property e.g. light fittings.
Income Statement: A statement of income and expenditure for a period.
Indemnity: Security against damage or loss; sum paid in compensation for loss incurred.
Index: Measurement used by lenders to determine changes to the Interest rate charged on an variable rate mortgage.
Inflation: A sustained increase in the general level of prices so that a given amount of money buys less and less. (e.g.: The number of dollars in circulation exceeds the amount of goods and services available for purchase; inflation results in a decrease in the dollar's value.)
Instalment: The regular periodic payment that a borrower agrees to make to the lender.
Instrument: Formal legal document in writing, e.g. a deed of conveyance.
Insurance: Protection against a specific loss over a period of time that is secured by the payment of a regularly scheduled premium.
Interest: The lending body's charge for the use of funds or the return on deposited funds. See also daily interest.
Interest Only Loan: A home loan where the principal is paid back at the end of the term and only interest is paid during the term. The loans are usually for a short term of one to five years.
Interest Rate: The amount of interest charged on a monthly loan payment; usually expressed as a percentage.
Internal Rate of Return: A measure of the return on an investment (or loan) which takes into account the time value of money by showing the rate of interest at which the present value of future cash flows is equal to the cost of the investment or loan.
Introductory Loan: A home loan or investment loan is offered at a reduced rate for an introductory period (usually 6 to 12 months) to new borrowers. Also called a discounted or honeymoon rate.
Inventory: A list of items included with a property e.g. furniture.
Investment Loan: A loan acquired to purchase an investment property. Typically investment loan interest rates are similar to standard home loan rates. As with home loans, you are requires you to pledge your investment property 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.
Investment Property: A property purchased for the sole purpose of earning a return on the investment, either in the form of rent or capital gain. The owner cannot live in the property.

Joint and Several Liability: 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 Tenants: Equal holding of property between two or more persons. If one party dies the property passes to the survivors.
Judgment: A legal decision; when requiring debt repayment, a judgment may include a property lien that secures the creditor's claim by providing a collateral source.

Land Tax: A State Government tax charged to the owners of any property over a stipulated value.
Lease: A document granting a period of tenancy of a property under specific terms and conditions.
Liabilities: Someone's debts or obligations.
Lien: The right to hold property as security against a debt or loan.
Line of Credit: A flexible loan arrangement with a specified ceiling to be used at a Customer's discretion secured by equity in the home or investment property..
Loan Pre-approval: The loan is approved before the borrower bids on or offers for the property.
Loan to Valuation Ratio (LVR): the ratio of the amount lent to the valuation of the security (usually the house).
Low Start Loan: A home loan where the initial repayments are low and increase over time.
'Low doc' loans: Low-doc or low documentation loans are structured for the self-employed who don't have the documentation required to get traditional home loans. The interest rate can be higher than the standard variable rate although the gap is narrowing. Other types of non-conforming loans are also on the rise to cater for people with riskier borrowing profiles. They accordingly pay higher interest rates. Both types of low-doc loans generally carry a requirement for mortgage insurance, adding to their cost.
Legal Fee: May be charged where an outside party is used to prepare Lender documentation.
LMI: L.M.I. is Lenders Mortgage Insurance. It's a one-off payment by the borrower to the lender to insure the loan. It's usually required when a loan amount is higher than a lender's acceptable L.V.R. which is usually around 80% of the property's value. L.M.I. insures the lender for the full amount of a loan in case a borrower defaults.
Loan: Money borrowed that is usually repaid with interest.
Loan Fraud: Purposely giving incorrect information on a loan application in order to better qualify for a loan; may result in civil liability or criminal penalties.
Lock-in: Interest rates can change frequently, so many lenders offer an interest rate lock-in that guarantees a specific interest rate if the loan is closed within a specific time.
Loss mitigation: A process to avoid foreclosure; the lender tries to help a borrower who has been unable to make loan payments and is in danger of defaulting on his or her loan.
Low Doc/No Doc Loan: A low doc loan is an abbreviation for low documentation loan and is a type of loan that is granted to individuals or businesses that have a smaller amount of finance documentation like pay slips, bank account records. A Low doc loan often attracts some type of interest rate loading because of the slightly riskier nature for the lender.
(LTV) Loan-to-Value Ratio: see LVR.
Lump sum repayments: Additional ad hoc repayments, made over and above your minimum repayment requirement.
LVR: This is the general term for the Loan to Value ratio. This measure is used to determine the percentage of the equity in a mortgage against the value of the security. eg. If a house is worth $500,000, and the mortgage over the property is $350,000 then the LVR is 70.00%. Typically, lenders consider 80% as the point at which Mortgage Insurance is required. (LVR is sometimes referred to as LTV.)

