100% 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 $5,000 in the transaction account, then interest is only calculated on $175,000.

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Acceptance

Usually, acceptance of an offer, according to the terms of the offer, creates an enforceable agreement or contract.

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Agent

A person authorized to act on behalf of another person in the sale, purchase, letting or management of the property. A real estate agent must be licensed by the relevant authority in their State.

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Allotment

When a larger area of land is subdivided into smaller pieces, these smaller parcels of land are known as allotments. Also referred to as a "lot", "building block" or "block of land".

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Amenity

Is a characteristic or feature of a neighborhood.

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Amortisation

Paying off the principal and interest, on a loan over a period of time (Loan Term), usually by installments.

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Application fee

A fee paid by a borrower for setting up a loan.

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Appreciation

The increase in the value of property caused by economic factors like inflation, or an excess of demand over supply for that property type.

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Auction

A public sale in which property (or an article) is sold to the highest bidder.

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Basis points

One basis point equals 0.01% interest. For example, 25 basis points equals 0.25%.

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Battleaxe

A block of land shaped like an axe, where the handle is in the approach. Generally situated between other blocks, thus having no apparent street frontage.

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Beam

A horizontal load-bearing structural member.

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Bearer

A sub-floor timber supporting the floor joists.

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Body Corporate

All of the owners collectively of the common property in a block of units. The council of the Body Corporate, which is elected by the members, meets regularly to discuss various matters relating to the administration of the building (for example, upkeep of common property).

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Bond

A sum of money paid by a tenant and held by the Rental Bond Board to protect against losses from non-payment of rent and damage done to the rental property.

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Boundary

A line separating adjoining properties.

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Breach of contract

Breaking the conditions of a contract.

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Brick Veneer Construction

In housing, a system in which a structural timber frame is tied to a single brick external wall.

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Bridging Finance

Short-term finance, which is used as a 'bridge' before securing long-term finance or selling a property.

 

Building Regulations

Rules of a legal or statutory nature by which local councils control the manner and quality of the building. They are designed to ensure public safety, health and minimum acceptable standards of construction.

 

Cashback

If you have made additional repayments on your loan, you may be able to access these through  Cashback service.

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Caveat

"Beware" – if a caveat is lodged on a title to land, it warns a person buying the property that a third party (party which lodged the caveat) has some right or interest in the property.

 

Caveat Emptor

"Let the Buyer Beware" - This principle of law requires the buyer to be satisfied with the item they wish to buy before buying. The buyer purchases the property "as is".

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Certificate of Title

A document identifying the ownership of land. It shows who owns it and whether there are any mortgages or other encumbrances on it.

 

Chattels

Property other than real estate. Moveable possessions which may be included in a sale, for example. furniture.

Clear Title A vendor has a clear title when there are no interests (like an outstanding mortgage) on the vendor’s title.

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Cluster Housing

Detached group of houses which share open space.

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Commission

A fee or payment made to a real estate agent for services successfully rendered (for example, someone who hires an agent to sell his/her home pays the agent a commission when the home is sold).

 

Common Area

An area which is available for use by more than one person (for example, home units have common areas like stairs, driveways, store rooms).

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Common Law Title

Usually referred to as "old system title", it consists of a series of title documents called "a chain of title". A title is clear only if every document in the chain is available and complete. Legal costs of acting on a purchase of Old System Title land are higher than on a purchase of Torrens Title land, because making a thorough investigation of the chain of title can be complicated and time consuming. Old System Title may be converted to Torrens Title, and is often automatically converted to Torrens Title following a sale.

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Comparison Rate

A rate that includes both the interest rate and most fees and charges payable during the life of the loan, expressed as a single percentage figure. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included and may influence the cost of the loan.

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Compulsory Acquisition (resumption)

The power of a government authority to purchase property from an owner without the owner agreeing to sell.

 

Contract of Sale

A document which sets out the terms and conditions of sale between the vendor and the purchaser (referred to as "Contract").

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Conveyance

The transfer of ownership of property from the vendor’s name to the buyer’s name.

 

Conveyancer

A third party hired by the buyer/seller to represent them to facilitate the conveyancing process.

 

Covenant

An agreement noted on the title to property requiring the property owner to adhere to certain terms, conditions or restrictions regarding a property. The nature of any covenant over a property should always be established before you enter into a contract to purchase the property.

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Cover Note

A document issued by an insurance company to temporarily insure a property until a formal policy is issued.

 

Credit limit (or facility limit)

The maximum loan amount that a borrower can borrow under their home loan contract.

