Contact
Information:
eMail:
Optimal
Lifestyle Mortgages
Melbourne Office:
Suite 2 Level 10
343 Little Collins Street
Melbourne VIC. 3000
Phone: (03) 9014 7753
Fax: (03) 8676 4986
Mobile: 0403 966 789
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Glossary |
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Confused
by all the goobledegook when it comes to talking
finance?
Use our glossary to help you talk the talk. Easey
peasey!
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AAPR
Average Annualised Percentage Rate. Sometimes
referred to as the compulsory Comparison Rate,
this figure takes into account the other costs
associated as an average interest rate, to create
a level field with which to compare similar loan
product interest rates.
Acceptance
Agree to the terms of an offer or contract.
Additional Repayment
Extra funds paid into the loan in addition to
the minimum monthly payments.
Affordability
The ratio of average household disposable income
to income required to meet payments. The higher
the number, the more affordable property is.
Agent
Real Estate Agent. Person/Body authorised to act
on your behalf in the sale, purchase or management
of property.
All-in-one Loan
Allows you to deposit all of your income into
the loan account and then withdraw money from
that account for day-to-day transactions. The
longer spare funds stay in the account, the greater
the interest savings.
Amortisation
Period
The period of time a loan is calculated over and
repaid.
Application Fee
The fee charged by the lender to cover or partially
cover the lenders costs of setting up or establishing
the loan.
Appraised Value
Estimate of the value of a property being used
as security foe a loan.
Arrears
An overdue account.
Assets
Money, property or goods.
Asset
Lender
Lending institution that lends finance based on
the value of the asset, which will be held as
security.
Assignment
Legal transference of a right or a title to a
property to another party. |
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Banker's Lien
The right of the bank to retain a customers securities
until a liability to bank is discharged.
Basic Variable
A variable home loan at a reduced rate with fewer
features than a standard variable
Bankruptcy
The legal financial state an individual is in
when unable to meet debts (for companies it's
known as being wound up). The federal court may
declare a debtor bankrupt, at either the debtors'
or the creditors' instigation; and the debtors'
estate will be placed in the hands of an official
receiver who will distribute the estate in accordance
to the provisions of the Bankruptcy Act
BayCorp Ltd - Veda
The company which records and holds credit information
on everyone, such as loan application, credit
defaults, and son on. Originally known as CRAA,
and may often be referred to as the 'CRAA Check'.
Body Corporate
A management corporation, employed on behalf of
the owners of units or flats to manage the building
and common areas.
Borrower
A person/persons, or entity borrowing money to
purchase, pay off, or refinance a product or effect.
Break Costs
Incurred when a loan is paid off before the end
of its term.
Bridging Finance
Enables you to cover the purchase of a new property
when you are yet to sell another property.
Building Inspection
A qualified building inspection is recommended
prior to the sale of a property to insure there
are no hidden problems with the property and that
you are getting what you pay for
Buyer's
Agent or Buyer Advocat
Person to act on behalf of the buyer to find and
negotiate on properties the buyer wishes to buy. |
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Capital
The current value of your assets, including car,
property, business, money etc.
Capital
Gain
The financial gain you get when you sell something
for more than you bought it for. May be subject
to the capital gains tax; this is paid on the
gained amount.
Capped Loan
A loan where the interest rate is not allowed
to exceed a set level for a period of time, but
unlike fixed rate loans, is allowed to drop.
Caveat
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
therefore prevents any action being taken without
the previous notice of the person entering the
caveat (the caveator).
Certificate
of Title
Details the land dimensions, encumbrances and
ownership details of a property.
Charge
(Over Property)
The term used to describe any right established
over a borrower's property to secure a debt or
performance of an obligation.
Collared
Rate
Variable rate loan with a set upper and lower
limit beyond which the interest rate cannot move
past.
Collateral Security
Additional or supporting security given in addition
to the principal security.
Combination
Loans
Various loans come under the same banner to form
one loan. Also known as a Split Loan.
Commission
Generally the payment that the broker receives
from the bank or lending institution, once the
client's loan has settled successfully.
