Glossary of Terms

Application Fee: 
Fees charged by the lender to help cover their costs of setting up a new loan.

Basic Variable Loan :
Is a loan with a very simple concept of having a low rate without all the frills of a more expensive loan.

Break Costs:
These apply if you end your loan by paying it off or refinancing before the contracted time. These costs usually apply for fixed loans.

Capital Gains:
The money gained when you sell your property for more than what you purchased it for.

Construction Loans:
A loan specifically  for the construction of a new dwelling or major home renovations.

Daily Interest:
Interest is calculated daily on what the current balance of your loan is at that time.

Deposit:
A seller will usually ask for a deposit so they know that you are genuinely interested in making the purchase.

Deposit Bonds:
Institutions that provide deposit bonds act as a guarantor that payment will be made. They are mainly used when cash can not be available at short notice.

Equity:
Is the amount of an asset that is not controlled by a lender Eg :  $400.000 property with a mortgage of $100.000 has equity of $300.000 that is like having money to use.

Equity Loan:
A loan granted through equity is secured by the portion of the property you own.

FHOG:
First Home Owners Grant

Fixed Interest Rate:
It is an interest rate that is set at that same rate for an agreed time period.

Guarantor:
A parent or third party who agrees to carry on another persons debt if they can not meet the requirements of the debt.

Honeymoon Rates:
These are rates that are on special for the first six to twelve months giving new home owners some time to adjust. However they do revert back to the standard rate offered  by that lender after it is over.

Income Statement:
A financial statement that allows a lender to see your income and expenses for a set amount of time.

Joint Tenants:
Where two or more persons share an equal holding in a property. If something should happen to one their share passes to the survivor, this is a typical arrangement for a married couple.

Lenders Mortgage Insurance:
This is an insurance paid by the borrower in a once off payment, that covers the lender in case of a default or loss of money if the property needs to be sold.

Liabilities:
Debts or obligations.

Line Of Credit:
A loan that is drawn down when funds are needed and only payment is needed on what you have used.

Low Doc Loan:
These loans allow people who are self employed or do not meet normal lending criteria to apply for a homeloan.

Loan Stamp Duty:
The State Government puts a stamp duty on a mortgage taken to secure a loan. Some states have exemptions on this for First Home Buyers.

Loan to Value Ratio:
Commonly called LVR which means the ratio of the amount lent over the value of the security. The way you work this out is the loan amount x 100 and then divided by the security value.