Glossary

Helpful Hints

To assist in finding your way through the maze of terms and language used in the mortgage industry we have provided the following glossary.

Should you require further assistance please click on the link below to email your question to us:
support@synergyhomeloans.com.au

A

Accrued Interest: Interest that you have earned or incurred which is yet to be paid or charged to your account.
Additional payments: Extra loan repayments paid to the loan above the minimum repayment amount, paid during the loan term.
Affordability: Measured by an index which is the ratio of your average household disposable income to the income required to meet the repayments of the loan or loans concerned.
Amortisation period: The period of time you have to repay the loan at the agreed rate.
Annual percentage rate: The rate of interest being charged per annum (APR).
Application fees: Fees charged to cover or partially cover the lender's internal costs for processing the loan approval for the borrower.
Appraised Value: An estimate of the value of the property offered as security for the loan. The valuation is by a licensed valuer for the lending purposes and may not reflect the actual market value.
Assets: Everything that a person or company owns or has a right to, from which a benefit can derive. Net Assets, are assets in excess of liabilities. Liquid Assets are ones which are or can be readily converted to cash.

B

Balance sheet: A statement at a given point in time, of assets, liabilities and net worth for individuals or businesses.
B-pay: Method of making one off principal payments to a loan.
Bridging finance: Short term loan to cover the financial gap between buying a new property and selling the current property.
Broken period interest: The first payment for a borrower may be for an amount greater than their normal payment as it includes interest charged from the settlement date to the start of the borrower's repayment cycle.
Building inspections: An inspection that is carried out, prior to purchasing, by a licensed builder to ensure a property is structurally sound.

C

Capital: Accumulated wealth, surplus of assets over liabilities.
Capitalising interest: When interest that has accrued is added to the total debt rather than being paid when due.
Capital Gain: The monetary gain received when an asset is sold for more than the original price.
Capital Gains Tax: A federal tax charged on the financial gain made on the sale of an asset purchased and sold after Sept 1985.
Caveat: Latin word for 'beware'. Sometimes registered on title deed to indicate that other parties may have a financial interest.
Certificate of title: Property ownership document.
Comparison rate: Also known as the 'true rate' which takes into account all fees and charges.
Compound interest: Interest that is paid on the accumulated interest as well as the principal amount.
Construction loan: A loan for the purpose of building a dwelling. Loan is generally drawn in progressive stages relative to the construction.
Consumer credit code: An Act of Parliament governing the relationship between borrowers and lenders.
CRAA - Credit Reference Association of Australia holds credit details on borrowers.
CRAA: Credit Reference Association of Australia holds credit details on borrowers.

D

Debtor: Someone who owes money to someone else.
Default: Failure to meet debt payments by the due date.
Deferred Establishment Fee: Also known as early payout fee payable on a reducing scale up to year 5 of a loan e.g. ranging from 0.20% to 1% of total loan amount.
Deposit Bonds: Used as surety when cash isn't readily available at short notice to pay deposit on a property. Institutions that provide deposit bonds act as a guarantor that the deposit will be made.
Direct debit: Loan payments made by way of direct debit to a nominated bank account.
Disposable income: Income that is available after all known expenses have been met.
Draw down: To access available loan funds, especially referring to lines of credit where the limit has been set and you can use the funds as required.
DSR: Debt Service Ratio - Maximum of applicants wage which will support loan repayments of an agreed term. Generally expressed as a percentage -usually the maximum DSR between 30% to 33%.

E

Equity: The percentage or amount of an asset actually owned, (after loan amount has been deducted).
Equity loan: A loan secured by the part of the value of an asset (usually a house) which you own. (Also known as an equity mortgage).
Establishment fee: Also know as application fee.
Exit fees: Also known as break costs.

F

Features: Applies to attributes of a loan product e.g. redraw facilities, combination loan facility, portability.
First Home Owner Grant Scheme (FHOGS): Government grant to assist first home buyers with purchase or construction of their first home.
Fixed interest: The interest rate is fixed for an agreed period.
Freehold: Common term meaning the proprietor of the land has absolute ownership of the property.

G

Garnishee: To legally divert part or all of someone's money or property to a third party.
Gearing: The ratio of your own money to borrowed funds in an investment.
Guarantee: A promise bound by terms of a contract.
Guarantor: A person or entity who agrees to be responsible for payment of someone else's debts.

H

Holding deposit: Refundable deposit paid based on goodwill to complete a purchase.
Home Equity Loan: Loan secured by the value of a property.
Honeymoon rate: Also known as an Introductory Loan, to encourage borrowers at a reduced interest rate for 6-12 months, which generally reverts to a higher than standard interest rate at the end of the term.

I

Income statement: A statement of income and expenses for a period, usually on year.
Insurance: General building insurance required for security properties (as distinct from Loan Mortgage Insurance).
Internet banking: Refer Loan Access System.
Interest: Can be daily or monthly, fee charged by lender for use of their money or return on deposited funds.
Interest only: Arrangement where payments are made on interest, not the principal amount, usually short term.
Interest only loan: A loan where the interest is paid during the term and the principal is repaid at the end of the term. These loans are usually short term loans.
Introductory loan: A loan offered at a reduced rate for an introductory period to new borrowers.
Investment loan: Where funds are used to purchase an investment property.

