We’ve included the Glossary below, to help you to understand some of the common terms used in lending.

Your Energise Home Loans mortgage broker can also assist you with any questions that you may have.

A

B

C

D

E

F

G

H

I

J

K

L

M

N

O

P

Q

R

S

T

U

V

W

X

Y

Z

A

Additional Payments	This facility allows you to make extra payments on a loan.
Account Fee	Many lenders charge one-off or ongoing mortgage account keeping fees.
All-in one	This type of loan usually has a variable interest rate, and allows you to deposit all your income into the loan account. You can then access that money for day-to-day expenses. This allows you to reduce the interest payable because the excess spare funds act as payments.
Application Fees	Some lenders charge an application fee, but often also a lower interest rate.
Appraisal	A written report of the estimated value of a property. A qualified valuer, usually engaged by the bank/lender, conducts the valuation to help determine how much can be borrowed to purchase that property.
Appreciation	This is an increase in the value of a property due to inflation and market conditions.
Assets	Anything of value that you own, including any savings, funds or shares.

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B

Basic or ‘no frills’ loans	These usually offer a lower interest rate than variable loans, in exchange for less flexibility and fewer loan features, such as redraw facilities or no extra payments.
Beneficiary	The person that is nominated to receive trust, estate, or deed of trust income.
Break Costs	If you wish to break a fixed rate loan before the period expires, you may incur a break fee.
Bridging finance	This type of finance is used to buy a new house while waiting for your existing house to sell. Bridging finance usually has a higher interest rate.
Building inspection	It is recommended to arrange a building inspection prior to purchasing a property to make sure the property is structurally sound.

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C

Capital gain	The financial gain made when selling a property for a higher price than you paid for it.
Capital gain tax	A federal tax on the monetary gain made on the sale of an asset (excluding your own residence) bought and sold after September 1985.
Capped loan	Capped loans cannot exceed a particular interest rate in a set time period, but unlike fixed rate loans, interest rates are allowed to drop.
Caveat	A warning on a property’s title that stipulates that a third party has some rights over the property.
Certificate of Title	A statement that identifies a land’s owner and includes details of mortgages, easements, obstructions on the land, and land dimensions.
Combination or Split loan	This is a combination of several loans that may have a variable, fixed or a line of credit portion.
Comparison rate	All lenders and brokers must provide a ‘comparison rate’, by law, which outlines the total cost of a loan, including interest rates, loan approval fee and any other up-front or ongoing fees. Government fees and charges are excluded, as they are standard across all loans.
Construction Loan	If you are building a new property, this loan allows you to draw money as required to assist with building costs at different stages of the construction project.
Consumer Credit Code	Credit providers must explain your rights and obligations in any credit arrangement. They must legally disclose all relevant information about your arrangement in a written contract, including interest rates, fees, commissions etc.
Contract of Sale	This legal document outlines the terms and conditions of the sale of a property between a buyer and seller.
Conveyancing	This is the legal process for transferring a real estate ownership from one owner to another.

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D

Deed	A legal document stating an agreement regarding a property.
Deferred establishment fee	This fee may be charged by a lender if you pay out your loan within a short period of time, usually within three years. This is not often charged with modern loans.
Deposit bonds	Lenders provide deposit bonds when cash is not readily available to pay a deposit. This acts as a guarantor that the full payment will be made by the due date.
Direct debit	Funds are electronically debited from your specified bank/building society account.
Discharge fees	This fee is charged when closing a loan account.
Draw down	A draw down usually refers to a line of credit and provides access to available loan funds.

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E

Easement	Easement is a portion of land that can be used by a home owner, even though that portion of land belongs to someone else.
Equity	Equity is the percentage of your home that you actually own, based on what percentage of the loan has been paid off.  This can be affected by changes in property prices.
Establishment fees:	An establishment or application fee is often charged by a lender to set up a loan.
Exchange of Contract:	This occurs when the solicitors or conveyancers of the buyer and seller exchange the necessary legal paperwork to commence the settlement process.
Exit fees:	Exit fees can be charged by a lender when a fixed interest rate loan is paid off earlier than the agreed loan term.

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F

First Home Owners Grant:	The Federal Government provides a grant to first home buyers to assist with the cost of buying their first property.
Fittings	These are items that can be removed on the sale of a property without causing damage.
Fixed interest rate:	A borrower is charged a ‘fixed’ interest rate, regardless of increases or decreases to the variable interest rates as adjusted by the Reserve Bank of Australia. A fixed rate can be locked in for any agreed period of time between one and ten years, although one to three years is most common. The fixed interest rate will be charged at whatever it was at the beginning of the fixed rate period.
Fixtures	These are items that are likely to cause damage to a property if removed. A contract of sale usually specifies what fixtures and fittings are included in the sale of a property.