Margin: The difference between the lender's interest indicator rate (or other reference rate) and the rate actually charged to borrowers.
Margin Lending: Margin Lending enables investors to borrow against their existing assets (e.g. cash, share holdings etc) to invest in more shares.
Maturity: The date a debt or investment must be paid in full.
Maximum Loan Amount: The maximum amount that can be borrowed based on an applicants' disposable income, deposit, and the purchase price of the property.
Maximum Loan Value Ratio (LVR): maximum loan to valuation. This means the amount you can borrow expressed as a percentage of the valuation of the security (usually the property you are buying).
Maximum Term: The maximum length of a home loan or a specific portion within that loan. (normally 25 or 30 years).
Median: The median is the 'midpoint' when a set of values are arranged in ascending order. eg. if the numbers were 1,1,3,4,5,6,7,7,7,7,8 the median would be 6, whereas the average is 5.09.
Minimum Fixed Amount: The minimum amount that can be borrowed at a fixed rate of interest.
Minimum Loan Amount: The minimum amount that can be borrowed.
Minimum Lump Sum Payment: The minimum amount that can be repaid as a lump sum.
Minimum Redraw Amount: The minimum amount that can be redrawn from a loan.
Minimum Repayment: The amount you are contractually obliged to repay each month, in order to repay your loan within the agreed term.
Monthly Fees: The fees charged to cover or partially cover the lender's internal costs of administering the loan each month.
Mortgage Offset: Non-interest earning account that is offset against a home loan to reduce the total interest payable.
Mortgage: A form of security for a loan usually taken over real estate.
Mortgagee: The creditor or lender in a mortgage agreement.
Mortgage Insurance: Some lenders may provide up to 97% of funds for a loan if you agree to take out mortgage insurance . This figure is a one off payment usually made at the time of settlement. The figure is not easy to calculate being based on variables such as the loan amount, the value of your property and the exact LVR (i.e. the figure between 80% & 95%). This payment allows the lender to recoup the unpaid principal in the event of default and the borrower's debt is transferred to the Mortgage Insurer.
Mortgagor: The person borrowing money under the terms of a mortgage.
Margin: an amount the lender adds to an index to determine the interest rate on an adjustable rate mortgage.
Mortgage Broker: A company or person that originates loans for a number of lenders.
Mortgage Manager: Mortgage managers are lending specialists who arrange funding for home and investment loans. Unlike banks, building societies and credit unions, mortgage managers do not have a base of Customer deposits with which to fund their loans. Instead they source their funds via a process known as securitisation.
Mortgage Offset Account: A savings account run in conjunction with a home loan. The interest earned on the account is applied to reduce the interest paid on the loan. A 100% offset is where the interest rates earned and paid are the same. A partial offset account is where the interest earned on the offset account is only a portion of the rate paid on the home loan.
Mortgage Originator: Originators initiate or generate mortgage applications for the mortgage trust. Put simply, they 'pool' a group of mortgages which can then be sold on to investors as an income producing asset. Originators are responsible for receiving applications for finance, assessing credit and monitoring the transaction through to settlement. They may then appoint a mortgage manager or may take on the management role themselves.
Mortgage Payment: A regularly scheduled payment that usually includes both principal and interest.
Mortgage Protection Insurance: See Mortgage Insurance.
Mortgage Registration Fee: State Government charge for the registration of a loan.

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.
Non-conforming loans: Non-conforming finance refers to loans that cater for those who can't meet the standard income verification and credit history criteria mainstream lenders like banks and mortgage originators use for ordinary borrowers. Such borrowers include those who are self-employed, have a poor credit record or who have recently arrived in Australia. Non-conforming loans are usually at higher interest rates to reflect higher risk of these borrowers. the Non -conforming finance is also called 'sub-prime lending'.

Offer: Indication by a potential buyer of willingness to purchase a home at a specific price; generally put forth in writing.
Origination: The process of preparing, submitting, and evaluating a loan application; generally includes a credit check, verification of employment, and a property valuation.
Origination fee: A fee for originating the loan charged by the lender. Can also be called an application fee.
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", flow on to variable home loan, personal loan and credit card rates within weeks.
Offset account/Mortgage offset: Offset accounts can help reduce your tax bill by offsetting taxable income from deposit accounts against interest paid in after tax dollars on mortgage repayments. However, not all offset accounts are equal, with many not paying the same interest as you are charged on your mortgage.
Offer to Purchase: A legal agreement that details a specific price for the purchase of a specific property.
Offset Account: A savings account linked to your mortgage in such a way that the interest earned on your savings is applied to reduce the interest on your mortgage.
Old System Title: (common law title) details the 'chain' of the title documents stretching back to the original owner.
Option to Buy: Legally binding document which gives a person first right of refusal on a property etc.
Overdraft: Pre-arranged limit to which a person can exceed an account balance.

Passed In: Property is 'passed in' at auction if the highest bid fails to meet the reserve price set by the vendor.
payee: the person or entity to which a cheque is payable.
plan: detailed illustration of a house that shows the internal layout and dimensions and the position of the house on the land.
Portability or Portable Loan: A portable home loan allows you to sell your house and move to a new one without having to refinance. This saves application and legal fees. Most lenders however insist that the home loan amount is the same or less. It is important to know the terms of your loan.
Pre-approval: 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.
Premium: Amount paid on a regular schedule by a policyholder that maintains insurance coverage.
Prepayment: Any amount paid to reduce the principal balance 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 and Interest Loan: Loan in which both the principal and the interest are repaid during the term of the loan.
Principal: Capital sum borrowed from a lender on which interest is paid (doesn't include the interest or additional fees).
Private Sale: the sale of a property without an estate agent.
Private Treaty: A private property sale where the buyer negotiates on a price set by the seller.

