Technical Terms

 

AARP Stand for “Average Annual Percentage Rate” which endeavors to represent the costs of a particular loan, including fees and charges
Administration Fund Part of a Body Corporate, the Administration fund covers the day to day running of a Body corporate Property such as gardening, marinating pools, lifts, exterior of the building etc.
Aged Pension Is a Government Pension administered by Centrelink which provides a Pension to people who have reached the retirement age and don’t have enough Superannuation or other income to support themselves
Aggregator An Aggregator in Lending is a business which groups a number of independent Mortgage Brokers under them to provide support and larger amounts of services and lenders to the Brokers.
Alternate Verification A method of demonstrating Self Employed income without showing tax returns. Usually by showing Business Activity Statements to the Lender instead of full Tax returns. Very few lenders will accept Alternate Income Verification.
Annual Fee A fee charge by the Lender to the customer once a year for use of a particular product, loan or service. Particularly common on Professional Pack Loans and Credit Card
Apartment A private Residence within a building (usually a high rise) which shares some facilities such as lifts & Gardens with other private residences. Can also be referred to as a Unit or a flat but these terms are a little inaccurate in their legal definitions.
Application Completing an application form which is presented to a lender for the purpose of obtaining finance. It is not a legally binding contract to accept the finance.
Application Fee A fee some lenders charge for processing an application form. It can either be required before the lender assesses the application or rolled into the loan at settlement.
Approval When a loan application form is accepted either in part (Conditional Approval) or completely (Formal Approval)
APRA The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the Australian financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies, and most members of the superannuation industry. It is a Commonwealth Government Body
Arrears An unpaid, overdue debt or missed payment.
ASIC The Australian Securities & Investments Commission enforces and regulates company and financial services laws to protect consumers, investors and creditors. It is a Commonwealth Government Agency
Asset Lend See Equity Lend
Assets An item of value that is owned either outright or in part i.e. a house or car or furniture etc.
ATM Bank term for an Automatic Teller Machine, usually positioned outside banks for withdrawing money without the aid of a bank teller
ATO (Australian Taxation Office) The federal Government’s agency for collecting Tax
Auction A public sale where Items or items of Merchandise are sold to the highest bidder. A common way to sell property and Vehicles in Australia
Austudy Austudy provides government financial assistance to students aged 25 years and older. To be eligible for Austudy students must be undertaking full-time study which is defined as at least 9 units per semester. You will automatically lose your Austudy if you drop below this load
Bad Credit Any Arrears, writ, default, judgment, bankruptcy, summons etc. which may have a detrimental impact on your ability to obtain credit
Bailiff An official who is court appointed and who has the power to execute writs, processes, and repossessions. In the Case of a Foreclosure, a Bailiff appearing on your front door will usually mean you moving out very soon!
Bank An APRA approved deposit taking and lending institution
Bankruptcy An Act of Federal Law giving relief to people who cannot pay their debts. Bankruptcy usually lasts 3 years but will stay on your credit history for 7 years and may effect you lending ability for many years
BAS Business Activity Statement. All self employed people, partnerships, companies and businesses who are registered for GST are required to submit BAS to the ATO usually on a quarterly basis. The BAS is a summary of the sales and purchases that a business has made which the ATO use to calculate how much GST is owed or needs to be refunded.
Basic Interest Rate/Loan A Basic style loan has very few fees and charges and has an interest rate somewhat lower than the standard variable rate. While the Basic rate is a variable rate, it will remain below the Standard Variable rate for the life of the loan. It’s a “No Frills” style of loan. You don’t get very many features, but the interest rate and fees are lower
Baycorp Is a company listed on the Australian Stock Exchange which is a credit reporting agency. If you have been listed for a default, judgement, writ, bankruptcy etc. it is reported on your Baycorp File. Lenders will do a Baycorp search do discover whether you have any past credit problems. You may also access your Baycorp file by referring directly to Baycorp; they are obliged to send you File to you upon request although they may charge a fee of this service.
Beneficiary The receiver of property, funds or benefits, usually from an insurance policy or a will.
