| Glossary Term |
Definition |
| Amortization Schedule |
A loan repayment schedule that shows the principal and interest payment portion of each mortgage payment and the effect that it has on debt reduction. |
| Application Fee |
The fee charged by a lender to prepare loan documents, process, underwrite, make credit checks, inspect and sometimes appraise a property (lenders profit is also included). |
| Borrower (Mortgagor) |
One who applies for and receives a loan in the form of a mortgage; with the intention of repaying the loan in full. |
| Bridging Loan/Finance |
A short term loan to enable the purchase of one property before the sale of another, essentially releasing funds that are required for the purchase. |
| Broker |
An individual in the business of assisting in arranging funding or negotiating contracts for a client buyer. |
| Capacity |
The ability to repay the loan |
| Capital |
The amount of money that the borrower already has |
| Collateral |
The security offered in a loan |
| Conditions |
The internal or external conditions that may affect the borrower's ability to repay a loan |
| Construction loan |
A short term interim loan to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as work progresses. |
| Contract of Sale |
A contract between the purchaser and the vendor (seller) of real estate to convey title after certain conditions have been met |
| Conveyance |
The legal process in which ownership of the property is transferred from the seller to the buyer. Generally undertaken by a solicitor or licensed conveyancer. |
| Credit Rating |
A report documenting the credit history and current status of a borrower's credit standing. |
| Default |
The failure to meet legal obligations in a contract, specifically failure to make the monthly payments on a mortgage. |
| Equity |
The difference between the fair market value and current indebtedness, also referred to as the owner's interest. The value an owner has in real estate over and above the obligation against the property. |
| First Mortgage |
The primary mortgage on a property |
| Fixed Rate |
A set interest rate on a mortgage fixed for a period of time. This varies from lender to lender. |
| Foreclosure |
A legal process by which the lender or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage. Also known as a repossession of property. |
| Guarantee |
A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract. |
| |
|
| Honeymoon Rate |
A special discounted interest rate given to new customers taking out a loan with a lender. Also referred to as an Introductory rate |
| Interest Only Mortgage |
A mortgage whereby the borrower is only required to pay inerest on the amount borrowed during the mortgage term. It is the borrowers responsibility to ensure that enough funds will exist (either through an investment policy or other means) to repay the full mortgage at the end of the term. |
| Interest Rate |
An annual percentage amount paid when you borrow money |
| Introductory Rate |
A special discounted interest rate given to new customers taking out a loan with a lender. Also referred to as an Honeymoon rate |
| Legal Fee |
A fee paid to conduct the legal process of transferring a property from the seller to the buyer |
| Lenders Mortgage Insurance (LMI) |
Money paid to insure the mortgage when the lender requires it - usually this is done when the deposit (down payment) is less than 20 percent |
| Line of Credit (LOC) |
An overdraft type loan secured against your property |
| Loan Settlement Fee |
A fee paid to the lender to attend the loan settlement of a property |
| Loan-to-Value Ratio (LVR) |
The percentage that represents the loan against the value of the property |
| Low-Doc Loan |
A loan that does not require the borrower to prove their income, but does require the borrower to declare an income amount and source |
| Mortgage |
A loan to buy a property where a property is used as security against you paying back the loan. |
| Mortgagee |
The organisation that lends you the money in the form of a loan |
| Mortgagor |
One who applies for and receives a loan in the form of a mortgage; with the intention of repaying the loan in full. |
| No-Doc Loan |
A loan that does not require the borrower to state or prove their income |
| Non-Conforming loan |
A loan that does not fit the ideal mould demanded by premium banks |
| Offset Account |
An account that is linked to the loan account with funds placed in it to reduce the mortgage payments. |
| |
|
| Payment Holiday |
A period during which the borrower makes no mortgage payments. |
| Principal |
The amount of debt, not counting interest, left on a loan. |
| Refinance |
The process of changing your mortgage from one lender to another |
| Rural property |
A security property that is not considered within a metropolitan area |
| Second Mortgage |
A mortgage made subsequent to another mortgage and subordinate to the first one. |
| Self Certification |
The process of signing a declaration to state your income amount and sources instead of providing evidence to prove your income. Generally self-certification is only accepted by lenders for Low-Doc or No-Doc loans |
| Serviceability |
The process of determining the amount of loan, a borrower can afford. |
| Split Loan |
A loan that is broken into two or more smaller loans. The loans can be broken into different products or simply for ease of management. |
| Stamp Duty |
Tax paid by the buyer of a property. It varies from state to state. |
| Tenancy |
A legal written agreement between a landlord and tenant that sets out the terms of the rental. |
| Term |
The period of years over which you take the mortgage and repay it. |
| Title Search |
An examination of municipal records to determine the legal ownership of property |
| Transfer of Mortgage |
A government fee charged when a mortgage is established or moved from one lender to another |
| Uncommitted Monthly Income (UMI) |
The difference between the monthly income of a borrower minus all monthly expenses of the borrower. The monthly expenses include an amount for living expenses |
| Underwriting |
The process of evaluating a loan application to determine the risk involved for the lender. This involves an analysis of the borrower's creditworthiness, employment, assets, and other factors such as the quality of the property itself. |
| Unencumbered Property |
A property that is owned outright with no mortgages or loans secured against it. |
| Valuation |
A review of the property in order to find out how much it is worth and whether it is suitable to secure a mortgage against. Valuations may include reviewing other property sales in the area. |
| Valuation Fee |
The fee paid by a borrower to cover the cost of the lender checking that the property is suitable security for the mortgage. |
| Variable Rate |
A loan where the interest rate moves up and down with movements in the professional money markets. Often these rates are linked to the reserve bank rate. |
| Vendor |
The person selling the property. |
| |
|
