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Home Loan Glossary

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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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