Bidding (Auction) To make an offer on a property in a public Auction. The highest bidder at an Auction doesn’t necessarily buy the property; the owner could have a reserve price higher than the highest bid which prevents the Auctioneer selling the property. In such cases the property will be passed in to the highest bidder and the negotiations can continue under private treaty.
Board Renting a room in a house, usually sharing amenities such as showers and kitchens. Boarders don’t always have a formal lease agreement and, as such, very few lender will accept income from board for loan serviceability purposes
Body Corporate A Body Corporate is a legal entity created when land is subdivided and registered to establish a Community Title Scheme. The scheme can be a Duplex, a residential Unit Block (units), a high rise accommodation complex (apartments), a shopping complex or a business park. Every owner in a Community Titles Scheme is automatically a member of a Body Corporate. Owners do not have a choice as to whether or not they will be a body corporate member. The Body Corporate handles the day to day running and maintenance of the common property such as gardens, insurance for the building, administering the sinking fund, maintenance of lifts, pools, tennis courts, BBQ areas etc. It is common practice to outsource these tasks to a Body Corporate Manager who may administer several different Body Corporates.
Body Corporate Insurance In a Community Title Scheme, the common property belongs to all the owners and is administered by the Body Corporate. This includes the exterior of the building and the common property of the interior of the building such as stair wells, lifts, common hallways, common balconies and common landings. It also includes some of the plumbing and electrical wiring inside the walls. As such, the Body Corporate must (by Law) have insurance on the building. Prior to settlement of a loan, the lender will require a copy of the building insurance to ensure that the building is adequately insured. The Body Corporate Insurance does not cover the interior of the individual dwellings and won’t cover appliances, carpets etc. To ensure that you are adequately covered, you should consider your own needs for insurance on the interior of your property in a Community Titles Scheme.
Bond A sum of money (usually 4 weeks rent) which the tenant of a property pays as security in the event of damage or rent arrears. Usually held and administered by a state government agency.
Boundary The perimeter of a property. Boundaries marked by fences etc. shouldn’t be relied on a being the legal Boundary, the only true way of determining the correct boundary is to have the property surveyed and pegged out. Fences have a habit of moving over time!
Break Fees The cost to end a loan or commitment. Most commonly used in relation to the cost to break a Fixed term early but can also be used to describe the costs to finish a home loan. See also Deferred Establishment fee.
Bridging Loan A Bridging loan is a temporary loan (usually 6 months) that allows you to purchase a property prior to selling a previous property. The lender will often service the loan on the end debt rather that the total borrowings. Bridging loans are often confused with Short Term Loans and 2nd Mortgages.
Brokerage A fee for service paid by the client to a broker for obtaining finance. Usually paid at the settlement of the loan out of the loan proceeds
Building Society A savings and loan association approved by APRA.
Business Loan A loan to obtain money for business purposes. A number of business lenders require the borrower to own property and/or will require a mortgage over the property
Capital Gain / Growth The difference between the price you pay for a property and the price you receive when you sell the property. Capital gains on investment properties are usually taxed (Capital Gains Tax) however capital gains on your primary residence is exempt. You should consult an accountant regarding Capital Gains prior to selling to confirm whether or not capital gains are payable. Particularly if you have moved into an investment property or rented out a property that was your primary residence.
Car Loan A loan to purchase a car which is secured against the car
Carers Allowance A Government Allowance administered by Centrelink for a person who is looking after a disabled person full time and can’t work because of that commitment
Casual Employment Generally, casual employees are employed on an irregular basis with no set roster or routine as to when they work. Furthermore, there is no guarantee of ongoing employment. Casuals, unlike permanent employees, are employed on an “as need” basis, often to meet a changing workload within the workplace.
Caveat Latin for “beware”. A caveat is a form of statutory injunction provided for under the Real Property Act 1900. When a Caveat is lodged against a property title, it effectively prevents the registration of any dealing (except for some statutory exceptions and any specifically permitted dealings) until the Caveat is withdrawn, lapses or is contested successfully in court. Caveats lodged without reasonable cause may leave the lodger open to compensation claims.
