AAPR
Average Annual Percentage Rate - an "artificial" rate that tries to capture all the costs of a particular loan, including fees and charges.
eChoice lists AAPRs for each rate listed in our interest rate tables. eChoice's AAPR is based on a $250,000 loan paid off in monthly payments over seven years; you get a different AAPR if you calculate for a different loan amount, payment frequency or repayment period.
Accelerated approval
A process for having your loan approved quickly and without some of the usual checks – and hence, usually, more expensive.
Accelerated repayment
An arrangement that lets the borrower pay off more of the loan than the minimum set out in the loan agreement.
Account fee
An amount often charged by lenders to cover the cost of setting up and maintaining mortgages
Agent
A person authorised to act on behalf of someone (usually the owner) in the sale, purchase, letting or management of property.
All-in-one facility
A facility which lets you deposit all of your money in your loan account and then draw on that money for smaller expenses.
Allotment
Smaller parcels or portions of land subdivided from a larger area of land - also known as 'lot' or 'block'.
Application fee
The fee a lender often charges to cover their costs in setting up a loan approval for a home buyer. Some lenders do not charge application fees, but these lenders tend to charge higher interest rates. But this is not always the case.
Assets
The items you own and which are worth money in the open market – generally including your home, if you own it.
ATM
Automatic Teller Machine
Auction
Public sale where property is sold to the highest bidder.
BAD
Bank Accounts Debits Tax, a state tax on withdrawals from bank accounts.
Body corporate
All the owners of units or apartments of a strata building. These owners elect a council which handles administration and upkeep of the building.
Bond
Money paid by the tenant and held by the Rental Bond Board to ensure against losses due to non-payment of rent or damage to the property - usually equivalent to four weeks' rent.
Boundary
Line that defines perimeter of a property.
Breach of contract
When the conditions of a contract are broken.
Bridging finance
Short-term finance (usually at a higher than normal interest rate) that you take out while waiting for a loan or for your existing property to sell.
Building line
A line established by the local council. No building is permitted within the area between this line and the street boundary.
Building regulations rules
(Usually local council) These control public health and safety, and the manner, quality and acceptable standards of construction of any building.
Building society
An institution which takes deposits and provides loans just like a bank, but without the Reserve Bank oversight given to banks.
Capital gain
The difference between the price you pay for an asset and the price you receive when you sell it. Most capital gains are taxed, but capital gains on the sale of a home remain exempt from capital gains tax.
Capital growth
The difference between the price you pay for an asset and the price you receive when you sell it.
Caveat
Warning on a property's title to any purchaser that a third party has some right or interest in the property.
Caveat emptor
'Let the buyer beware' - the principle that puts the onus on buyers to be satisfied with any item before buying.
Certificate of title
Document identifying ownership of land showing dimensions of land, name of owner, details of mortgages, easements or encumbrances.
Chattels
Movable possessions (other than real estate), such as furniture, that may be included in a sale.
Collateral
An asset (such as a car or a home) which the borrower must give to the lender if the loan is not repaid. In a home loan, the home itself is usually the main collateral.
Commission
In home lending, the money that a lender pays to a mortgage broker when a borrower agrees to take out a loan through that broker. All brokers are paid commission - but eChoice's individual Home Loan Managers get a flat fee regardless of which loan they chose for a borrower. In real estate, the fee paid to real estate agent by owner for services rendered - usually for selling his/her property.
Common law title
Consists of a series of title documents called a "chain of title". The overall title is sound only if every document in the chain is sound. The legal investigations required are complicated and expensive.
Common property
Areas in a strata property that are not included in any of the owners' individual lots - all owners are tenants in common.
Company title
Older form of title for home units where owners are usually shareholders in a private company. Shareholders have exclusive possession of their unit (and car space if applicable). The approval of the majority of shareholders is required if you wish to lease, sell or transfer your shareholding.
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 loan application form
The comparison rate is based on a $150,000 loan paid off over 25 years.
The comparison rate can be useful. Of course, it isn't perfect.
It won't be so accurate if you're taking out a $400,000 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.
Contract of sale (contract)
Legal document setting out the terms and conditions for the sale of the property; a legally binding document when signed by both buyer and seller.
Conveyance
The transfer of ownership of property from seller's to buyer's name.
Conveyancing
The sometimes costly process of transferring a home’s official ownership from one owner to another (except in areas such as South Australia which use a legal process called Torrens Title).
Covenant
Terms, conditions and restrictions noted on the certificate of title regarding a property. The covenant may affect future plans or resale of the property.
Credit union
A financial services co-operative owned and controlled by the people who use it.
Deposit
Usually, this is the sum that you contribute to the cost of buying your home.
Lenders normally want a deposit at least 10 per cent of the cost of the property, although some lenders will accept as little as 5 per cent. (When you finally buy a home, the seller will also ask for a different "deposit" - a sum, often 10 per cent of the purchase price, that shows that you are serious about the purchase.)
Deposit bond
An amount of money that guarantees the buyer of a property will pay the full deposit when it's due.Deposit bonds are often used to give reassurance when a buyer can't provide cash immediately.
Downpayment
The money that a home buyer pays to the seller upon the signing of the agreement of sale.
The rest of the sale price is paid within a short period called a settlement period - typically, 90 days. The downpayment may not be refundable if the purchaser fails to complete the purchse without good reason. Often the contract of sale will set out the acceptable reasons for failing to complete the purchase will be set out in the sale contract.
Easement
The right for one person to use another person's property in a particular way (or, less commonly, to prevent it being used in a particular way).
EFTPOS
Electronic Funds Transfer Point of Sale - a facility provided by stores and service providers to let you pay for goods and services with your ordinary lender card, and often withdraw cash as well.
Encroachment
Use of part or adjoining property without consent. Usually a structure overhanging the street or neighbour's land.
Encumbrance
An impediment to the use or transfer of the property in the form of a right or interest in the property e.g. easement, mortgage or caveat.
Equity
The value of the "slice" of the home that you actually own - as opposed to the debt, which your bank or other financier owns.
The value of the "slice" of your home which you own outright – in other words, the amount of money you’d have if you sold the house and paid off your home loan.
If you own a $200,000 home with a $120,000 loan, you have $80,000 of equity; if the market suddenly values your home at $220,000, your equity jumps to $100,000 while your loan stays the same.
Your equity and debt in your home will together represent the home's value.
Establishment fee
An amount often charged by lenders to cover the cost of setting up new mortgages.
FID
Financial Institutions Duty, a state duty which all financial institutions pay on the money paid to them.
First Home Owner's Grant
A $7000 government grant available to Australians buying or building their first home.
Fitments
Items such as baths or stoves which are usually included in the contract and which cannot be moved without causing damage to a property.
Fittings
Items such as light fittings which are usually not included in the contract unless specified and which can be removed without causing damage to a property.
Fixed rate loan
A loan whose interest rate stays the same for a set number of years - the opposite of a variable rate.
Fixtures
Built-in items actually fixed in position, e.g. kitchen cupboards, linen or storage cupboards.
Flat interest rate
Interest calculated on the original amount of the loan for the whole term.
Freestanding
A building that stands unattached to any others.
Gazumping
Practice where seller agrees to sell to a particular buyer and then either sells to another buyer or raises the price if two or more buyers wish to purchase.
GST
A Federal Government tax on sales of all goods and services, set at 10 per cent.
Holding Deposit
Refundable amount paid to the real estate agent when the buyer decides to purchase a property. It is a goodwill, not necessarily, practice.
Home Loan Consultant
The eChoice staffer who will speak to you by phone immediately after we match you to a loan.
eChoice Home Loan Consultants have been selected for their years of lending experience and their ability to help prospective borrowers.
Most have run branches or groups of branches for major banks.
Home Loan Manager
The professional paid by eChoice to take care of your loan, completing and submitting your paper work.
They stay with you right up until the lender delivers your money. They receive the same fee no matter what the lender and no matter how big the loan - so their only incentive is to get you the right loan.
Honeymoon rate
A rate lower than the prevailing market rate, but which is raised to a higher rate after a short period - 12 months, for instance.
Interest
The charge you pay for the right to borrow and use someone else's money. It's expressed as a percentage of the amount you borrow. Interest can be paid weekly, fortnightly, monthly or yearly.
In a typical home loan, the early payments are mostly interest; as the amount of the remaining loan drops over time, the interest bill falls.
Interest only loan
Only the interest is repaid throughout the course of the loan. The original amount or principal is repaid at the end of the term of the loan.
Internet banking
The ability to transfer money between accounts, pay bills, see statements and perform other financial transactions over the Internet.
Joint tenants
Two or more purchasers own the property in equal shares - if one dies, his/her share passes to the surviving owners.
Land tax
A tax based on the value of property (which is not a principal place of residence) payable by owners.
Lease
Granting of possession, but not ownership, of a property for an agreed period to a tenant. The lease document specifies the terms and conditions of occupancy.
Lender
A bank, building society, credit union, lending the money received from deposits, or a specialised home lender which lends money raised on the professional money markets.
Lessee
A person or legal entity that leases a property.
Lessor
The owner of a property that is leased to another person or legal entity.
Liabilities
Amounts you have promised to pay to people – including the remaining amount of your home loan.
Limited title
A form of Torrens title where no adequate survey definition of the property's boundaries exist. The limitation is normally lifted when a plan of survey defining the boundaries is lodged with the relevant authority.
Line of credit
A loan arrangement which lets a customer borrow any amount up to a set limit.
Loan-to-value ratio
A key measure of a loan’s strength, showing the amount owed as a proportion of the amount borrowed. Lenders will look carefully at this figure.
Mortgage
A legal document expressing the terms and conditions applying to the lending of money secured by real estate.
Mortgage broker
A person or organisation offering loans from a panel of lenders. They can select the best loan or loans for a borrower, and then manage dealings with the lender on the borrower's behalf until the loan is established.
Mortgage insurance
Insurance that lenders take out to protect themselves against the risk that they will have to sell a borrower’s property at a loss compared to the value of their loan.
It is often required on loans where the borrower is borrowing more than 80 per cent of the home’s purchase price. Though included in a borrower’s costs, it protects only the lender, not the borrower.
Mortgage offset account
An account used to pay off a home loan: the contents of the account is paid straight into the borrower’s home loan, reducing the amount left to be paid.
Effectively, you deposit money in your mortgage instead of depositing it for the bank to lend to other people. In most ways, it works much like an ordinary savings account.
So you can get your money when you need it (although with some offset accounts, you may need to give the bank or financier some notice). But by depositing extra money in your mortgage, you reduce your interest charges.
You also avoid paying tax on the interest you would otherwise earn on your deposit - meaning you pay no more tax than you have to.
Mortgagee
Person or legal entity who lends the money.
Mortgagor
Person or legal entity who borrows the money.
Old system title
Consists of a series of title documents called a 'chain of title'. The overall title is sound only if every document in the chain is sound. The legal investigations required are complicated and expensive.
Old systems titles may be converted to Torrens titles and are automatically converted following sale. Also called Common Law Title.
Option (to buy)
Legal documents giving a purchaser the right to buy a property at a specific price and time. The purchaser may choose not to proceed with the purchase and only forfeits the option fee, which is usually less than 1 percent of the purchase price.
Overcapitalising
The act of spending more money improving a home than you could recover by selling it. If you buy a $120,000 home and then spend another $200,000 renovating it - in an area where houses never sell for more than $240,000 - you’ve probably overcapitalised.
Portability
The ability to retain your existing home loan if you move homes, essentially replacing the old home’s security with the new one’s.
Prepayment
The act of paying off the loan ahead of schedule; it often attracts penalty fees.
Principal
The money a lender lets you borrow to buy a home. When you buy a home, the principal of your loan, combined with your downpayment, covers the total sales price.
When you make payments to the lender each month, you pay back a portion of the principal as well as additional fees in the form of interest charges.
Private sale
The selling of a property by the owner without the use of a real estate agent. The owner saves agent's commission and deals directly with the buyer.
Private treaty sale
Sale of property through an estate agent, where the purchaser agrees to pay or negotiates a specific price set by the seller.
Qualified title
A form of title used when title is being changed from old system title to Torrens title which includes a caution that the old system title has not been fully investigated.
Real property
Land with or without improvements.
Redraw
A feature which lets you make extra payments on your mortgage and then “reborrow” the money when you need it. Typically redrawing extends the term of the loan or increases the repayments.
Reserve Bank
The body responsible for maintaining Australia’s financial system, and for setting the official short-term interest rates on which many variable-rate home loans are based.
Reserve price
Minimum price a seller will accept when selling a property at auction.
Right of way
A right of one property or the general public for access to or across another property.
Semi-detached
Two buildings attached together by a common wall or walls.
Serviceability
The borrower's ability to make payments as they fall due (called “servicing” the loan).
Setback
Distance from the wall of a structure to a boundary of the property.
Settlement
Completion of a conveyance where the balance of the contract price is paid and ownership of the property passes from seller to buyer.
Specification
A written document with technical directions and conditions describing the quality of materials and standard of workmanship of the project and forming part of the contract documents.
Split loan
Still relatively unusual in Australia, a loan repaid partly at variable rates and partly at fixed rates.
Stamp duty
State tax paid by the purchaser, calculated as a percentage of the sale price of a property.
Strata title
A system of ownership of property based on the horizontal and vertical subdivision of air space of a building into lots with separate titles where rights of transfer, lease or mortgage are unrestricted.
Tenancy
The right to occupy a property on the basis of agreed terms and conditions.
Tenants in common
Two or more purchasers own a property in equal or unequal shares - if one dies, his/her shares pass to his/her beneficiaries under his/her will.
Term
The length of time over which the loan is repaid – for a home loan, usually between 15 and 30 years.
Terrace
One of row of buildings attached together by common or party walls.
Torrens title
System of recording ownership of property where registration on the certificate of title guarantees ownership.
Town house
Strata-titled two-storey attached building.
Transfer
A document registered at the Land Title Office and noted on the certificate of title, which verifies change of ownership of a property.
Unencumbered
A property free of encumbrances, covenants and restrictions.
Valuation
A report by a registered valuer giving their opinion of the value of a property.
Variable rate loan
A loan whose rate changes as outside rates change – unlike a fixed rate, which stays the same for a set number of years.
The outside rates are effectively set by the Reserve Bank, an independent authority that reports to Parliament.
Depending on your arrangements with your bank, a change in your variable rate may not change your actual payments; instead, you may just pay off your loan faster or slower.
Vendor
The seller - a person who offers a property for sale.
Villa
A single storey attached dwelling.
Yield
The income or earnings from a property usually expressed as a percentage of the value or cost of the investment.
Zoning
Statutory description of the allowable uses of a property as set out by planning authorities and local councils
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