A

AAPR

Average Annualised Percentage Rate. Sometimes referred to as the Compulsory Comparison Rate, this figure takes into account the other costs associated with the loan etc, and expresses them as an average interest rate, to create a level field with which to compare like loan product interest rates. Application fee

The fee charged by a lender to cover or partially cover the lender's costs of setting up or establishing the loan.

Asset Lender

Lending institution that lends finance based on the value of the asset, which will be held as security.

B

Basic Home Loans

Also known as 'Discount' Home Loans. These loans are a no frills version of the Standard Variable Home Loan. Generally they have fewer features than the Standard Variable Home Loan and are less flexible. These loans are only available for new borrowings.

Popular with first home buyers, basic home loans typically offer interest rates of half to one per cent below the standard variable rate. Many also have lower ongoing fees.

In return for a lower interest rate, basic home loans have fewer features and can be less flexible. Some lenders may offer the option to pay for extra features when you need them. There may also be fees and charges if you decide to switch loans or lenders, or pay off the loan sooner.

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BayCorp Advantage

The company which records and holds credit information on everyone, such as loan applications, credit defaults, and so on. Was originally known as CRAA, and may often be referred to as the 'CRAA Check'.

C

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).

Collateral Security

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

Comparison Rates Schedule (CRS)

Or CCR, is the figure expressed an interest rate, that takes into account some of the extra costs of a loan product. The formula used to calculate the CCR is regulated by the Uniform Consumer Credit Code and all Australian lenders are required to use the same formula.

Consumer Credit Code

Legislation designed to protect the rights of the individual (personal consumer) by ensuring banks and other financial institutions all adhere to the same rules when providing personal, domestic or household credit. It should provide borrowers with complete and honest information. Also known as the Uniform Consumer Credit Code or UCCC.

COSL

Credit Ombudsman Service Limited. Formerly known as MIOS (Mortgage Industry Ombudsman Service).

D

Disbursements

Solicitors incidental costs involved when dealing with client on behalf of the Lender, e.g. searches, certificates pest reports, etc.

E

Equity

Generally used to denote the financial interest of a person in a property or business enterprise, e.g. a person&$39;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).

Exchange

The legal point of time when the vendor and the buyer swap documentation with a view to settlement.

F

Fixed Interest (Fixed Rate)

An interest rate set for an agreed term.

Fixed Rate Home Loans

Fixed rate home loans offer a fixed interest rate for a set period of time, 1, 2,3,4,5, 7 or 10 years. Because of this, repayments remain the same for the duration of the fixed rate period. At the end of the fixed period, you can switch to a variable rate loan or negotiate a new fixed rate or even opt for a split rate loan.

They allow you to manage your loan repayments so you can budget for other financial priorities in your life. Fixed rate loans only allow limited additional repayments without penalty.

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G H I

Interest

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

Interest Only Home Loans

With an interest only home loan, repayments only cover the interest component. The principal is repaid in full at the end of the loan term. Because borrowers only repay the interest component, interest only loans have lower repayments than principal and interest loans.

These loans are usually for a short period of time, 1 to 5 years.

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J K L

Lenders mortgage insurance (LMI)

In cases where a lender borrows more than 80% of a property's value, they will usually be required to to pay lender's mortgage insurance that protects the lender should the loan default.

Line of Credit Home Loans

A line of credit home loan is a credit facility secured with a first mortgage on a residential property. Similar to a credit card, they allow you to withdraw funds up to a set limit at any time. Repayments can be made in full or on a monthly basis.

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L V R

(Loan to Valuation Ratio) the ratio of the amount lent, to the valuation of the property.

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M N

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.

O P

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.

Q R S

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.

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!

Split Rate Home Loans

A split or combination loan brings together the benefits of variable and fixed interest rates into a single home loan.

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Stamp Duty

Stamp Duty is a state government-based tax/fee calculated on the basis of property values. Stamp duty laws are different from state to state and may vary depending upon the circumstances of your property purchase eg. whether you are buying the property to live in, or as an investment. Stamp duty exemptions and reductions alson apply in some states.

Links to State Revenue Offices for local stamp duty information

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Standard Variable Rate Home Loans

The most common type of home loan based on the housing market's variable rate of interest. Just as it is subject to rate rises this loan can also provide you with interest rate decreases. These home loans are the most flexible offering a range of features.

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T U

Unencumbered

A property free of liabilities, restrictions or mortgages.

V W

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.

X Y Z