Caveat Emptor Latin for “let the buyer beware” In a real estate transaction it puts the onus on the purchaser to perform due diligence prior to purchasing the property with little or no comeback against the seller after settlement. The law does provide some right of recourse for a purchase if they were deliberately misled.
Centrelink Centrelink is a government agency delivering a range of Commonwealth services to the Australian community. Centrelink is set up so people can get more of the help they need in one place. Its primary role is to administer the payment of pensions and allowances.
Certificate of Currency (Insurance) A certificate of currency is a document provided to the insured by the insurer which confirms that the insurance policy is paid up to date and has a summary of the amounts insured and the beneficial parties. In Finance, the lender will often require a minimum insured amount on the policy as well as their interest noted if they have security over the item.
Certificate of title In a property transaction, all dealings of the property used to be recorded on the certificate of title. In these days of electronic systems, Certificate of Titles is being replaced by computer records. However, in some states, certificate of titles are still being used. Generally, the lender will hold the certificate of title until the mortgage is discharged.
Chattel An article of movable personal property such as a car, furniture or other possession of value. Used predominately in legal terms such as on a contract to buy a property to describe items included in the purchase i.e. pool maintenance equipment or pot plants. Can also be used to describe a type of personal finance over an item i.e. a car loan is often described as a “chattel mortgage”, the chattel being the car.
Chattel Mortgage A Chattel Mortgage or Commercial Loan Agreement is where a first registered Bill of Sale/Chattel Mortgage is granted by the borrower in favour of the lender. Normally the total Stamp Duty is payable up front. This facility is ideal for clients who operate their accounts on a cash basis and wish to claim the GST up front as input tax credit. This facility can be structured similar to a Commercial Hire Purchase facility. The term is usually 2-5 years and a balloon amount can also be structured into the loan depending on usage and depreciation of goods. This facility is ideal when financing motor vehicles
Childcare Allowance A government allowance administered by Centrelink for people who are sending children to approved daycare centers. Essentially it is to compensate for the cost of the daycare.
Collateral In finance, an asset (such as a car or a property) which the borrower must surrender to the lender if the loan is not repaid.
Commercial Loan A loan secured against a property of a commercial nature such as a shop, industrial shed, some rural property etc. They are similar to a home loan although different lending criteria and ratios apply
Commercial Property Any property of a commercial nature. The most common are shops, Offices, industrial sheds, rural property etc. Although the term will also cover more specific properties such as service stations, hotels, motels, clubs etc
Commission The fee a lender will pay a broker for a referred loan.
Common law title Consists of a chain of Title documents to track the ownership and dealings on a property. The Title is sound only if every document in the chain is sound. To trace a Common Law title is Complicated and expensive
Common property Areas in a Community Management Scheme which are shared by the Lot owners and managed by the Body Corporate. While technically not owned by the Lot holders, they have full use of any facilities subject to the by laws of the body corporate. These areas could include pools, tennis courts, driveways, hallways etc.
Community Title A Body Corporate is a legal entity created when land is subdivided and registered to establish a Community Title Scheme. The scheme can be a Duplex, a residential Unit Block (units), a high rise accommodation complex (apartments), a shopping complex or a business park. Every owner in a Community Titles Scheme is automatically a member of a Body Corporate
Company Title Similar in some respects to a community title, a company title administers the building by forming a private company and owners become shareholders in the company. Shareholders have exclusive use of their unit and all decisions affecting the property require a majority approval of the shareholders. The title system is old and rarely used these days however there are still some around. They can cause all sorts of problems when you try to get finance on them due to their unusual nature
Comparison Rate A single “artificial” percentage rate designed to capture all the costs of a particular loan, including fees and charges. The comparison rate came about because fees and charges have made it so much harder to compare home loans. A home loan with a 6.03% interest rate and no fees may end up costing you less than a 5.97% loan with a $10 monthly fee, a $600 valuation fee, redraw fees and a $2000 early-exit fee. Australia’s lawmakers have agreed that for a three-year trial period, all lenders and brokers must provide comparison rates: In their ads, in their offices & at the time they hand you an application form. The comparison rate is based on a $150,000 loan paid off over 25 years. The comparison rate can be useful but of course, it isn’t perfect. It won’t be very accurate if you’re taking out a $600,000 loan that you expect to redraw from and then refinance in five years’ time. And it requires borrowers to deal with two interest rates rather than one.
