The language and terms used for purchasing a property can appear very confusing to those who are not familiar with them. For your understanding, this article provides a glossary of terms with simple definitions to clarify the meaning of each term.
Additional repayment
Additional payments in loan above the payments prescribed.
Amortization
The process of paying off the principal and interest under loan at regular intervals.
Application fee
Fee lender charges when a loan application is lodged.
Arrears
It is the overdue amount which has not yet been paid.
Body Corporate
Representative body acting for owners with the responsibility of administering, controlling and managing all common property areas.
Body Corporate Levy
The sum paid to a body corporate for covering the administrative costs associated with a common property.
Building Insurance
It is the insurance in which costs incurred in the rebuilding or repairing of a property after structural damage are covered.
Capital Gain
It is the money acquired upon selling an asset at a higher price than you had originally paid.
Common Property
An area which many people use and is owned by a Body Corporate.
Contract of Sale
A written agreement in which the terms and conditions of purchasing or selling a property are stated.
Comparison Rate
A tool that enables consumers in identifying the actual cost of a loan including the interest rate as well as the underlying charges and fees related to the loan.
Default
Failure of paying the debts on the agreed due date.
Depreciation
Decrease in property value over time.
Equity
The difference in the amount you owe and the property’s current worth.
Exchange of Contracts
The buyers and sellers entering into a binding contract that obligates them to purchase or sell the property.
Fixed Interest Rate
Interest for a home loan that enables you to lock it for a set period.
Gross Income
It is the total income prior to tax and doesn’t include super or other perks.
Holding Deposit
Refundable deposit made by purchasers to demonstrate their goodwill for going forward with the purchase.
Honeymoon rate
Honeymoon rate, also called introductory rate, is when home loans offer a low rate of interest for the starting period, usually the initial 1-3 years.
Interest only loan
It is an agreement wherein which borrower only makes payments of interest, not the principal.
Joint tenants
When property is held by two or more people with equal shares.
Loan to valuation ratio
Loan to valuation ratio (LVR) is the measure of loan amount compared to the property’s value.
Mortgage
A kind of security for a loan that is taken over real estate.
Negative gearing
When the return on investment is not enough to meet investment costs and interest costs of the loan.
Offset Account
A savings account in which balance is offset against home loans for reducing total payable interest.
Portability
A feature that allows transfer of home loan from one property to another one without having to refinance.
Refinancing
Movement of the loan from one lending institution to another one.
Transfer
A document which is registered at the Land Titles Office and confirms ownership change.
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