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Home Loan Glossary
Throughout the home buying process, there are specific terms you'll come across. Below is a glossary of the more common terms and their meanings.
| Terms and definitions | |
|---|---|
| Break (or Economic) Cost | A lender’s estimate of its loss resulting from the payout or change of a fixed rate loan. |
| Bridging loan | This is a short-term loan (that can be at a higher interest rate) to give you time to sell your existing property. |
| Certificate of Title | The official document of title, showing area and location of land, registered land owner, and all mortgages and other interests in the land. |
| Comparison rate | A comparison rate is a rate that helps you to understand what the true cost of a loan is. It takes all fees, including set up costs, interest rates, early repayment fees, monthly fees and annual fees, and re-purposes them into a new interest rate, so it’s easier to plan for your repayments and compare loan options between different lenders. |
| Conditional approval | Based on the information you provide in your application, this will state how much a lender is prepared to lend you along with the conditions that will apply. This is not a guarantee. Also known as a pre-approval. |
| Contract of sale | A written contract between a seller (vendor) and a purchaser, for the sale and purchase of property. |
| Conveyancing | The process of legally transferring ownership of interest in land. |
| Credit contract | The contract between the lender and the borrower that sets out the loan terms and conditions. |
| Credit limit | The maximum credit that can be provided on a loan account. |
| Default | Failure to make loan repayments within a specified timeframe. |
| Deposit | The amount of money paid to secure the purchase of a property. On settlement, the deposit is treated as part payment of the purchase price. |
| Equity | Refers to the difference between the market value of the property and what is still owing on the mortgage. |
| Fixed rate period | The period of the loan term that the interest rate remains fixed irrespective of market interest rate movements. |
| Gross income | Total income before tax. |
| Guarantee | Agreement from a third party to perform a borrower’s obligation under a loan agreement. |
| Joint tenancy | The form of ownership where two or more people purchase a property together. |
| Lender's Mortgage Insurance (LMI) | LMI protects the lender in case the borrower defaults on a loan where the LVR is 80% or greater. |
| Loan-to-Value Ratio (LVR) | The ratio determined by dividing the amount of the loan by the value of the property held as security against that loan. |
| Mortgage | A security over property given to the lender for the repayment of the loan and interest on the loan. |
| Net income | Total income after tax and mandatory levies have been deducted - for instance HECS payments. |
| Principal | This is the initial amount of money lent by the lender. Loans are made up of the principal as well as interest. |
| Refinancing | The paying out of an existing loan from the proceeds of a new loan. |
| Registration | The process following settlement when a legal title to property is transferred into the name of the purchaser. |
| Settlement | The process by which a sale and purchase of property takes place. |
| Stamp duty | A tax imposed by state and territory governments for the transfer of property ownership. |
| Strata title | A system for sub-dividing ownership of a building and the land on which it is situated into lots and common property. |
| Tenants in common | A form of joint ownership in which each person owns a share of the property equally or unequally. |
| Term | The period from when the loan is funded (or drawn down) until the loan must be repaid. |
| Valuation | An assessment of the value of a property by a registered valuer. |
| Vendor | The seller of a property. |
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