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Loan to Value Ratio

Mortgage

A mortgage is where a property is offered as security for a loan. The loan finances the property, with the property being owned by the lender until payment has completed. The ownership of the property transfers from the lender to the borrower when the loan has been repaid.

Mortgage Insurance

Some lenders may provide a higher LVR (link to loan to value ratio) for a loan; if you take out mortgage insurance. This figure is a one off payment usually made at the time of settlement. The figure is calculated based on the loan amount, the value of your property and the LVR. The mortgage insurance protects the lender in the event of payment default when the borrower's debt is taken over by the insurer.

Mortgage Offset or Offset Account

This option allows you to set aside cash in a savings account attached to your loan.  Any money deposited in this account is subtracted against the outstanding balance of the loan for the purposes of calculating daily interest charges.  For example, if your loan was $300,000 and has $10,000 deposited in an offset account, then interest is calculated on $290,000 reducing the interest payable.

Mortgagee

The institution/lender who lends the money 

Mortgagor

The person who borrows the money 

Negative Gearing

Where the return on an investment is insufficient to meet the costs of the investment, leading to a reduction in assessable income for tax purposes

Net Income

Gross income less tax

Non-conforming loans

Also called 'Sub-prime lending'. Non conforming loans cater for persons who do not meet the standard criteria mainstream lenders use for ordinary borrowers.  Examples include persons who are self-employed, have a poor credit record or who have recently arrived in Australia.  Non-conforming loans usually incur higher interest rates.

Portable Loans

A portable loan allows you to sell your house and move to a new one without having to refinance. This saves application and legal fees, but as a caveat: the loan amount usually has to be the same or lower than the one for your current property.

Pre-Approval

When a lender advises you in writing how much they will lend you, subject to lending terms and conditions

Principal Amount

The loan amount required to assist complete the purchase.

Redraw Facility

This allows you to access (or redraw) money from your loan when you have made additional repayments.  Some loans have fees attached to this feature. 

Refinance

To move your loan from one lending institution to another

Reverse Mortgage

These loans are for people who find themselves later in their life owning their own home (or owning most of it) but requiring more cash for living costs, travel, etc.  A reverse mortgage allows such a person to borrow against the value of their home and access the equity without having to sell the property immediately.  No repayments are generally required during the life of the loan, with the total interest, fees and charges being recuperated from the value of the estate at the borrower's death.

Service Fee

Usually a monthly fee covering lender cost of administering & maintaining the loan account

Settlement

The completion of the sale transaction.  Final payments are made at settlement in exchange for the property contract and therefore ownership entitlement

Split Loan

Combination of either a variable (link to variable type loan) rate loan and a fixed (link to fixed type loan) rate loan or the combination of a standard (link to standard loan) term loan and a line of credit (link to loc)

Stamp Duty

Stamp duty is a State/Territory government tax which is calculated on the sale price of the property. Stamp duty is also payable on mortgage documents and is calculated on the amount borrowed.  More detail on Stamp Duty (link to stamp duty section)

Strata Title

Gives you ownership of a “unit” of a large building which you may sell or lease at your discretion.

Sub-prime

Also called 'non-conforming' (link to non confirming) loans.   Click on the link for more information

Switching Fee

The lender may impose a switching fee where an existing borrower changes from one loan product to another, with the same lender.

Transfer

A document which allows the Land Titles Office to record change in property ownership. This form of transfer is used when the change of ownership is due to normal real estate trading i.e. buying or selling.

Uniform Consumer Credit Code (UCCC)

The Uniform Consumer Credit Code legislation regulates credit provided to personal customers and strata corporations and provides uniform standards for all forms of customer lending in all states and territories of Australia. The UCCC consists of a set of rules which regulate the conduct of the lender from loan advertising and throughout the duration of the loan. It enforces the Truth in lending principle, so that borrowers are provided with clear and factual information to assist them in choosing a home loan product.

Valuation

A report as required by the lender detailing a professional opinion of the property's value

Valuation Fee

Fee which may be charged if the lender seeks to cover the cost of valuing the property taken as security for the loan