Glossary

    A

    AAA Rating:

    There are a number of agencies that provide opinions and ratings about the security of companies, shares and bonds. ‘AAA’ rating is given to the most secure investments.

    Amortisation:

    To pay off principal and interest under a loan over a period of time, usually by instalments.

    Application fee:

    A fee paid by a borrower to cover the costs of processing a loan and mortgage.

    B

    BAD:

    (Bank Account Debit Tax) State or Territory government tax (except ACT) on withdrawals from bank accounts with a cheque facility.

    Bank Bill Swap Reference Rate:

    A market rate of interest that is widely used to price commercial borrowings. The Bank Bill Swap Reference Rate can be found in national newspapers.

    Basis Point:

    A term used to measure the rate of interest. For example, ten basis points equal 0.10%.

    C

    Certificate of Title:

    A document that details the ownership and land dimensions of a property and lists any encumbrances on it.

    Consumer Credit Code:

    The Consumer Credit Code is a law that protects individuals (and strata corporations — but not other companies) who are borrowing money predominantly for personal, domestic, or household purposes. The Consumer Credit Code applies to such loans regardless of the size of the loan and gives borrowers certain rights and requires lenders to give borrowers certain information about their loan.

    Conveyancing:

    The process of legally transferring property ownership from the seller’s name to the buyer’s name.

    Contract:

    An agreement between two or more people that is enforceable by law. Contracts may be written, oral, or implied by a person’s behaviour.

    Contract for Sale:

    A contract used in the transfer of property, which sets out the conditions relating to the purchase/sale.

    Credit Limit:

    The maximum preset amount a borrower can use on a loan account.

    Credit Reference or Credit Report:

    Before approving a loan, most lenders will require a credit report on the borrower. Credit reports are prepared by authorised credit reporting agencies, such as the Credit Reference Association of Australia. The report sets out the credit history of the borrower. The Lender must get the borrower’s permission in writing before obtaining a credit report.

    D

    Daily Interest:

    Interest calculated on a daily basis.

    Debt Service Ratio:

    This is a measure of the borrower’s capacity to repay the loan. Lenders calculate the Debt Service Ratio by taking into account a borrower’s expenses as a proportion of their income.

    Default:

    Failure to make a loan repayment by a specified date.

    E

    Early Repayment Penalty:

    If a loan is repaid before the end of its term, lenders may charge an early repayment fee.

    Exchange of Contracts:

    An exchange of contracts commits the buyer to buy the property and the seller to sell the property. In some states, the law allows a cooling off period after the exchange of contracts, during which time either party can pull out. Borrowers should ask their solicitor or conveyancer whether the cooling-off period applies in their state.

    Equity:

    The amount of an asset that is owned.

    F

    Facility:

    This is another term used to describe your loan account.

    FID:

    (Financial Institutions Duty) State duty on payments made to financial institutions.

    Fixed Interest Rate:

    You can choose to “lock in” your interest rate for a specific period, for example, for 2, 3, or 5 years. Lenders may charge a fee if you “break” this period, so it is important to ask the lender if any fees apply.

    H

    Honeymoon Rate:

    Some lenders offer a “discount” or introductory rate for a short period of time, say a year, to entice you to take out a loan with them. At the end of the “honeymoon” period, the interest rate normally reverts to the lender’s variable rate.

    I

    Interest Only Loan:

    Under an interest-only loan, usually the borrower makes no principal repayments. The repayments are for the amount of interest, which has accrued on the loan, which is paid monthly in arrears.

    J

    Joint and Several Liability:

    When two or more people take out a loan, most lenders require all the borrowers to be responsible for the loan if there is a default. This means that if one borrower defaults, the other borrowers are responsible for that person’s share of the loan. Another example, is where a wife and husband take out a loan jointly and then separate or divorce during the term of the loan — both remain responsible for paying off the loan, unless they have notified the lender and the lender has agreed in writing to change their loan agreement and mortgage.

    L

    Lease:

    A document granting tenancy of a property for a specified period.

    Liabilities:

    Loans, debts or obligations.

    Line of Credit Loan:

    This is a flexible loan that allows you to have funds transferred to your cheque account when required. It is similar to an overdraft but is available at a much lower interest rate at Wizard.