 

Credit reference or Credit report

A report, prepared by an authorised credit reporting agency, that shows the credit history of a borrower. A lender needs permission from the borrower to obtain a credit report.

 

Deed

A formal document including special signing requirements recording an agreement, obligation or conveyance of property.

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Deposit

A deposit is normally paid by the buyer at the time of exchanging contracts. It is normally between 5-10% of the total purchase price.

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Deposit Guarantee

 substitute for a cash deposit to assist with the purchase of a property. The buyer is required to pay the full purchase price at settlement.

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Drawdown Date

The first time the borrower uses the loan funds, for example, to pay the vendor.

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Dual Occupancy

A block of land or existing dwelling which is zoned in a way which allows the owner to erect a building which has two distinct living arrangements (for example, a duplex or a house with a granny flat attached).

 

Duplex

A two-storey block of apartments with one apartment covering each floor.

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Economic costs (or break costs)

A fee which may be payable if, during a fixed rate period, the borrower makes certain changes such as switching the loan from a fixed to variable rate or fully prepaying the loan prior to the expiry of the fixed rate period. The economic cost is the lender’s estimate of its loss resulting from the change.

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Equity

The amount of an asset that is owned (eg. the value of the property less any outstanding loans secured by the property.)

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First home owners grant (FHOG)

A Federal Government grant given to first home buyers.

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Fittings

Goods or articles that can be removed from a property without causing damage to it.

 

Fixed Interest Rate

A fixed interest rate does not vary for the fixed rate period, so payments remain constant for this period.

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Fixtures

Items like built-in cupboards, bath, toilets and stoves that are intended to form part of a property and that usually cannot be removed from a property without causing damage to it.

 

Free Standing

A dwelling which stands independently of others.

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Gazumping

Gazumping may take two forms:

 

1. The intending buyer believes that the property has been secured by payment of a holding deposit, and proceeds to arrange finance, legal and other matters. When ready to exchange contracts, the intending buyer finds that another buyer (of which he was unaware) has exchanged contracts on the same property.

 

2. The vendor or real estate agent accepts two or more deposits and then before contracts are exchanged, tells the intending purchasers that the price has gone up. The intending buyers are then left to outbid each other as if it were an auction.

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Government or statutory charges

All home loans and purchase/refinance of residential property attract government charges such as stamp duty and mortgage duty. These charges are determined by the relevant State government, and will vary from State to State.

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Guarantee

A promise by a third party to meet a borrower’s payment obligations if they are unable to pay.

Guarantor The third party who is providing the guarantee for the borrower.

 

Home Unit

A residential dwelling grouped with others, having shared common areas and owned under Strata Title, Company Title or other group title system.

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Honeymoon 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 variable rate.

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Interest in advance

When interest is charged at the beginning of a period of time. For example, charging the first year’s interest in the first month of a loan. It is generally only available on fixed rate loans for investment purposes.

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Interest in arrears

Interest charged at the end of a period of time, generally the end of the month.

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Interest only loans

The amount borrowed is not repaid until the end of the term of the loan. Repayments consist of interest, fees and charges.

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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.

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Inventory

A list of items included with a property, usually furniture, furnishings and movable items.

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Investment loans

Loans used for investment purposes, such as the purchase of an investment property.

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Joint Tenants

Joint tenancy is the holding of property by two or more persons in equal shares. If one person dies, their share is transferred to the remaining joint tenants in equal shares.

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Land Tax

A State government tax payable by owners of property based on the unimproved capital value of the property.

 

Lease

A lease is a document granting possession of a property for a given period without conferring ownership. The lease document specifies the terms and conditions of occupancy and rent payable.

 

Lenders Mortgage Insurance (LMI)

Insurance 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%.

 

Lessee

A person who obtains possession of a property under a lease.

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Lessor

A person who owns a property and allows another to occupy it under a lease.

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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.

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Loan agreement (or facility agreement)

The formal contract between the borrower and the lender, which sets out the terms and conditions of the loan.

Loan to Value Ratio (LVR) This ratio measures the amount of the loan, compared to the value of the security property. For example, if the property is valued at $250,000 and you borrow $200,000, the LVR would be 80% (200000 / 250000 x 100 = 80)

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Loan Trimmer

A feature which may help reduce interest payable on a NAB home loan when the loan account is linked to a deposit account.

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Low doc (documentation) loans

A loan process generally for self employed people who do not have the standard financial statements required to obtain a loan.

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Lump Sum Payment

An extra payment made by the borrower, in addition to the regular loan repayments. These lump sum payments reduce the amount of the loan.