Comparison Rate Schedule
TThe annual percentage rate and the respective
Comparison Rate, for loan products for specific
amounts over specific terms for a particular lender.
Compulsory Comparison Rate
Sometimes referred to as the Average Annualised
Percentage Rate, the CCR takes into account other
costs associated with a loan as an average interest
rate, to create a level field with which to compare
similar loan product interest rates.
Construction Loans
Specifically granted for the purpose of building
a new dwelling. You are generally able to draw
down money as required.
Consumer
Credit Code
Legislation designed to protect the rights of
the individual (personal consumer) 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. Also known
as the Uniform Consumer Credit Code o UCCC.
Contract of Sale
A written agreement outlining the terms and conditions
for the purchase or sale of property.
Cover Note
Temporary insurance taken out on a property before
an official insurance policy can be drawn up.
Conveyancing
The legal process for the transferal of ownership
of real estate.
CRAA
Credit Reference Association of Australia. The
CRRA used to record and hold credit information
on everyone. Formerly known as Credit Advantage
Limited, CRAA is now called BayCorp Ltd.
Credit History
A thorough check of all financial history of a
potential borrower such as past loans and debt.
Credit Limit
Maximum amount the borrower can use at any one
time. |
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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 document in writing, which is signed, sealed
and delivered by parties thereto, to prove and
testify the agreement of the parties whose deed
it is, to the things contained in the deed.
Default
Failure to meet debt payment on a due date.
Default Rate
The rate a loan rolls/moves to automatically at
the end of any fixed period.
Deferred
Establishment Fee
Is charged when you payout your loan within a
short period of taking it out, such as three years
(not all loans have this fee).
Deposit
The down payment on the purchase of a property
normally paid to the real estate agent's trust
account to secure the home.
Deposit
Bond
Guarantees that the purchaser of a property will
pay the full deposit by the due date.
Depreciation
The accounting practice where the cost of a fixed
asset of a business is spread over the life of
the asset. Depreciation is a non-cash expense
that allows the money to be retained by the business,
thus technically allowing the business the capacity
to replace the asset over time.
Direct
Debit
Where the lender debits (deducts) a payment from
clients bank, credit union or building society
account.
Disbursement
Solicitors incidental costs involved when dealing
with client on behalf of Lender, e.g. searches,
certificates, pest reports etc.
Discharge
The total repayment of the mortgage.
Discharge Fee
The administration fee for finalizing a repaid
loan.
Discount Rate/Introductory
Rate
A loan offered at a reduced rate for an introductory
period - usually no longer than 12 months to a
new borrower.
Dividend
A source of income where company profits are paid
out to the company's shareholders.
Drawn
Down
Act of transferring money from lending institution
to the borrower after the loan has settled.
DSR
Debt Service Ratio. |
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Encumbrance
A charge or liability, e.g. mortgage.
End Loan
The loan amount you are left with after you have
sold your existing home and paid the proceeds
towards your bridging loan.
Equity
Generally used to donate the financial interest
of a person in a property or business enterprise,
e.g. a persons equity in his/her house is difference
between its value and the amount still owed to
a lender . A persons overall equity refers to
his/her net financial worth, or the difference
between what he/she owns and what he/she owes
(i.e. Assets - Liabilities = Equity).
Equity Loan
A loan usually secured by the value of equity
you hold in your house.
Establishment
Fee
Fees that may or may not be charged to set up
a loan (also known as an application fee).
Estate
An interest in land.
Exchange
The legal point of time when the vendor and the
buyer swap documentation with a view to settlement.
Expenses
Cost of living per month - i.e. rent, school fees
or a car loan repayment. |
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Fee Simple
The estate in fee simple is the highest estate
in land, and it is the closest the law comes to
recognizing absolute ownership for all practical
purposes. However, while we refer to proprietor
of an estate in fee simple (who is the owner for
all practical purposes), their ownership is not
legally absolute, for absolute legal ownership
of all rests with the Crown.
First
Home Owners Grant (FHOG)
A subsidy which the State and Federal Governments
offer to people when they purchase their first
owner occupied home.
Fittings
Items that can be removed from property without
causing damage to it, e.g. carpet and curtains.
Fixed Interest (Fixed Rate)
An interest rate set for an agreed term (1, 2,
3, 4, 5 and 10 are normal terms).
Fixtures
Items that would cause damage to the property
if removed. Their removal must be stipulated in
contract of sale, and damage made good by the
seller, e.g. hot plate and oven, etc.
Freehold
The dwelling and the land on which it stands which
is owned by the owner indefinitely. |
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Garnishee Order
A court order taken out by a creditor on a person's
employer or banker for the deduction of funds
from wages or bank account to repay a debt.
Gearing
The ratio of your own money and borrowed funds
in an investment.
General Law
System
System whereby all dealings on a property are
made in the form of conveyances, whether the transaction
is a sale, a mortgage, re-conveyance, etc. Under
this system the mortgage is, in fact a transfer
of ownership. When a conveyance is prepared, it
forms part of a chain of title and must be carefully
preserved in order to prove the "root"
to title.
General Lien
Sets out in writing the banks right to retain
property until the debt is paid. Includes Power
of Attorney and other clauses generally contained
in bank security forms.
Government
Fees
State and Federal government taxes/charges at
the time of settlement, e.g. stamp duty.
Gross Income/Profit
Income from a person or company, before tax, superannuation
or payroll deductions.
Guarantee
A person who agrees to be responsible for the
payment of another persons debts. |
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Holding Deposit
A refundable deposit based on the goodwill of
the buyer to go ahead with the purchase. |
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Income
The total of all incoming monies.
Indemnity
Security against damage or loss; sum paid in compensation
for loss incurred.
Instalments
Regular loan repayments.
Instrument
Formal legal document in writing, e.g. a deed
of conveyance.
Interest
The lenders charge for the use of funds or the
return on deposited funds.
Interest
Adjustment
This may be charged to compensate the lender for
loss of interest revenue when additional repayments
are made on a fixed loan.
Interest
Only Loans
A loan where the principal is paid at the end
of the term and interest is paid during the term.
These loans are usually for a short period of
time up to five years and for investment purposes.
Interest Only Repayments
The minimum amount that can be repaid on a loan.
Only interest is paid and the original loan amount
does not decrease.
Interest
Rate
A percentage of interest that the borrower pays
on the loan.
Introductory Loan/Honeymoon
Rate
A loan offered at a reduced rate for an introductory
period (usually no longer than 12 months) to new
borrowers.
Investment Loan
A type of loan required when purchasing an investment
property. |
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Joint and Several Liability
The banks joint account authorities, guarantee
form, etc, are framed to ensure that joint account
holders with debts due to the Bank of joint guarantors
liable to the Bank shall be severally liable,
(i.e. individually), as well as jointly . 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 Tenancy
Property in the name of two or more persons, where
all persons have an equal interest in the whole
property . When one person dies the interest passes
to the survivor(s). They are known as joint Tenants
or Joint Proprietors of that property. |
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Liability
A debt which one is liable for; being responsible
only to a limited amount.
Land
Tax
A state government tax charged to the owners of
any property over a stipulated value, unless it
is their principal place of residence.
Land Transfer Registration
Registration of the transfer of ownership in property
to the buyer.
Lien
The right to hold property as security against
a debt or loan.
Line of Credit
A loan arrangement with a specified credit ceiling
to which funds are drawn from.
Loan
An advance of funds from a lender to a borrower
on the agreement that the borrower pays interest
on the loan, plus paying back the initial amount
of the loan, at, or over, an agreed time.
Loan Administration Fees/Loan Maintenance
Fees
A fee that is charged to cover the lenders maintenance
and administration cost of the loan accounts.
Loan Approval Fee
A fee, which lenders charge to cover the cost
of processing a loan application.
Low
Doc Loan
Low Doc loans are offered by select lenders if
a borrower lacks the standard income statements
or tax records that verify their income - due
to self employment or no set salary.