Comparison Rate Schedule A list of comparison rates designed to let you choose the comparison rate calculated on the basis which most closely matches your loan. A lender or broker must provide a comparison rate schedule whenever they give a borrower a loan application form.
Conditional Approval A conditional approval happens after you have submitted an application to a lender but before formal approval. It effectively says that you appear to fit the lenders criteria however they need something else to happen before the loan is formally approved. They could require a valuation to be carried out on the property or they might be missing some important paperwork such as loan statements or a letter from an employer confirming your wages. Once the condition has been fulfilled to the lenders satisfaction, the lender should then proceed to formal approval
Construction Loan Used to build residential houses, duplexes and also for major renovations, a construction loan is the facility whereby the lender can liaise with the builder and complete the construction in sections. Once the construction is complete, the loan reverts to a standard loan for the remainder of the term.
Contract of Sale A legally binding document setting out the terms and conditions of a property sale. To form a contract, the parties must have agreed on all terms, signed the contract and the purchaser needs to have paid a consideration (deposit). The property is then transferred according to the terms and conditions of the contract.
Contractor A self employed person who is employed by another business via a contract
Conveyancing The transfer of ownership on a property from a seller to a buyer, in most cases it is performed by solicitors acting on behalf of their respective clients.
Council / Shire The local council authority in which your property resides and to whom you pay rates
Council Rates Council rates are the local government levy which funds the administration of the council and the local council amenities. Council rates are considered to be a regular expense and most lenders won’t refinance a property while rates are in arrears. Most people don’t know that the local rating authority has the right to sell the property to repay rates that a considerably in arrears.
Covenant Terms, conditions and restrictions noted on the certificate of title regarding a property. The covenant may specify a certain style or standard of building to keep in with the surrounding properties etc.
Cover Note (Insurance) A cover note is a short term insurance cover prior to a full insurance policy being accepted and the premium paid. They are becoming quite rare these days as most insurance companies don’t want to do them anymore; they would prefer to just do the whole policy over the phone. A cover note cannot be used instead of a Certificate of Currency for lenders replacement value requirements.
Credit Card A plastic card, usually with a pre-approved limit, allowing the user to obtain goods and services without the use of cash. Credit cards usually have a higher interest rate than most other forms of credit and can cause financial difficulties if used irresponsibly. The most common forms of Credit Card are Visa, MasterCard, Bankcard American Express & Diners Club
Credit History A record of your credit over the last 5 to 7 years as recorded by one of the credit recording agencies (Baycorp & Dunn and Bradstreet). You can obtain a copy of your credit history by contact either of those two agencies directly. Contrary to popular belief, your credit history doesn’t show whether you have obtained credit or whether you have made all your payments on time, it only shows who you have applied to for credit and if you have any registered defaults, judgements, writs, bankruptcies and any business names or directorships. Commercial credit checks are also available for companies and business names.
Credit Union A financial Service co-operative owned and controlled by the people who use it. They provide similar services to Banks and Building Societies
CSA (Child Support) The Child Support Agency, which is part of the Department of Family and Community Services, is responsible for the administration, assessment and collection of child support payments for Centrelink customers receiving Family Tax Benefit. The Child Support Agency can collect child support payable under court orders or registered agreements. When child support is paid through the Agency, the amount may be deducted from the paying parent’s wage or salary (together with tax) or paid directly to the Agency.
Debt agreement A term that is perhaps too loosely used in the industry because it can mean a couple of things, however it’s most common use is for a debt agreement under the bankruptcy act. A debt agreement can take several forms but the most common is the Part 9 which runs over 3 years and you pay your creditors a set monthly fee without interest charges to repay your debts
Debt Consolidation Combining 2 or more debts into one to reduce the interest rate and/or reduce the number of different payments required each month. The most common form is using the equity in your home to consolidate your consumer debts into your mortgage
Debt Councilors A professional person who gives advice on reducing and eliminating debt
Debt Mediators A professional person who intervenes at your request to negotiate with your creditors for different terms on a debt. Generally used prior to a debt agreement or bankruptcy
Default To miss payments on a loan which may cause a default to be registered on your credit history and may impede you from obtaining future credit
Defence Force Home Loans A home loan for people who have served in the defence forces at a reduced interest rate. Usually capped to a certain amount.