I

Joint Tenants: Equal ownership of a property where if one party dies their share passes to the survivors.

L

Land Tax: Based on property value. State Government tax payable by the owners of the property.
Leasehold: The right to use and have exclusive possession of property (not ownership) for a specified period subject to conditions spelt out in a lease agreement.
Legal fee: May be charged where an outside party is used to prepare bank documentation.
Lenders Mortgage Insurance (LMI): This is a one off payment usually paid at time of settlement and allows the lender to recoup the unpaid principal in the event of default and the borrower's debt is transferred to the Mortgage Insurer.
Liabilities: Someone's debts or obligations.
Line of credit: Flexible loan which has a ceiling where funds can be used at customer's discretion without re-application.
Loan access system: Method for borrowers to view or transact on their loan via internet or touch phone.
Loan maintenance fee: Lenders loan management fee charged over the life of the loan. (Also called on-going fee).
Loan security duty: Same as mortgage stamp duty.
Lo-doc loan: A loan available to applicants who are unable to demonstrate on paper the required income levels to service the loan.
LVR: Loan to valuation ratio. The maximum amount lenders will approve against the value of a property expressed at a ratio.

M

Maturity: The date on which a debt or other borrowing is due to be repaid.
Mortgage: A form of security for a loan usually taken over Real Estate. The lender, as mortgagee, has the right to take the real estate if the mortgagor (borrower) fails to repay the loan.
Mortgagee: The lender of the funds.
Mortgagor: The person borrowing the funds in the terms of the mortgage.
Mortgage originators: A person or organisation marketing numerous loans from a panel of lenders.
Mortgage discharge fee: Administration fee charged by the lender to cover the costs incurred in winding up the loan.
Mortgage insurance: See lenders mortgage insurance.
Mortgage offset account: A savings account run in conjunction with a home loan. The interest 'earned' on the account is applied to the interest paid on the loan to reduce the interest payable on the mortgage.
Mortgage protection insurance: This covers borrowers' loan repayments in the event that they are not able to honour them through illness or redundancy.
Mortgage registration fee: A state government charge for the registration of a loan.
Mortgage stamp duty: A state government tax assessed on the dollar value of a mortgage.

N

Negative gearing: Where the return on an investment is insufficient to meet the interest and other costs of the loan.
Non conforming loans: Loans available to applicants who do not meet the criteria for regular lending due to impaired credit history, insufficient income or business start up finance.

O

Offer to Purchase: A written offer of a specified price for a specified property.
Offset account: See mortgage offset account.
Ongoing fee: Any loan maintenance fee charged regularly over the life of a loan.
Overdraft: Prearranged limit to which a person or entity can exceed the account balance.

P

Portable loans: A portable loan allows you to sell your house and move to a new one without having to refinance. Most lenders request that the amount be the same or less than the current loan.
Principal: The total amount borrowed on which interest is paid/charged.
Principal and Interest Loan: (P & I) A loan where both the principal and interest are repaid during the loan term.
Private Treaty Sale: Sale of property via an agent through private negotiation and contract.

R

Redraw facility: A redraw facility allows you to make additional repayments on your mortgage and then have access to the additional repayments when necessary.
Refinancing: To replace or extend an existing loan with funds from the same institution or another.
Residential Investment Loan: A loan to purchase a property intended for investment purposes as opposed to owner-occupied.

S

Security: An asset that is offered to the lender guaranteeing the borrowings until the loan is repaid in full.
Serviceability: Refer affordability.
Settlement date: The date on which the new owner finalises payment and assumes possession.
Split loans: Loans or portions of loans may be split into "principal & interest" or "interest only" and either at a fixed interest rate or variable rate.
Stamp Duty on loan: See mortgage stamp duty.
Standard Variable Rate: The rate which lenders apply to their standard home loan product.
Stratum Title: This title gives legal ownership over a property and also gives a share in the company set up to look after common areas of the unit or flat concerned.
Switching: Converting from one loan type to another, e.g. variable to fixed. Also known as post settlement variation.

T

Tenants in common: The equal or unequal holding of property by two or more persons. If one party dies, the property is divided according to law.
Term: The length of a home loan or a specific portion within that loan.
Title fees: Fees payable to the states Land Title Office for the title search to have transfer of property ownership, registration of the new mortgage and discharge of the old one.
Title Search: A search undertaken of records registered at the lands titles office to confirm interests in land of a property.

U

Uncommitted Monthly Income: Your available net income once all monthly expenses including loan payments have been taken into account - refer "Affordability".
Unencumbered: A property free of liabilities, encumbrances or restrictions.
Uniform Consumer Credit Code (UCCC): Government Act to regulate home loan lending on a national basis.

V

Valuation: A report as required by the lender, detailing a professional opinion of the properties value.
Valuation fee: Fee for preparing the valuation report.
Variable interest rate: A rate that varies in accordance with the rates in the marketplace.

Z

Zoning: Falls into many categories, most commonly commercial and residential. Local councils and Planning Authorities control the use of land and designate zoning accordingly.