Jul
28
2008

Glossary

Acceptance – Agree to the terms of an offer or contract
Additional Repayment - Extra funds paid into the loan in addition to the minimum monthly payments
Amortisation Period - The period of time a loan is calculated over (and repaid)
Application Fee - The fee charged by a lender to cover or partially cover the lender’s costs of setting up or establishing the loan
Arrears - An overdue account yet to be paid
Assets - Money, property or goods owned
Asset Lender - Lending institution that lends finance based on the value of the asset, which will be held as security
Assignment - Legal transference of a right or a title to a property, to another party
Borrower - A person, persons, or entity borrowing money to purchase, payoff, or refinance a product or effect
Capital - The current value of your assets, including car, property, business, or money etc
Capital Gain - The financial gain you get when you sell something for more than you bought it. Maybe subject to the capital gains tax, which is paid on the gained amount
Caveat - A notice of warning given to a public authority, e.g. Titles Office, claiming entitlement to an interest in certain land. The caveat is registered and remains on the books as a warning to anyone who contemplates dealing with the property. It therefore prevents any action being taken without the previous notice of the person entering the caveat (the caveator)
Charge (over property) - The term used to describe any right established over a borrower’s property to secure a debt or performance of an obligation

Collateral Security - Additional or supporting security given in addition to the principal security
Comparison Rate A comparison rate is a tool to help consumers identify the true cost of a loan. Comparison rates only have to be provided if a loan is regulated under the Uniform Consumer Credit Code (which is designed to protect consumers). This is; credit which is wholly or mainly for personal, domestic or household purposes.
Contract of Sale - A written agreement outlining the terms and conditions for the purchase or sale of property
Conveyancing - The legal process for the transferal of ownership of real estate
CRAA - The company which records and holds credit information on everyone. CRAA is now know as ‘Credit Advantage Limited’
Credit Advantage Limited - See CRAA
Daily Interest - Interest calculated on a daily basis – varies according to daily account balance
Debtor - Someone who owes money to another and can be compelled to perform an obligation
Deed - A document in writing, which is signed, sealed and delivered by the parties thereto, to prove and testify the agreement of the parties whose deed it is, to the things contained in the deed
Direct Debit - Where the Lender debits (deducts) a payment from client’s bank, credit union or building society account.
Disbursements - Solicitors incidental costs involved when dealing with client on behalf of the Lender, e.g. searches, certificates pest reports, etc
Draw Down - Act of transferring money from lending institution to the borrower after the loan has settled
Encumbrance - A charge or liability, e.g. a mortgage
Equity - Generally used to denote the financial interest of a person in a property or business enterprise, e.g. a person’s equity in his house is the difference between its value and the amount still owed to a Lender. A person’s overall equity refers to his net financial worth, or the difference between what he owns and what he owes (i.e. Assets – Liabilities = Equity)
Estate - An interest in land
Exchange - The legal point of time when the vendor and the buyer swap documentation with a view to settlement
Fee Simple - The estate in fee simple is the highest estate in the land, and it is the closest the law comes to recognising absolute ownership for all practical purposes. However, while we refer to a proprietor of an estate in fee simple (who is the owner for all practical purposes), their ownership is not legally absolute, for absolute legal ownership of all and rest with the Crown.
Fittings - Items that can be removed from a property without causing damage to it eg, carpet and curtains
Fixed Interest - An interest rate set for an agreed term.
Fixtures - Items that would cause damage to the property if removed. Their removal must be stipulated in the contract of sale, and damage made good by the seller eg. Oven and bath etc
General Lien - Sets out in writing the Bank’s right to retain property until a debt is paid. Includes Power of Attorney and other clauses generally contained in Bank security forms
Government Fees - State and government charges at the time of settlement, e.g. stamp duty
Gross Income - Income from a person or company, before tax, superannuation, or payroll deductions
Guarantor - A person/s who agree to be responsible for the payment of another person’s debts
Holding Deposit - A refundable deposit based on the goodwill of the buyer to go ahead with the purchase
Indemnity - Security against damage or loss; sum paid in compensation for loss incurred
Instrument - Formal legal document in writing, e.g. a deed of conveyance
Interest - The Lender’s charge for the use of funds or the return on deposited funds