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Monthly Service Fee

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

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Mortgage

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

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Mortgagee

A person who holds a mortgage as security. For example, if a bank holds a mortgage, the bank is the mortgagee.

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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.

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Option to buy

A legal document giving a person a right to buy. The price of the option and the period in which it must be exercised are specified in the option. Usually, a fee is paid and if the person proceeds to buy, the amount paid for the option is deducted from the purchase price. Where the person does not proceed to buy the property, the option fee is not refundable.

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Portability

The ability to ‘move’ a loan from one security (eg. property) to another. For example, borrowers can usually take their current loan with them when buying a new home by swapping the security held on the loan to the new property.

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Pre Approval (or Approval in Principle)

Initial approval process which provides an estimate of how much someone can borrow (before finding the property), based on the information provided to the bank.

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Prepayment

Additional payment(s) made to a loan, in addition to the scheduled principal and interest repayments.

Principal and interest loan The principal and interest loan is the most common form of housing loan. The repayments through the term of the loan include both interest and principal and reduce the balance of the loan, so it is repaid in full over the term of the loan.

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Private Sale

The seller (vendor) does not engage an estate agent, but acts for himself or herself and so avoids paying agent’s commission. The seller deals directly with the buyer.

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Private Treaty Sale

Sale of property through an estate agent, other than by auction.

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Progress Payments

When a lender pays installments to a builder as the building is constructed, normally in five payments.

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Property Management

The management of a property on behalf of the owner.

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Property value

The value of the property as determined by lender - usually by referring to the property's purchase price, engaging an external valuer or doing an internal valuation of the property.

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Rate Lock 

Allows a  borrower to lock in the fixed interest rate that is quoted at the time of loan approval for up to 3 months. If interest rates change prior to the loan drawdown date then the borrower is guaranteed the original rate (provided the time between approval and drawdown is within the 3 months). A Rate Lock fee may be payable.

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Rates

The amount charged by the local council or water authority to provide services to a property.

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Real Property

Land with or without improvements on it.

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Redraw

A loan feature that allows the withdrawal of funds from a loan, if the borrower has made additional repayments.

 

Refinancing

Paying off an existing loan and establishing a new one.

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Repayments

The amount that the loan contract specifies must be paid at an agreed frequency (eg fortnightly or monthly).

Reserve Price This is the minimum price a seller has specified that they will accept to sell their property at auction.

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Search (title)

The process of investigating or examining title to land, to ascertain if the vendor has the right to transfer ownership. A title search reveals the names of the owner and other precise details of the property, like the existence of any restrictive covenant, encumbrance or caveat on the title.

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Security The asset used to secure repayment of a loan, for example a property.

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Semi-detached

Two houses joined together by a common wall.

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Settlement (Home Purchase)

Settlement is when the loan is drawn down and the exchange occurs completing of the sale or purchase of the property.

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Settlement Date

The date on which settlement takes place.

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Split loans

Splitting a loan into more than one loan account. For example, a fixed rate loan account and a variable rate loan account.

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Stamp Duty

There are two types of Stamp Duty. Stamp duty is a state government tax which is payable when a property is transferred. It is calculated on the purchase price of the property and is paid by the buyer. Stamp Duty varies between states and territories. Mortgage Stamp Duty is payable on your mortgage and is calculated on your loan amount.

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Strata Title

A system of title that allows the owner of a unit, in a block of units, to have separate title for that unit.

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Survey

Shows dimensions and boundaries of land and location of buildings.

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Tenancy

The right to occupy land or buildings as provided by the terms of a lease or other agreement.

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Tenants in Common

This is the holding of property by two or more persons in specific shares. If one person dies, their share passes according to the terms of their will.

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Term 

The length of a loan, for example 30 years.

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Terrace

One of a row of houses joined together with common walls.

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Torrens Title

The name given to the government system of recording ownership of land. It’s by far the most common land title in Australia and the cheapest title to buy or sell. Once you are registered on the title you are taken to be the owner.

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Town House

Two-storey attached dwellings usually registered under Strata Title.

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Transfer

A document registered at the Land Title Office recording the change of ownership of a property.

 

Unencumbered

Usually describes a property free of mortgage interests.

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Valuation

A written opinion of a property’s value by a valuer.

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Variable Interest Rate

A variable interest rate may increase or decrease with changes in financial market conditions. Repayments change to cover the new interest rate.

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Vendor

A person who offers a property for sale.

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Villa

Single-storey dwelling usually registered under strata or community title.

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Zoning

Description of the allowable uses of land, as set out by local councils or planning authorities.

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