Real Estate Agent: A person who is licensed to negotiate and arrange real estate sales.
Real Property: Land, with or without improvements (eg. a house).
Re-amortise: To recalculate the minimum repayment required to repay the outstanding balance of your loan over the remaining period (typically relevant when loan balance has changed substantially from the original amount).
Redraw Facility: 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.
Refinancing: Replace or extend an existing loan with funds from the same institution or another lender.
Rent Purchase: Designed to assist low to moderate-income homebuyers to purchase a home by allowing them to lease a home with an option to buy; the rent payment is made up of the monthly rental payment plus an additional amount that is credited to an account for use as a down payment.
Requisitions on title: Process by which the buyer requests additional information about the title of the property from the seller.
Reserve Price: Specified minimum price acceptable to a seller at auction.
Right of Way: A person's right to cross other property or a general pathway across your land.
Rise and Fall Clause: Building contract clause that allows the final pricing to move up or down according to the fluctuations of material prices or wages.

Search: an examination or research usually carried out on the purchaser's and lender's behalf prior to settlement to confirm that a vendor is in a position to sell a property and that there are no encumbrances on it.
Securitization: This is a process whereby assets (such as mortgages) with an income stream are pooled and converted into saleable securities. These assets are purchased and packaged into low risk negotiable securities such as bonds and then issued to investors.
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.
Semi-detached: Two houses that share a common wall or walls.
Service Fee: Usually a monthly fee levied by the Lender to cover cost of administering & maintaining the loan account i.e. fixed and variable costs such as staff, IT software / hardware.
Settlement Date: Date on which the new owner finalises payment and assumes possession.
Settlement Period: Period after contracts exchange and before settlement date. Allows the buyer time to organise finance if that is needed and to conduct searches, surveys and other formalities, The settlement period usually lasts about six to eight weeks, depending on a range of factors, including the state.
Signatory: A person authorised to utilise an account.
Solicitors Mortgages / Finance: Mortgages / finance offered through solicitors' firms.
Split Loan: A combination of loan types forming one loan, such as a partial fixed/variable interest rate loan. Typically, different types of interest are paid on different portions of the account. e.g. fixed rate and variable rate.
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.
Strata Title: A strata title is the most common title associated with town houses and home units and is evidence of ownership of a unit, which is called a 'lot', in a strata plan. Of the entire building, individuals each own a small portion (such as a unit or townhouse) but where there is common property (external walls, windows, roof, driveways, foyers, fences, lawns and gardens) which all owners share.
Sub-prime lending: 'Sub-prime lending', also called 'non-conforming' loans, refers to loans that cater for those who can't meet the standard income verification and credit history criteria mainstream lenders like banks and mortgage originators use for ordinary borrowers. Such borrowers include those who have a poor credit record or who have recently arrived in Australia. Non-conforming loans are generally at higher interest rates.
Survey: Plan that shows the boundaries of a property and the positioning of any buildings on that property.
Switching Fee: The lender may impose a switching fee where an existing borrower wishes to change from one loan type to another e.g. Variable Rate Loan to Fixed Rate Loan.

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 Deposit: Often called a fixed interest account - a type of savings account where the interest rate is fixed for a set period of time.
Term: The length of a home loan or a specific portion within that loan. The term is usually written in months, rather than years.
Third Party Guarantee: Use someone else's property as security - where someone else has agreed to offer their property as additional security for a loan.
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.
Title Search: A check of public records to ensure that the vendor has the right to sell and transfer ownership.
Torrens Title: Records your ownership of a piece of property. You are lawfully entitled to lease it.
Town House: Usually a two storey dwelling registered under a strata title.
Transfer: A document registered with the Land Titles Office that confirms the change of ownership as noted on the Certificate of Title.

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 value.
Uniform Consumer Credit Code (UCCC): The Uniform Consumer Credit Code is legislation to ensure uniformity amongst all credit providers across all Australian states. For example, all loan contracts must now adhere to a uniform format as specified by the act. It must set out all fees and charges that the borrower (and, if required, guarantor) are liable for under the loan contract.

Valuation: A report required by the lender detailing a professional opinion of a property's value.
Valuation Fee: Fee which may be charged if the lender seeks to cover the cost of valuing the property taken as security for the home 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.
Vendor Statement: A statement by the seller to the buyer detailing material particulars regarding the property in question.
Vendor: The party who offers a property for sale.
Villa: single storey attached dwelling.

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

X Inc Finance - Mortgage and Finance Definitions

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X Inc Finance - Mortgage and Finance Definitions

Finance Glossary

Glossary of lending terms

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