Glossary
The technical terms used when having to deal with home loans or mortgage refinancing can sometimes be a bit overwhelming.
Here's an A-Z glossary of the most common words and phrases.
Accelerated Payment - The option to make higher repayments to pay off the loan faster.
Acceptance - To agree on a terms of an offer or a contract
Account keeping fees - Account keeping fees are charged to cover or partially cover the lender's internal costs of administering the account.
Accrued interest - The amount of loan interest that has already occurred but not yet due for payment.
Accelerated Payment - The option to make higher repayments to pay off the loan faster.
Adjustments - The process of allocating expenses (Council, rates, water rates) on settlement day that the seller has paid for but not used.
Agent - A person or body authorized to act on behalf of a client in the sale, purchase, or management of the property.
Amortization period - The period of time you have to repay a loan at the arranged terms.
Application fees - Fees charged to cover or partially cover the lender's costs of processing a loan application for an applicant.
Assets - Money, property, or goods owned.
Balance sheet - A statement of assets, liabilities, and net equity for an enterprise at a point in time.
Balloon payment - A large loan repayment, typically towards the end of the loan term, to clear a debt.
Banker's opinion - A communication from one bank to another to advise on a customer's reliability or creditworthiness.
Bankruptcy - When a debtor who cannot pay their debts, has their financial affairs managed by a trustee in bankruptcy.
Bridging finance - A short-term loan that covers the time gap between the purchase of a new property and the sale of an old property.
Capital gain - The monetary gain obtained when you sell an asset for more than you paid for it.
CalHFA (California Housing Finance Agency) - An agency that offers guidance and information to low-to-moderate income borrowers on the down payments, closing closets, and other conditions of their loans.
California VA Loan - Zero down payment available to veterans residing in California.
Capped loan - A loan where the interest rate is not allowed to exceed a set level for a period of time but, unlike fixed-rate loans, is allowed to drop.
Caveat - An entry made in a land registry or court to prevent a certain step is taken (eg. the transfer of land) without notice to the person who lodged the caveat.
Certificate of title - A document that details the title or ownership details of a property, and whether there are any encumbrances on the title. Not all States and Territories have Certificates of title.
Commission - A fee payable to a real estate agent, by the vendor, for the sale of property, or by a lender or client to a third party, such as a broker, for arranging a loan.
Compound interest - Interest that is paid on both the accumulated interest as well as on the original principal.
Contract - A legally bindable agreement between individuals or entities. In real estate, a contract is entered into when contracts are exchanged and the deposit is paid.
Conventional Mortgage - The most common type of home loan and usually the best interest rates. Mortgage terms can be either 15 or 30 years.
Conveyancer - A person qualified and licensed to handle all documentation for the sale and or purchase of a property.
Countersigned - Additional signature or signatures to verify the authority of the person signing.
Cover note - A note of temporary property insurance before the implementation of a formal policy.
Credit - Borrowed money to be paid back under an arrangement with a lender. Also, a sum of money paid into an account.
Credit limit - The maximum amount a borrower can use at any one time.
Creditor - A party to whom money is owed.
Contract of sale - A written agreement outlining the terms and conditions for the purchase or sale of the property.
Daily interest - Interest calculated daily. It therefore varies according to the daily account balance.
Debit - An account entry to charge a withdrawal to a specified account.
Debtor - Someone who owes money to someone else.
Deed - A legal document that states an agreement or obligation regarding a property.
Default - The failure to meet a debt payment on a due date.
Deposit - The money you pay in exchange for contracts as part of your initial contribution to the purchase of your home. This could be between 5 and 10% of the purchase price. You could also pay your deposit by way of a Deposit Bond, if acceptable to the vendor.
Deposit bond - A deposit bond acts as a substitute for the cash deposit in between signing a contract and settlement and can be issued for all or part of the deposit amount required, up to 10% of the purchase price, if acceptable to the vendor. At settlement, the purchaser is required to pay the full purchase price including the deposit.