Defence Service Pension A service pension provides a regular income for people with limited means.  A service pension can be paid to veterans on the grounds of age or invalidity, and to eligible partners, widows and widowers.  It is subject to income and assets tests
Deferred Establishment fees A fee on loans discharged within the first few years of the loan being taken out. The fee varies from lender to lender as does the number of years it applies to. Not all lenders charge the Deferred Establishment fee.
Deposit In lending, it is a sum of money provided by the purchaser to complete a purchase of a property. For Real Estate agents, it is the initial holding money to show good will in a purchase contract.
Deposit Bond A facility where an insurance company provides a letter of deposit without the purchaser putting in cash. They are usually secured against an asset such as a property.
Direct Debit A method of payment in which the payer authorizes the payee to take funds from the payer’s bank account, as for paying monthly bills; an instruction to a bank for this transaction
Disability Pension A Commonwealth Government Pension administered by Centrelink available to people who have a permanent Injury, illness or disability that will prevent you working for at least 15 hours a week within the next 2 years. The impairment must be greater that 20 points on the impairment tables and you or your partner’s income must be below a certain amount.
Discharge The act or instance of removing an obligation, burden or responsibility. In finance, to complete a loan & remove a mortgage from a property
Discount Rate A discount on an interest rate, usually for a short period of time i.e. 6 or 12 months. sometimes referred to as a Honeymoon rate
Discretionary Trust A Family Trust (also called a Discretionary Trust) is one of the most common small business structures in Australia. Unlike, say a Unit Trust, you establish a Family Trust to benefit the members of a family. Family Trusts provide families with a great deal of flexibility in sharing the tax burden among family members and protecting family assets
Dividends A share of profits received by a stockholder
Duplex A Community Title property with two residences on it.
Dwelling A place to live in; an abode
Easement A right such as a right of way or right of access afforded to a person to make limited use of another person’s real property
Eftpos Electronic Funds Transfer Point Of Sale – A method of electronic payment which allows money to be transferred from the account of the shopper to the merchant in close-to real-time. Generally the shopper will give the merchant a credit or debit card, which will be swiped to obtain the account information. The shopper will then be required to either sign a receipt or enter a PIN via a keypad to authorise the transaction
Encroachment Something (as a structure) that encroaches on another’s land
Encumbrance A Lien or claim on a property
Equity The residual value of a business or property beyond any mortgage thereon and liability therein
Equity Loan A line of credit secured against the equity in property  by way of a mortgage
Establishment fee A Fee to establish a loan can also be known as an application fee, although some lenders charge both an application and an establishment fee, particularly if the processing of the loan has been outsourced to another business.
Estate 1. The whole of one’s possessions, especially all the property and debts left by one at death. 2. A housing development
Factoring The selling of a company’s accounts receivable, at a discount, to a factor, which then assumes the credit risk of the account debtors and receives cash as the debtors settle their accounts. Also called accounts receivable financing.
Family Allowance Family Allowance provides assistance for families for the costs of raising children and is paid at a rate determined by income and assets, marital status, age and number of children and whether the family is renting privately. It reduces as family income increases until the minimum rate is reached. Families whose incomes move beyond the applicable income limits are excluded from Family Allowance entitlements
Family Tax Benefit A supplementary income source for people who have children. It is administered by Centrelink and comes in two parts, Part A & Part B. The Family tax benefit is means tested
Family Trust A Family Trust (also called a Discretionary Trust) is one of the most common small business structures in Australia. Unlike, say a Unit Trust, you establish a Family Trust to benefit the members of a family. Family Trusts provide families with a great deal of flexibility in sharing the tax burden among family members and protecting family assets
FBAA Finance Brokers Association of Australia.
