Here is a list of most common terms you may hear when getting a loan and purchasing a property. We hope this helps you!
AMORTISATION PERIOD
The time taken to repay a debt, including accrued interest, in full through regular repayment.
CERTIFICATE OF TITLE
Documents the ownership of or interest in land. It provides a description of the land, proprietorship and shows any registered interests such as mortgagees, charges and caveats. It also shows any restrictive covenants and easements which affect the estate or interest.
CONTRACT OF SALE
The written agreement detailing the terms and conditions for the sale of a property. It is usually prepared by the vendors solicitor or conveyancer.
CONVEYANCING
The legal process where the ownership of a property is transferred from one party to another.
BREAK COSTS OR PREPAYMENT FEES
May be charged if you switch loan products, make additional repayments to your fixed rate loan or repay your loan in full during the fixed rate period. It is important to ask your lender if these fees will apply to your loan, and to understand if and when they would be payable.
COMPARISON RATE
A single percentage rate figure that takes into account the interest rate and most fees and charges associated with the loan. The comparison rate can help you to compare the true cost of a loan between lenders.
CERTIFICATE OF TITLE
Documents the ownership of or interest in land. It provides a description of the land, proprietorship and shows any registered interests such as mortgagees, charges and caveats. It also shows any restrictive covenants and easements which affect the estate or interest.
COOLING OFF PERIOD
A period of time, usually between 24 hours and 14 days, during which an individual or organisation can decide not to continue with a contract. Cooling off periods vary in each state of Australia.
MORTGAGE
A legal document between a borrower and a lender. A mortgage gives the lender a conditional right to the property that is held as security for the repayment of the money that has been lent.
LENDERS MORTGAGE INSURANCE
Lenders Mortgage Insurance (LMI) is insurance taken out by the lender and provides a safety net to the lender in the event that you, the borrower, default on your loan repayments. The cost of the insurance premium is usually added to your loan and paid off along with the rest of the loan. With LMI, a lender may accept a smaller deposit than the 20 per cent usually required, which can get you into your home sooner.
EQUITY
Homeowners often talk about how much equity they have in their house. Property investors often talk about how much equity they have in their portfolio. This is the value of the property (or portfolio) over and above the amount they owe on their loan(s).
LOAN AGREEMENT
A formal contract between you and a lender which sets out the terms and conditions of your loan.
FIXED INTEREST RATE
Fixed interest rate loans lock your monthly interest repayments at a set rate for a period (typically one, three or five years), after which they will revert to the standard variable rate. They can be a good choice for buyers who want certainty around interest payments, but beware of break costs or prepayment fees if you try to change your loan or want to make additional repayments.
OFFSET ACCOUNT
A mortgage offset account is a bank account that is linked to your home loan. The savings in this type of bank account reduces the balance of your loan on which interest is calculated. This reduces the amount of interest you will be charged and can assist you to pay your loan off sooner.
REDRAW
This is an optional feature on certain home loans that allows access to any additional repayments made on your home loan. If you redraw funds from your home loan, your outstanding balance will increase.
VARIABLE INTEREST RATE
If your loan has a variable interest rate, the interest charged on the outstanding balance of your loan may increase or decrease in line with the official cash rate set by the Reserve Bank of Australia. Lenders may also change your regular loan repayment amount based on changes in the interest rate. Lenders do not have to track changes in the cash rate and you should make allowances for higher-than expected increases.
Disclaimer: This article provides general information only and may not reflect the publisher’s opinion. None of the authors, the publisher or their employees are liable for any inaccuracies, errors or omissions in the publication or any change to information in the publication. This publication or any part of it may be reproduced only with the publisher’s prior permission. It was prepared without taking into account your objectives, financial situation or needs. Please consult your financial adviser, broker or accountant before acting on information in this publication.