LVR
(Loan to Value Ratio) The ratio of amount lent,
to the valuation of the property (i.e. $100,000
at 80% LVR = $80,000). |
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Maturity
The date a debt or investment must be paid in
full.
MIOS
Mortgage Industry Ombudsmen Service.
Mortgage
A form of security for a loan usually taken over
real estate. The Lender, the mortgage has the
right to take (repossess) the real estate if the
mortgagor fails to repay the loan.
Mortgagee
The lender of the funds.
Mortgagor
The person borrowing money in the terms of the
mortgage.
Mortgage Broker
A person or organisation marketing numerous loans
from a panel of lenders who select the best loan
or loans for borrowers from this selection.
Mortgage Discharge Fee
An administration fee to cover the costs (eg.
documents) incurred in up a loan (This fee is
not charged on every loan).
Mortgage
Offset Account
By offsetting all available funds in your transaction
account against the loan, you can lower the interest
you pay.
Lenders Mortgage Insurance
This is taken out by lenders, but is paid for
by the borrowers, to cover themselves if the borrower
defaults on their loan, and property sale proceeds
don't cover the outstanding amount (usually charged
above 80% of the value of the property).
Mortgage Manager
A company responsible for managing every facet
of a borrower's loan. Often sources loans from
mortgage originators.
Mortgage
Originator
Retail, and more often, wholesale lender who sources
securitised funds in order to package them as
loans.
Mortgage Protection Insurance
Different to mortgage insuranceand covers borrowers
loan repayments in the event that they are not
able to meet their them, through illness or redundancy,
for example.
Mortgage Registration
Fee
A state government fee for the registration of
a mortgage. |
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Negative Gearing
Gearing your investment so that the costs to maintain
it (loan repayments, council rates, maintenance,
etc) outweigh the income produced by the investment,
leading to a reduction in taxable income.
Net Income
The income received by an individual after tax
has been taken out.
Net Profit
The profit remaining in a business after all expenses
have been taken out, but before tax.
No Deposit Home Loan
A loan that select lenders offer where no deposit
is required allowing a 100% loan of the entire
property value.
No Doc Loan
No Doc loans are offered by select lenders if
a borrower has no income statements or tax records
that verify their income. This particular loan
requires borrowers to sign an agreement stating
that they will be able to service the loan (ie.
meet the repayment requirements).
Non
Conforming Borrowers
Applicants who fall outside the normal eligibility
requirements of mainstream lenders.
Non-Conforming Loans
Where standard loan criteria can not be met by
borrower ie. credit card defaults or no standard
income. |
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Off The Plan Purchase
Buying a property from the plans only, not the
finished product.
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.
Ongoing Fee
Any loan maintenance fee charged regularly over
the life of the loan and charged monthly or yearly.
Overdraft
A pre arranged limit to which a person can exceed
an account balance. |
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Passed In
A property is passed in at auction if the highest
bid fails to meet the reserve price.
Portability
Where a new property can be used as security for
an existing loan i.e. when a loan is transferred
to a new security property without needing to
repay the loan, reapply, or restructure.
Power Of Attorney
A written authorisation to another person or persons,
to perform certain acts for the signer, as they
were the signer.
Pre-Approval
Loan
Before looking or making an offer on a property,
you are able to be conditionally or unconditionally
approved by a lender allowing you the security
of knowing what you are eligible to borrow.
Principal
The capital sum borrowed on which interest is
paid during the term of the loan.
Principal
and Interest Loan
A loan which both the principal and interest are
paid during the term of the loan.
Private
Treaty Sale
A property sale where the buyer negotiates directly
with the seller, as opposed to an auction sale.
Progress Draws
Payments made to the builders at the completion
of each stage of construction where you only use
a portion of your loan at a time.