Fees Most loans in Australia have fees of some description attached to them whether its application fees, settlement fees, deferred establishment fees, monthly fees or annual fees. Different lenders charge some but not others and at different amounts. The comparison rate was brought out to try and make the loan fees more transparent however the comparison rate isn’t perfect by any stretch of the imagination. If you are concerned about loan fees, ask your broker for a full breakdown of all fees that could be payable on the proposed loan. A full breakdown of all fees will also appear in the Mortgage Documents which you are required to sign prior to a loan settling
Finance Broker A person who obtains finance for a client and is paid to do so. For a finance broker, phone 1300 139 883
First Home owners grant A one off Commonwealth government grant of $7000 paid when you purchase your owner occupied dwelling. To be eligible, you or your spouse must not have owned property in Australia before.
Fittings For Real Estate – Fittings are objects in a property that are attached such as light fittings, plumbing features etc.
Fixed Rate Loan A rate of interest that is a fixed for a certain period of time. Common for home loans
Fixtures Something attached to a property that is deemed to be part of that property i.e. plumbing
Flat An apartment on one floor of a building
Foreclosure A situation in which a homeowner is unable to make principal and/or interest payments on his or her mortgage, so the lender, be it a bank, building society, credit union or other lender, can seize and sell the property as stipulated in the terms of the mortgage contract
Formal Approval When the lender has completed all their checks and are satisfied to lend you money, they may issue a formal approval with the basic terms and conditions prior to mortgage documents being issued.
Freestanding A building that stands unattached to any others i.e. a house
Full Time Employment Being employed on a regular 48 hour week with all benefits and entitlements under law, Holiday pay, sick pay etc.
Fully Detached Dwelling See Freestanding
Fully Verified Income A method of proving income to a lender by way of showing pay slips, group certificates, tax returns and (for self employed) profit and loss statements and ATO notices.
Gazumping Raising the price of a property after agreeing on a lower price (often involving another party)
Government Fees Government fees are charged on real estate transactions and mortgages. They can include stamp duty, lodgement fees, discharge fees, transfer fees and many others.
GST Goods and services tax. A federal Government tax on goods and services currently set at 10%
HECS Debt HECS offers Commonwealth loans to assist students to pay their higher education fees and to study overseas.
Hire Purchase The Commercial Hire Purchase (CHP) agreement is simply a contract where the financier (the ‘owner’) allows you (the ‘hirer’) the right to possess and use a car or other vehicle in return for regular payments. A balloon payment (a final payment made at the end of the term – ideally this payment should be no more that the estimated value of the car at that time) is optional with a hire purchase agreement. When the final payment of the commercial hire purchase is made, the title to the goods is transferred to you.
Home Loan Consultant A person who obtains finance for a client and is paid to do so. For a finance broker, phone 1300 139 883
Honeymoon Rate Some lenders offer a discounted introductory or ‘honeymoon’ interest rate which usually lasts six moths or one year of the mortgage.  After the first year the rate usually reverts to the ‘standard variable’ rate
House A free standing dwelling on a lot of real property.
Income The amount of money or its equivalent received during a period of time in exchange for labor or services, from the sale of goods or property, or as profit from financial investments
Industrial Property Property zoned for industrial businesses and activities
Insolvency Unable to meet debts or discharge liabilities; bankrupt
Interest A charge for a loan, usually a percentage of the amount loaned
Interest Only A type of loan where only the interest is paid, the principle amount does not reduce
Internet Banking Accessing and using a banks facilities to transfer money and pay bills by way of a computer and the internet
Investment An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price
Joint Tenants A tenure by two or more persons of estate by unity of interest, title, time, and possession, under which the survivor takes the whole
Judgement A court act creating or affirming an obligation, such as a debt. A judgement against you will appear on your credit history and may impair your ability to borrow money in the future
Land Tax A capital tax on property imposed by municipalities; based on the estimated value of the

 

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Dorian Traill is the current Director of Grand Capital Finance Group and Fountain Property Group. He specialize in home loans for people as well as helping them build wealth through quality investment properties that ultimately lead to long term financial freedom.

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