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G

Guarantor:

A guarantor is someone that agrees to be responsible for the payment of another person’s debts should they default on their repayments.

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H

Home Equity Loan:	This loan is based on the amount of money already paid off on your residence. A line of credit is then offered, that can be used for property investment or renovations.
Honeymoon Rate:	Also known as an ‘Introductory Rate’, this is when lenders offer a lower interest rate for the first period of the loan, usually one year. The interest rate will then revert back to the standard variable interest rate after the initial time period.

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I

Interest only loan:	This type of loan is short term, usually for only one to five years, although generally can be extended to ten years. Only the interest is paid during that part of the loan. This loan type then reverts to principle and interest repayments.
Interest Rate:	The percentage rate at which interest is charged on the amount borrowed.
Investment property:	A property can be owned and leased out to tenants for a profit, or held for capital gain purposes, instead of the owner buying the home to live in themselves.

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J

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K

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L

Line of credit	Also known as a Home Equity Loan, a line of credit is offered, based on the amount of equity already built up in your property. As you repay the loan, the money becomes available for you to use again. This sort of loan can be especially useful for buying an investment property or doing renovations.
Loan To Value Ratio	A lender will calculate the Loan to Value Ratio (LVR) as one of the considerations when determining if a loan will be approved. The LVR formula is: Mortgage / Property Price x 100 = LVR For example, if a house is worth $500,000 and the mortgage for the property is $320,000, then the LVR equals 64%.

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M

Maturity	This is the date that a loan must be completely paid off by.
Maximum loan amount	The maximum amount you can borrow is determined by how much deposit you have saved, the price of the property you wish to purchase, and your disposable income.
Minimum repayment	This is the minimum amount to be paid on your loan each month.
Mortgage insurance	Mortgage insurance is required if you are borrowing more than 80% of the purchase price of the property. This insurance is to protect the lender against the risk, rather than to protect the borrower.
Mortgage offset account	This savings account can reduce the interest to be paid on your home loan. Any money in your savings account can be accessed at any time, but whilst in your savings account, ‘offset’s the interest to be paid on your loan.
Mortgage protection insurance	This insurance is often recommended as it protects the borrower if they are unable to meet repayments due to serious illness or redundancy.

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N

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O

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P

Principal	This is the initial amount borrowed, before interest is added.
Principal & interest loan	This is a loan where the initial borrowed amount and the interest amount is to be repaid simultaneously.

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Q

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R

Redraw facility	This is a loan feature that allows you to recall extra repayment funds that you may have initially paid off your loan.
Refinance	A borrower may replace an existing mortgage by arranging for a new mortgage, with the same or different lender. This is most likely to happen to refinance to a better deal, or when buying and selling a home.

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S

Searches	Research that is conducted by a solicitor to confirm information about the property or the purchaser, prior to settlement.
Settlement	The date where the balance of the contract price is paid and the property legally transfers to the buyer.
Split loan	A loan that consists of part variable rate and part fixed rate.
Standard Variable	A variable interest loan with extensive features. These can be explained by your Energise Home Loans consultant.
Stamp Duty	Stamp Duty is a tax paid by the purchaser to the State Government, calculated as a percentage of the purchase price.
Strata title	Strata title applies to property where all property owners share some common areas, and where the overall area is divided into different lot amounts (e.g. individual apartments). Commonly owned areas can include things like laundries, car spaces, garages etc.  which form part of the lot. The common property is everything that does not form part of an individual lot and is owned by the owners corporation (all the owners collectively). Each owner is required to contribute financially to the upkeep of the common property, with contribution amounts proportioned in accordance with each ‘lot’ size.

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T

Term	The total duration of the loan.
Title deed	This legal document indicates ownership of a property.
Torrens Title	This is the most common form of property title in Australia. All previous and current owners and mortgagees etc. are listed on one deed.
Transfer	This document is completed to indicate a property’s change of ownership with the Land Titles Office.

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U

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V

Valuation	A report undertaken by a registered valuer that estimates a property’s value. There is often a fee charged by a lender for this service.
Variable rate	This interest rate increases or decreases depending on money market rates.

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W

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X

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Y

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Z

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Contact us with any questions – your Energise Home Loans mortgage broker will be happy to assist you.