Glossary
At Resi, we know our AAPR’s from our LVR’s to our amortisation curves, but the rest of the world has better things to do with their time.
We have translated compiled some of the more confusing terms to plain English to help you.
If you can't find the term you're looking for, then ask us by filling out the form below.
Simply click on the letter of your choice, or simply scroll down for curiosity
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AAPR
The Average Annual Percentage Rate (AAPR) is also known as the "True Rate" or mortgage comparison rate and can be used as a usual tool in determining the cost of ongoing fees associated with taking up the loan. The AAPR is the average interest rate payable over a 7 year period for a given loan amount including all upfront fees, ongoing fees, interest rate [and a revert to rate for the case of Fixed term, introductory and honeymoon loans] and the interest payable on that loan amount over that period. Not included in the AAPR are government fees, exit/discharge fees, service fees (eg Redraw, Internet usage fees, etc) and any other fees that are not always applied.
Accrued Interest
Interest you have earned or incurred that is yet to be paid or charged.
Additional Repayment
Extra funds paid into the loan in addition to the minimum repayments. These extra funds reduce the term of the loan.
Additional Securities
An asset that guarantees the lender their loan until the loan is repaid in full. Usually the property is offered to secure the loan.
Agent
An agent is someone who acts on behalf of another person or organisation. A real estate agent acts on behalf of a landlord or owner in the letting or sale of property.
Amortisation period
The period of time a loan is calculated over (and repaid)
Application Fee
The fee charged to cover or partially cover the costs of setting up or establishing a home loan
Appreciation
The increase in the value of property caused by economic factors such as inflation, and market conditions.
Arrears
An overdue amount that has not yet been paid.
ASIC
Australian Securities and Investment Commission
Assets
Money, property or goods owned.
Assignment
Legal transference of a right or a title to a property, to another property.
Auction
A public sale where the property is sold to the highest bidder.
Baycorp Advantage
Australian credit files are held by Baycorp Advantage Limited, previously Credit Advantage Limited and CRAA
Body corporate
A corporation of the owners of units within a strata building. The owners elect a council responsible for the management of the building and common areas.
Boundary
A line separating adjoining properties.
Breach of contract
Breaking the conditions of a contract.
Break costs
Penalty charges for breaking or discontinuing the agreed fixed term of a loan.
Bridging Finance
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 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.
Buyers' Agent
Person who acts on behalf of the buyer to find and negotiate on properties the buyer wishes to purchase.
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
The monetary (financial) 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.
Certificate of Title
A document identifying 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.
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.
Commission
The fee or payment made to a real estate 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 as well as on the original principal.
Consumer Credit Code
An Act of Parliament governing the relationship between borrowers and lenders. Legislation designed to protect the rights of the individual by ensuring banks and other financial 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 a property.
Conveyance
The legal process for the transferral of ownership of real estate
Conveyancing
The legal process for the transfer of ownership of real estate.
CRAA
The company which records and holds credit information on everyone in Australia. CRAA is now know as Baycorp Limited
Credit History
A history of an individual or companies debt re-payment. Lenders use this information to gauge a potential borrower's ability to repay a loan
Daily Interest
Interest calculated on a daily basis - varies according to daily account balance.
Debtor
Someone who owes money to another and can be compelled to perform an obligation
Deed
A legal document that states an agreement or obligation regarding a property.
Default
Failure to abide by the terms of a mortgage or loan agreement. A failure to make loan payments (defaulting on the loan) may result in the mortgage holder taking legal action to repossess the mortgaged property.
Deposit
The amount of money provided by a borrower when purchasing a residential property. A deposit is normally paid by the buyer at the time of exchanging contracts. In the majority of residential home loans, a deposit 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 guarantor that payment will be made.
Direct debit
Where the lender debits (deducts) a payment from a borrowers bank, credit union or building society 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. loan repayments, bills, other commitments).
Draw down
To access available loan funds, usually referring 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.
Duty (or Stamp Duty)
State Government tax on financial 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 from state to state. Click here to find out what stamp duty you would pay on a property in your state.
Early Termination Payment
The cost of winding up a loan early.
Encumbrance
A charge of liability (e.g. a mortgage)
Equity
Generally used to denote the financial interest of a person in a property or business enterprise, e.g. a person's equity in their house is the difference between its value and the amount still owed to a lender. A person's overall equity refers to their net financial worth, or the difference between what they own and what they owe (e.g. Assets minus Liabilities = equity)
Establishment fees
Fees payable to a lender to cover the costs of setting up a loan.
Exchange of Contracts (or Exchange)
The legal point of time when the vendor (seller) and purchaser (buyer) swap documentation and start inquiries with a view to settlement.
Exit Fee
A fee imposed when the loan is paid off before the end of its term. Fees most generally apply to fixed-rate loans.
First Home Owners Grant
The First Home Owners Grant is a grant from the Federal Government which is available as compensation for the increased cost of housing after implementation of the Goods and Services Tax (GST) on 1 July 2000. The grant of $7,000 is available for first home buyers.
Fittings
Items not intended to be removed from a property on sale (eg. fixed carpets, lights, curtains, stoves).
Fixed Interest
An interest rate set for an agreed term regardless of any variations in the market (eg. Change of RBA Cash rate)
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 it.
Gross Income
Income from a person or company, before tax, superannuation or payroll deductions.
Guarantor
A party who agrees to be responsible for the payment of another partys debts should that party default.
Holding Deposit
A refundable deposit demonstrating the goodwill of the buyer to go ahead with the purchase.
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.
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. For a list of Resi home loans, click here
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.
Instalment
The regular periodic payment that a borrower agrees to make to the lender.
Interest
The amount you are charged for the money advanced to you
Interest only loan
A loan where only the interest is paid for an agreed term (usually a short period of one to five years) or during a construction period. The principle is then repaid over the remaining term of the loan by the conversion of repayments to Principle & Interest.
Interest Rate
The rate at which interest is applied. This can be either variable, fixed or capitalised. Click here for Resi rates and fees.
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 does not live in the property. Click here to see how Resi can help property investors
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.
Lease
A document granting a period of tenancy of a property under specific terms and conditions.
Line of credit loan
A flexible loan arrangement with a specified limit to be used at a customers discretion.
LMI
See Mortgage Insurance.
Loan to Valuation Ratio (LVR)
The ratio of the amount lent to the valuation of the security (usually the house). E. If the house if worth $100,000 and the loan to purchase the house is $80,000, the LVR is 80%
Lump Sum Repayments
Additional ad hoc repayments, made over and above your minimum repayment requirement.
LVR
See Loan to Valuation Ratio
Maturity
The date at which a debt must be paid in full.
Maximum Loan Amount
The maximum amount that can be borrowed, based on an applicant's disposable income, deposit and the purchase price of the property.
Maximum Term
The maximum length of a home loan or a specific portion within that loan (normally 25 or 30 years).
Minimum loan amount
The minimum amount that can be borrowed.
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. At Resi there are none. Click here for Resi rates an fees
Mortgage
A form of security for a loan usually taken over real estate (eg your home). The lender, the mortgagee has the right to take (repossess) the real estate if the mortgagor fails to repay the loan
Mortgage insurance
This insurance is taken out by the lender to cover themselves in the event that the borrower defaults on their loan and the sale of the property is unable to cover the outstanding debt. Mortgage insurance premiums are usually paid by the borrower when the amount borrowed is over 80% of the property value. There is no protection for the borrower.
Mortgage payment
A regularly scheduled payment that usually includes both principal and interest.
Mortgage protection insurance
This type of insurance is taken out by a borrower to cover the borrowers loan repayments in the event that they are not able to meet them through specific events such as serious illness or redundancy. It is also sometimes called income protection insurance.
Mortgage Registration Fee
A State Government charge for the registration of a loan.
Mortgagee
The lender of the funds (such as Resi Mortgage Corporation Ltd).
Mortgagor
The person borrowing money under the terms of a mortgage.
Negative Gearing
Gearing your investment so that the cost to maintain it (loan repayments, council rates, maintenance, etc) out weigh the income produced by the investment, leading to a reduction in taxable income.
Net Income
Gross income less expenses, including taxes and insurance, but before depreciation, or distribution of earnings
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. Click here for the recent history of RBA Cash rates.
Passed in
A property is passed in at auction if the highest bid fails to meet the reserve price set by the vendor (seller).
Portability
Where a new property may be substituted as security for an existing loan (eg so you do not have to refinance)
Power of Attorney
A written authorisation to another person, or persons, to perform certain acts for the signer, as if they were the signer.
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.
Principal
A capital sum borrowed from a lender on which interest is paid (doesn't include the interest or additional fees) during the term of the loan
Principal and Interest Loan
A loan in which both the principal and the interest are repaid during the term of the loan. To compare Resi's home loans, click here
Private Sale or Treaty
The sale of a property without a real estate agent.
Re-amortise
To recalculate the minimum repayment required to repay the outstanding balance of your loan over the remaining period (particularly where the loan balance has substantially increased or decreased from the original amount).
Redraw Facility
The ability to make additional repayments on your mortgage, and then have access to those additional repayments if you wish to.
Refinance
To pay off a mortgage and arrange for a new mortgage, sometimes with a different lender. Click here for more information on looking for a better deal.
Reserve Price
A specified minimum price acceptable to a seller at auction.
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.
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. At Resi, there are no regular ongoing service fees. Click here for Resi's Fees and rates
Serviceability
Ability of a borrower(s) to make and meet repayments on a loan, based on the borrowers income and expenses
Settlement
The date on which loans funds are advanced to you or your legal representative. The day you can pick up the keys
Settlement Period
A period after contracts exchange and before the settlement date. 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. To find out what stamp duty you would pay on a property in your state, click here
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. 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.
Survey
A plan that shows the boundaries of a block of land and the positioning of any building/s on that land.
Tenants in common
The equal or unequal holding of property by two or more persons. If one party dies, their share passes according to their Will or the law (not necessarily to the owner of the other share).
Term
The length of a home loan or a specific portion within that loan. The term is usually written in months, rather than years.
Title deed
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 System
System whereby ownership and all dealings on a property are detailed on the one document, i.e. a Certificate of Title or Deed of Grant.
Transfer
A document registered with the Land Titles Office that confirms the change of ownership as noted on the Certificate of Title.
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.
Unencumbered
A property free of liabilities, encumbrances or restrictions.
Uniform Consumer Credit Code (UCCC)
Legislation to ensure uniformity amongst all credit providers across Australia. 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 detailing a professional opinion of a propertys value.
Variable rate
A rate that goes up or down depending on money market interest rates. For a history of interest rates, click here. For Resi's home loan rates, click here
Variation
A change to any part of a loan contract.
Vendor
The party who offers a property for sale, and is the current owner
Zoning
Local government authority guidelines as to the permitted uses of land and buildings on that land.
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