Disbursements - The various costs your solicitor or conveyancer has to pay to other organizations and bodies on your behalf, for example, search fees and stamp duty/ land tax. Your solicitor or conveyancer will itemize the disbursements on the invoice they send you.
Down Payment - The minimum amount of disposable cash the vendor must have to obtain a home loan. Upon completing the sales transaction, the borrower must provide this capital. The most common amount required is 10% of the loan amount. At E Mortgage Capital, our down payments go down as 3% or 3.5% except for VA loans (exclusive for veterans) which do not require a down payment.
Electronics Fund Transfer (EFT) - The online transfer of funds from one account to another.
Encumbrance - An outstanding liability or charge on a property.
Equity - The difference between the amount you owe on your home loan and the current value of your property.
Establishment fees - The lender’s fees may or may not be charged to set up a loan.
Exchange of contracts - The legal point of time when the vendor and purchaser swap documentation and start inquiries with a view to settlement.
FHA Mortgage - First-time home loan available to most citizens. Borrowers only need a 3.5% upwards for the down payment.
Fixed interest rate - An interest rate for a home loan, set for an agreed period.
Gearing - The ratio of your own money and borrowed funds in an investment.
Guarantee - A promise made as bound by the terms of a contract.
Guarantor - A person or company that guarantees that promises made by the first party (the borrower) to the second party (lender) will be fulfilled, and assumes liability if the borrower fails to fulfill them (defaults). In case of a default, the guarantor must compensate the lender, and usually acquires an immediate right of action against the borrower for payments made under the guarantee.
Home Owners Association Fees (HOA Fees) - Monthly payments for the maintenance of the common areas and amenities if you live in a joint association (example, block of flats or condominium association)
Holding deposit - A refundable deposit demonstrating the goodwill of the buyer to proceed with the purchase.
Home insurance - A way of referring to both buildings and contents insurance.
Inclusions - Household items included with property (for example light fittings)
Income statement - A statement of income and expenditure for a period, usually one year.
Income statement - A statement of income and expenditure for a period, usually one year.
Interest - The lender's charge for the use of funds, or the return on deposited funds.
Internal rate of return - A measure of the return on investment (or loan) which takes into account the time value of money by showing the rate of interest at which the present value of future cash flows is equal to the cost of the investment or loan.
Inventory - A list of items included with a property eg. furniture, moveable items, etc.
Joint tenants - The equal holding of property between 2 or more persons.
L
Lease - An agreement between two parties under which one (the lessee) is granted the right to use the property of another (the lessor) for a specified period under specific terms and conditions.
Liabilities - A person's debts or obligations.
Lien - The right to hold property as security against a debt or loan.
Life assurance - A form of insurance by which someone's life is insured.
Line of credit - A flexible loan arrangement with a specified ceiling (the credit limit) to be used at a customer's discretion.
Loan security duty - Stamp duty on loan security documentation.
Loan pre-approval - The loan is approved before the borrower bids on or offers for the property and is dependant on the borrowers satisfying the Lender’s lending criteria in principle. It is also subject to a satisfactory valuation.
Loan term - Period over which a loan agreement is in force, and before or at the end of which the loan should either be repaid or renegotiated for another term.
Loan to valuation ratio (LVR) - The ratio of the amount lent to the valuation of the security (usually the house). The LVR measures the amount of the loan compared to the value of the property being used as security for the loan, expressed as a percentage figure. From a lender’s perspective, the higher the LVR, the higher the risk to the lender.
M
Mandatory comparison rate - An interest rate that includes both the headline interest rate and the fees and charges relating to a loan. It is designed to help consumers identify the true cost of a loan and compare it with other similar loans.
Maturity - The date a debt or investment must be paid in full.
Max Term - The maximum length of a home loan or a specific portion within that loan.
Maximum loan amount - The maximum amount that can be borrowed.
Min fixed amount - The minimum amount that can be borrowed at a fixed rate of interest.
Min lump sum payment - The minimum amount that can be repaid as a lump sum.