    Loan Agreement:

    The contract between the lender and the borrower, which sets out the conditions that apply to your loan. It is important that you read the agreement carefully, and wise to get legal and financial advice, before you enter into the loan.

    Loan Security Duty:

    Government stamp duty charged to register your mortgage.

    Loan to Value Ratio (LVR):

    This is the measure of the amount of the loan compared to the value of the property. For example, if you have borrowed $160,000 and your property is valued at $200,000, the LVR would be 80%.

    Lenders Mortgage Insurance:

    Lenders Mortgage Insurance is insurance taken out against the borrower to protect the lender against default. It is important to understand that lenders mortgage insurance does not provide you, the borrower, any form of protection. If the loan is in default, you may still be required to meet any shortfall between the amount owed to the lender and the amount received from the sale of your property. In most cases, the borrower pays the insurance premium.

    Lump Sum Payment:

    An additional payment made by the borrower to reduce the loan amount. These payments are in addition to regular installments.

    M

    Mortgage:

    Security over property given to the lender for the repayment of the loan.

    Mortgagee:

    The lender of money, and the party who has the benefit of the mortgage over your property.

    Mortgagor:

    The borrower.

    Mortgage Duty:

    A government tax which is payable by the borrower on the borrower’s mortgage. The amount of the duty varies from state to state and in some states, mortgage duty may not be payable when the loan is refinanced.

    O

    Old System Title:

    (common law title) consists of a ‘chain’ listing all owners of a property since origin.

    P

    Power of Attorney:

    A formal appointment where a person appoints another (called the attorney) to act as their legal representative.

    Principal:

    The amount outstanding on your loan. You pay the lender the interest on the principal.

    Principal and Interest Duty:

    This is the most popular type of loan where you repay a portion of the principal and the accrued interest over the term of the loan by regular installments.

    Private Sale:

    Sale of a property without the involvement of an estate agent.

    Private Treaty Sale:

    The amount outstanding on your loan. You pay the lender the interest on the principal.

    R

    Redraw Facility:

    If you have made any Lump Sum Repayments to your loan account, you can access those extra repayments whilst on a variable rate.

    Refinancing:

    This means that you switch your loan from one lender to another.

    Reserve Price:

    Preset minimum acceptable price of seller at auction.

    S

    Search:

    An inquiry to confirm that a property vendor is in a position to sell a property, also detailing any encumbrances listed against the property.

    Security:

    An asset used to guarantee a loan.

    Settlement:

    This is the most popular type of loan where you repay a portion of the principal and the accrued interest over the term of the loan by regular installments.

    Settlement Date:

    Specific date at which buyer is to take possession of property upon finalising payment.

    Signatory:

    Person authorised to access an account.

    Stamp Duty:

    Stamp duty is a state government tax which is payable when a property is sold. Stamp duty is calculated on the purchase price of the property and is paid by the buyer. Each state and territory has a different rate of duty.

    Strata Title:

    Title that grants ownership of a section or a ‘unit’ of a larger building. This ‘unit’ can be sold or transferred by the owner.

    Survey:

    Plan that details a block of land noting the position of any buildings.

    T

    Term:

    The length of a loan or a defined period within that loan.

    Torrens Title:

    Title that grants ownership of a piece of property. Also known as Certificate of Title.

    Transfer:

    A document registered with the Land Titles Office noting the change of ownership.

    V

    Valuation:

    A professional opinion of the value of a property.

    Variable Interest Rate:

    This is a fluctuating rate of interest charged by lenders. Variable interest rates change as official market interest rates rise and fall.

    Vendor:

    The seller of a property.

    Z

    Zoning:

    Local authority guidelines as to the permitted uses of land and buildings.

    Call us on 1800 803 428 or:

    Accredited Lenders

    ANZ logo
    Commonwealth Bank Logo
    BOQ Logo
    Capital Finance Logo
    Macquarie Bank Logo
    Metro Finance Logo
    NAB Logo
    Pepper Money Logo
    St George Logo
    Westlawn Logo
    Westpac Logo

    Accredited Lenders

    ANZ logo
    Commonwealth Bank Logo
    BOQ Logo
    Capital Finance Logo
    Macquarie Bank Logo
    Metro Finance Logo
    NAB Logo
    Pepper Money Logo
    St George Bank Logo
    Westlawn Logo
    Westpac Logo

    For fast finance quotes

    Fill out the form below: