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Common Terms

Acceptance
Agreement to the terms of an offer or contract.

Additional repayment
Extra funds paid into the loan in addition to the minimum monthly payments.

Agent
Real estate agent

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.

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.

Break costs
Sometimes called exit fees, these are the costs involved in paying off a fixed-rate mortgage prior to the end of its term.

Bridging loan
A short-term loan taken out when one property is sold before the next one is purchased.

Broker
Sometimes called the buyer’s agent, a person who acts on behalf of the borrower to negotiate with lenders to find the ideal loan.

Collateral
Additional or supporting security given in addition to the principal security.

Construction loan
A loan taken to fund the building of a new home usually in five stages to coincide with land purchase, foundations, roof, lock up and handover of keys.

Contract of sale
A written agreement outlining the terms and conditions for the purchase or sale of a property.

Conveyancing
The legal process for the transferal of ownership of real estate.

Debt consolidation loan
A loan (usually a mortgage) taken out to pay off several smaller loans all in one go.

Debtor
Someone who owes money to another and can be compelled to perform an obligation.

Encumbrance
A charge or liability, e.g. a debt, loan or mortgage.

Equity
The difference between what a person owns and what he owes (i.e. assets – liabilities = equity). The bulk of most people’s equity is in their homes.

First home buyer loans
Loans with special features designed for people buying their first home.

First Home Owner Grant
An incentive paid to first time home owners by state or territory governments.

Fixed Rate (fixed interest)
An interest rate set for an agreed term.

Flexible repayments
Repayments on a loan that allows the borrower to repay in a number of ways including fixed rate, variable rate, a mixture of the two or interest-only.

Government fees
State and government charges at the time of settlement, e.g. stamp duty.

Guarantor
A person/s who agree to be responsible for the payment of another person’s debts.

Home Buyer’s Assistance Account
A grant of up to $2,000 for first home buyers who purchase an established home for $400,000 or less.

Home loan
Another term for mortgage.

Interest
The Lender’s charge for the use of funds or the return on deposited funds.

Interest-only loan
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.

Investment loan
Money borrowed to fund the purchase of property which will be rented or leased.

Lender
A bank, building society, credit union or any recognised financial institution that lends money.

Lender’s mortgage insurance
Insurance taken out by the lender to cover non-payment of loan. The premium is paid by the borrower.

Line of credit equity loan
A loan which allows home owners to borrow an agreed amount from the equity in their home as and when they need it.

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.

Loan portability
The ability to keep your existing mortgage and take it with you when you move house.

Low doc loan
A property loan which does not require the borrower to provide tax returns, bank statements or other documentation.

LVR
(Loan to Valuation Ratio) the ratio between the amount lent and 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 property.

Mortgagee
The lender of the funds.

Mortgage protection insurance
Insurance taken out by the borrower to cover the eventuality that mortgage repayments cannot be made.

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.) outweigh the income produced by the investment, leading to a reduction in taxable income.

Net Income
The income received by an individual AFTER TAX has been taken out.

Non bank lenders
Lenders other than banks such as building societies and credit unions.

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 interest are paid during the term of the loan.

Professional package loans
A fee-charging loan for those borrowing large amounts – usually over $250,000 – with discounts on interest rates and some other financial services.

Property
A person’s property is described as “what he or she owns to do what they like with.” In the context of mortgages, property usually means a house or commercial building.

Purchaser
The person or persons who are buying a property.

Redraw facility
Borrower is able to draw on pre-paid funds.

Refinancing
To replace or extend an existing loan with funds from the same lender or another.

Repayment holiday
The ability to stop paying loan repayments for an agreed period such as maternity leave or time spent in hospital.

Repossession
The lender, or mortgagee, has the right to take back (repossess) a property if the mortgagor fails to repay the loan.

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 borrowings until the loan is repaid in full. Usually the property is offered to secure the loan.

Settlement
Finalisation of payment by the new owner, and assumption of possession. When you pick up the keys!

Split loan
A loan which can be repaid using both fixed and variable interest rates.

Stamp duty
A tax on the sale of goods and property paid by the purchaser.

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 (someone 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.

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 rate
An interest rate that changes in accordance with the rates in the marketplace.

Vendor
Person selling a property who is the current owner.

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