Use this mortgage glossary to quickly understand common terms you may encounter during the homebuying and loan process. Browse the terms alphabetically or select a letter at the top of the page to jump directly to that section. Each entry provides a simple explanation to help make mortgage terminology easier to understand. Refer to this glossary whenever you come across an unfamiliar term while exploring loan programs, rates, or other mortgage resources.
The option to make higher repayments to pay off the loan faster.
To agree on the terms of an offer or a contract.
Account keeping fees are charged to cover or partially cover the lender's internal costs of administering the account.
The amount of loan interest that has already occurred but not yet due for payment.
The process of allocating expenses (Council rates, water rates) on settlement day that the seller has paid for but not used.
A person or body authorized to act on behalf of a client in the sale, purchase, or management of the property.
The period of time you have to repay a loan at the arranged terms.
Fees charged to cover or partially cover the lender's costs of processing a loan application for an applicant.
Money, property, or goods owned.
A statement of assets, liabilities, and net equity for an enterprise at a point in time.
A large loan repayment, typically towards the end of the loan term, to clear a debt.
A communication from one bank to another to advise on a customer's reliability or creditworthiness.
When a debtor who cannot pay their debts, has their financial affairs managed by a trustee in bankruptcy.
A short-term loan that covers the time gap between the purchase of a new property and the sale of an old property.
The monetary gain obtained when you sell an asset for more than you paid for it.
An agency that offers guidance and information to low-to-moderate income borrowers on the down payments, closing costs, and other conditions of their loans.
Zero down payment available to veterans residing in California.
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.
An entry made in a land registry or court to prevent a certain step is taken (e.g. the transfer of land) without notice to the person who lodged the caveat.
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.
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.
Interest that is paid on both the accumulated interest as well as on the original principal.
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.
The most common type of home loan and usually the best interest rates. Mortgage terms can be either 15 or 30 years.
A person qualified and licensed to handle all documentation for the sale and/or purchase of a property.
Additional signature or signatures to verify the authority of the person signing.
A note of temporary property insurance before the implementation of a formal policy.
Borrowed money to be paid back under an arrangement with a lender. Also, a sum of money paid into an account.
The maximum amount a borrower can use at any one time.
A party to whom money is owed.
A written agreement outlining the terms and conditions for the purchase or sale of the property.
Interest calculated daily. It therefore varies according to the daily account balance.
An account entry to charge a withdrawal to a specified account.
Someone who owes money to someone else.
A legal document that states an agreement or obligation regarding a property.
The failure to meet a debt payment on a due date.
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.
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.
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.
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.
The online transfer of funds from one account to another.
An outstanding liability or charge on a property.
The difference between the amount you owe on your home loan and the current value of your property.
The lender’s fees may or may not be charged to set up a loan.
The legal point of time when the vendor and purchaser swap documentation and start inquiries with a view to settlement.
First-time home loan available to most citizens. Borrowers only need a 3.5% upwards for the down payment.
An interest rate for a home loan, set for an agreed period.
The ratio of your own money and borrowed funds in an investment.
A promise made as bound by the terms of a contract.
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.
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).
A refundable deposit demonstrating the goodwill of the buyer to proceed with the purchase.
A way of referring to both buildings and contents insurance.
Household items included with property (for example light fittings).
A statement of income and expenditure for a period, usually one year.
The lender's charge for the use of funds, or the return on deposited funds.
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.
A list of items included with a property e.g. furniture, moveable items, etc.
The equal holding of property between 2 or more persons.
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.
A person's debts or obligations.
The right to hold property as security against a debt or loan.
A form of insurance by which someone's life is insured.
A flexible loan arrangement with a specified ceiling (the credit limit) to be used at a customer's discretion.
Stamp duty on loan security documentation.
The loan is approved before the borrower bids on or offers for the property and is dependent on the borrowers satisfying the Lender’s lending criteria in principle. It is also subject to a satisfactory valuation.
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.
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.
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.
The date a debt or investment must be paid in full.
The maximum length of a home loan or a specific portion within that loan.
A loan secured by real estate, usually the property being purchased.
The lender or person to whom a mortgage is granted.
The borrower or person who grants a mortgage.
When the current value of a property is less than the amount owed on the mortgage.
A written promise to pay a specified sum of money to a specified person at a specified time.
A savings or transaction account linked to your home loan. The balance in this account is offset daily against your loan balance, reducing the interest charged.
The amount still owed on a loan.
The amount of money borrowed or still owed on which interest is calculated.
An assessment of the market value of a property, often performed by a professional valuer.
Approval given by a lender based on preliminary information about the borrower, subject to conditions such as property valuation.
A deed transferring any ownership interest the grantor has in a property without warranties.
Replacing an existing loan with a new loan, usually to get better terms or interest rates.
The money paid back on a loan.
A record of rental income and lease details for an investment property.
The process of transferring ownership of property from seller to buyer and paying off the mortgage.
A tax charged on certain documents and transactions, including property purchases.
An inspection and measurement of land and property boundaries.
The legal right to own and use property.
A rental agreement between landlord and tenant.
The length of time a loan agreement is in force.
The process a lender uses to evaluate the risk of lending money.
An interest rate that can change over time based on market conditions.
The process of estimating the value of a property.
The voluntary relinquishment of a known right.
The removal of funds from an account.
An account that always maintains a zero balance by transferring funds in or out as needed.