Property
A person's property is "that is his/her own
to do what he/she likes with". It may be
tangible or intangible, and may be given a monetary
value (eg. house, car or goodwill). Property may
be classed 'real' which relates to land or interests
in land (except leaseholds) and buildings, etc,
or 'personal', which relates to other kinds of
property such as cars, bank account, and leasehold
interests in land. |
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Redraw
Borrower is able to draw/take out on pre paid
funds.
Refinancing
To replace or extend an existing loan with funds
from the institution or another.
Rental
Guarantee
A promise by a developer guaranteeing a certain
level of return on an investment property. Usually
stated as a percentage of the purchase price,
it generally relays to investment properties purchased
off the plan.
Repayment Period
The repayment frequency throughout the life of
the loan. I.e weekly fortnightly or monthly.
Reserve Price
A specified minimum price acceptable to a seller
at auction.
Residential Investment
Loan
A loan funding a property bought for investment
purposes.
Reverse Mortgage Loan
On option for people 60 years and above to use
the equity in their home to secure a loan. No
repayment needs to be made until the property
is sold in which case the whole loan amount must
be repaid including the interest.
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Search
An examination to confirm that the vendor is in
a position to sell the property and that there
are no encumbrances on the property.
Securitisation
The packaging of cash flow producing assets into
a marketable security, e.g. property, roads, bridges,
etc. The process where mortgage backed securities
(in the form of a bonds) are sold directly into
capital markets, investors in the bonds comprise
superannuation funds as well as other major institutions.
Security
An asset that guarantees the lender their borrowings
until the loan is repaid in full. Usually the
property is offered to secure the loan.
Serviceability
Ability of borrower to make and meet repayments
on a loan, based on the borrowers expenses and
income(s).
Settlement
Finalisation of payment by the new owner, and
assumption of possession.
Split
Loan
Selective lenders offer loans where you can split
the loan amount into several accounts i.e. fixed
or variable.
Stamp Duty
A state government tax on the mortgage amount
and purchase price.
Standard
Variable
A variable home loan with comprehensive features.
This is often the variable rate fixed rate loans
roll to at the end of the fixed term.
Strata Title
A title that records your ownership of a 'unit'
of a larger property. Unlike a strata title, the
owner becomes a shareholder in the company that
manages the common area.
Surety
Person who makes themselves responsible for anothers
payment of debt, also known as guarantor.
Survey
A plan of a property showing how the building
and the boundaries around it are situated.
Susceptibility Report
Shows likelihood of future pest infestations.
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Tenants In Common
Property in the names of two or more persons and
in which each has separate and distinct share.
When one person dies his share is not passed to
the survivor(s) but becomes part of their estate
for disposal according to their will.
Term
The length of a home loan or specific portion
within that loan.
Third Party
Security
Security provided for a mortgage by a third party
(someone different from actual borrowers) who
is legally different from the borrower or debtor.
Title Deed
Registration showing the ownership of property.
Title Search
Process to ensure that the venor has the right
to sell and transfer ownership.
Title
Transfer Fee
A fee charged when purchasing a property for the
transfer of the title deed for the property.
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. Under
this system a mortgage is a charge or encumbrance
on the title. Registration is compulsory to effect
legal transfer of an interest in property and
each time the property is sold, mortgaged, or
a mortgage discharge, the transaction is recorded
on the certificate of title.
Transfer
The document registered with the land titles office
that confirms the change of ownership as noted
on the certificate of title. |
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Uncommitted Monthly Income
Total income available once all monthly expanses
are taking out.
Unencumbered
A property free of liabilities, restrictions or
mortgages. |
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Valuations
A report as required by the lender, detailing
a professional opinion of a properties value.
Variable Interest Rate
A rate that changes in accordance with rates
in the marketplace.
Variation
Changing any part of the original loan contract.
Vendor
Person selling a property who is its current
owner.
Veda Advantage
The company which records and holds credit information
on everyone, such as loan application, credit
defaults, and son on. Originally known as CRAA,
and may often be referred to as the 'CRAA Check'. |
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Zoning
Local authority guidelines as to the permitted
use of land. |
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| © |
2000-2008 Optimal Lifestyle
Mortgages.
All Rights Reserved |
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