Min redraw amount - The minimum amount that can be redrawn from a loan at any one time.
Monthly fees - The fees charged to cover or partially cover the lender's internal costs of administering the loan each month
Mortgage - A form of security for a loan usually taken over real estate. A mortgage over land is registered or noted on the Certificate of Title to that land.
Mortgage term - The length of time over which you agree to pay back your mortgage, usually up to a maximum of 30 years.
Mortgagee - The lender of funds, secured by a mortgage.
Mortgagor - The person borrowing money under the terms of a mortgage.
The maximum loan to valuation ratio (Max LVR) - This means the amount you can borrow is expressed as a percentage of the valuation of the security.
N
Negative gearing - Situation when the income from an investment property is not enough to meet the interest costs of the loan used to fund the investment property.
O
Off The Plan - When you buy a property from the plans only and not the finished building.
Offer to purchase - Usually a written contract setting out the terms under which the buyer agrees to buy. If it is accepted by the seller, it forms a legally binding contract and must be honored by both parties subject to the terms and conditions stated in the document.
Offset account - A non-interest earning account where the balance is offset against the home loan to reduce the total interest payable.
Overdraft - An arrangement on a bank or savings account under which a bank extends credit up to a maximum amount (the overdraft limit) and against which the customer can make withdrawals. Interest is charged on the fluctuating daily balance.
P
Plan - The detailed illustration of a house that shows the internal layout and dimensions and the position of the house on the land.
Portability - A feature that enables a home loan to be transferred from one property to another, without refinancing. It can be of benefit by savings on loan set-up fees and government loan security duty.
R
Refinancing - To replace or extend an existing loan with funds from either the same or another lender. It facilitates reducing monthly payments or reducing the payment terms on a current home loan.
Reserve price - The specified minimum price acceptable to a seller at auction and which commits the seller to sell the property if the reserve is reached.
Right of way - A right of way is a particular type of easement ie. a right to travel over land belonging to another person in a particular manner. It does not give a right to take any produce or soil from that other person’s land.
S
Securities - An asset that guarantees the lender their loan until the loan is repaid in full.
Security - A right of a lender against the real property, or other assets of a borrower or guarantor, to secure the repayment of a loan.
Settlement date - The date on which documentation for the transfer of ownership of property from the seller to the buyer takes place upon finalization of the purchase price. It is also usually the date on which the buyer assumes possession.
Signatory - A person authorized to access an account or who has authority to sign and be bound by documents.
T
Townhouse - A type of dwelling which shares at least one common wall with neighboring dwellings - usually a two-story dwelling registered under a strata title.
Transfer - A document registered with the Land Titles Office that confirms a change of ownership. The change of ownership is noted on the Certificate of Title.
V
Valuation - A report required by the lender detailing a professional opinion of a property's value and conditions.
Variable Interest Rate - A rate that varies following interest rates in the marketplace.
Vendor - A party that offers a property for sale.
Vendor statement - A statement by the seller to the buyer detailing the property available for them to acquire.
Villa - A single-story, attached dwelling.
2ND COLUMN
18071 Fitch Ste 200, Irvine CA 92614
915 Highland Pointe Dr, Ste 200, Roseville, CA 95678
3401 Mallory Lane, Franklin, TN 37067
For information purposes only. This is not a commitment to lend or extend credit. Information and/or dates are subject to change without notice. All loans are subject to credit approval. E Mortgage Capital, Inc. d/b/a E Mortgage Capital, NMLS# 1416824. Equal Housing Lender (NMLS consumer access: https://www.nmlsconsumeraccess.org/_)
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A toll-free consumer hotline is available at 1-877-276-5550. The department maintains a recovery fund to make payments of certain actual out of pocket damages sustained by borrowers caused by acts of licensed mortgage banker residential mortgage loan originators. A written application for reimbursement from the recovery fund must be filed with and investigated by the department prior to the payment of a claim. For more information about the recovery fund, please consult the department’s website at