Within the home loan industry there are many terms used which some of us are not familiar with and if you are looking at a home loan then it's worthwhile having a look through the below home loan glossary so you understand what these terms mean.
You may find these home loan terms used in advertising, within home loan documents or when you're seeing an agent to buy a property so having a basic knowledge of home loan terminology used can be useful.
List of Home Loan terminology used:
Accrued Home Loan Interest
This means the interest which is calculated on the home loan term leading up to the payment date which had not been added to the home loan until the home loan repayment date.
Amortisation (P&I Home Loans)This relates to the repayment schedule of the home loan over the term of the home loans duration. This type of home loan repayment factors in the interest and principal component so amortisation does not apply to interest only home loans.
Application Fees – Home Loans
Home Loan providers normally charge an application fee for the home loan product they offer, the home loan application fee generally covers the valuation within the fee. Some home loan providers do offer no application fees for a specific type of home loan or if the home loan is of a certain valule.
Arrears
This may appear in your home loan documents and refers to a missed payment on the regular home loan installments.
Assets
An asset can be deemed as shares, equity in an existing property, vehicles, cash and so on.
Bridging Finance
This refers to a home loan which can be put in place when you may have purchased another property and settled and you have not yet sold your existing property. Bridging finance can be considered as an interim home loan when you are between two homes.
Certificate of Compliance
This certificate relates to construction and is provided by the local council. It is required by home loan providers to ensure that council regulations have been met as part of the construction.
Community Title
This is where there are a number of dwellings on a parcel of land and these dwelling share common areas such as driveways, BBQ area or a swimming pool for example. As part of these common areas comes a shared cost of maintaining these shared facilities.
Company Title
As the name suggest a company title is when a company purchase a property rather than an individual person.
Covenant
This means that there is a restriction or ruling in place over the property.
Credit Bureau
This is a body which provides credit information in relation to applying for a home loan. Home loan providers utilise this service to assess the credit risk of home loan applicants, this service is not limited to home loan providers so you can also obtain your credit history for a small fee.
Disbursements
This term is in relation to the settlement of a property where home loan funds and associated costs are disbursed to the relevant parties such as the vendor, government body, solicitor etc.
Equity Home Loan (line of credit)
This is a type of home loan which allows the borrower to access equity in their property by way of a line of credit for whatever purpose the borrower sees fit.
Equity
As above the term equity simple means the net value of your property once any owing home loan amount.
Establishment Fee
This relates to a home loan providers charge for establishing the home loan from an administration point of view.
Fixed Home Loan interest rate
This simply denotes a home loan which has a fixed interest rate for a specified period as compared to a standard variable interest rate home loan where the home loan interest rate varies depending on market conditions.
Guarantee
A guarantee in the home loan industry means a person is willing to sing off on a home loan you apply for and as a "guarantor". The guarantor signs off that if the applicant fails to meet the home loan repayments then they are liable to repay the home loan on their behalf.
Interest Only Home Loan
As the name suggests an interest only home loan is where your home loan repayments are based on the interest component of the home loan amount. This is most commonly used for investment home loans for tax reasons.
Liabilities
Home loan providers use liabilities you hold to assess your ability to service a home loan. Liabilities can include credit cards, personal loans, other home loans, leases or other regular repayments which are a provision of credit.
Loan Stamp Duty
Stamp duty is a government charge and is applied to the value of the home loan in most states.
Loan to Valuation Ratio
A loan to valuation ratio or LVR is reflected as a percentage of the home loan amount versus the purchase price or value of the property i.e. a home loan of $80,000 on a property worth $100,000 equals an LVR of 80%.
Mortgagee
You will find this term within home loan offer documents and it refers to you being a mortgagee (the owner of the home loan debt)
Negative Gearing
This is a term commonly used with investors and it relates to the potential tax benefit of claiming the interest component of the home loan
Old System Title
This is very uncommon and it refers to a type of title that the property is on. It dates back many years and it is unlikely that you will find a property under this type of title.
Overdraft
An overdraft can be put in place and is based on a set limit of the bank providing the facility. This is predominantly used for business purposes but can also be set up on a personal level.
Principal
This is the amount on a home loan which actually reduces your home loan balance by way of regular repayments versus an interest only home loan where the balance of the home loan does not reduce.
Principal & Interest Loan
This is the most common home loan selection in the market as the home loan balance reduces over time with regular home loan repayments.
Title Search
A title search is performed when you are in the process of purchasing a home and it highlights the details of the land and if there are any monies owing against the property by way of an existing home loan. Home loan providers use this information along with conveyancors.
Security
This term is in relation to the property you are purchasing or already own and it is deemed a security in the home loan providers eyes.
Settlement Date
This term refers to the date when the property you have purchase or refinanced has settled. On settlement day is when monies are transferred from the home loan provider to the vendor etc.
Stamp Duty on Transfer
This is a government charge and is applied on the transfer of the title from one person to another. The amount charged is based on the value of the property and there are differing scales for owner occupiers, investors and people entitled to the first home owners grant.
Survey
This is a plan of the land which shows the boundaries and the location of the dwelling on that parcel of land.
Tenants in Common
Simply refers to a property which has more than one person on the title.
Torrens Title
This is the most common type of title type and all home loan providers accept this type of title classification.
Valuation
An integral part of obtaining a home loan or a home loan refinance is that of a valuation. A valuation is performed by an independent valuer which is on the valuation panel of the chosen home loan provider.
There are other terms which you may come across and we invite you to contact us and ask one of our home loan consultants to help in any way they can.
 |
Other Useful Links within our site: |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Useful Sites as a point of reference: |
| | | | | | | |
 |
| 