Interest Only Loans - A loan where the principle is paid back at the end of the term and only interest is paid during the term. These loans are usually for a short period of time, 1 to 5 years
Joint and Several Liability - The Bank’s joint account authorities, guarantee forms, etc are framed to ensure that joint account holders with debts due to the Bank of joint guarantors liable to the Bank shall be SEVERALLY liable, (i.e. individually), as well as JOINTLY. With Joint and Several Liability a creditor has as many rights of action as there are debtors; he can sue them jointly or severally until he has obtained payment, and an unsatisfied judgment against one debtor will not be a bar to an action against the others
Joint Tenancy - Property in the names of two or more persons, where all persons have an equal interest in the whole property. When one person dies his interest passes to the survivor(s). They are known as Joint Tenants or Joint Proprietors of that property
Liability - A debt which one is liable for; being responsible only to a limited amount.
Loan - An advance of funds from a lender to a borrower on the agreement that the borrower pays interest on the loan, plus paying back the initial amount of the loan at or over an agreed time
LVR - The ratio of the amount lent, to the valuation of the property
Maturity - The date a debt or investment must be paid in full
Mortgage - A form of security for a loan usually taken over real estate. The Lender, the mortgagee has the right to take (repossess) the real estate if the mortgagor fails to repay the loan
Mortgagee - The Lender of the funds
Mortgagor - The person borrowing money in the terms of the mortgage
Negative Gearing - Gearing your investment so that the cost to maintain it (loan repayments, council rates, maintenance etc) out weigh the income produced by the investment, leading to a reduction in taxable income
Off The Plan Purchase - Buying a property from the plans only, not the finished product
Portability - Where a new property can be used as security for an existing loan, i.e. when the loan is transferred to a new security property without needing to repay the loan, reapply, or restructure
Power of Attorney - A written authorisation to another person, or persons, to perform certain acts for the signer, as if they were the signer
Principal - The capital sum borrowed on which interest is paid during the term of the loan
Principal & Interest Loan - A loan in which both the principal and the interest are paid during the term of the loan
Property - A man’s property is “what is ho own to do what he likes with.” It may be tangible or intangible, and may be given a monetary value (e.g. house, car, goodwill). Property may be classed ‘real’ which relates to land or interests in land (except leaseholds) and buildings, etc or ‘personal’, which relates to other kinds of property such as cars, bank accounts, leasehold interests in land
Redraw - Borrower is able to draw on pre
Refinancing - To replace or extend an existing loan with funds from the same institution or another.
Search - An examination to confirm that the vendor is in a position to sell the property and that there are no encumbrances on the property
Security - An asset that guarantees the Lender their borrowing until the loan is repaid in full. Usually the property is offered to secure the loan
Serviceability - Ability of borrower to make and meet repayments on a loan, based on the borrowers expenses and income(s)
Settlement - Finalisation of payment by the new owner, and assumption of possession. When you pick up the keys!
Surety - A person who makes himself responsible for another’s payment of debt; also knows as the guarantor
Tenants in Common - Property in the names of two or more persons and in which each has a separate and distinct share. When one person dies his share is not passed to the survivor(s) but becomes part of his estate for disposal according to his will
Term - The length of a home loan or a specific portion within that loan
Third Party Security - Security provided for a mortgage by a third party (some one different from actual borrowers) who is legally different from the borrower or debtor
Title Deed - Registration showing the ownership of property
Title Search - Process to ensure that the vendor has the right to sell and transfer ownership
Torrens System - System whereby ownership and all dealings on a property are detailed on the one document, i.e. a Certificate of Title or Deed of Grant. Under this system a mortgage is a charge or encumbrance on the title. Registrations is compulsory to effect legal transfer of an interest in property and each time the property is sold, mortgaged, or a mortgage discharged, the transaction is recorded on the Certificate of Title
Unencumbered - A property free of liabilities, restrictions or mortgages.
Valuation - A report as required by the Lender, detailing a professional opinion of a property’s value
Variable Interest Rate - A rate that changes in accordance with the rates in the marketplace
Variation - Changing any part of the original loan contract
Vendor - Person selling a property who is the current owner

 
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