Glossary of Terms

Acceptance	To agree to the terms of an offer or contract.
Additional Repayment	Extra funds paid into the loan over and above the minimum prescribed repayments.
Basic Rate	Applied to loans commonly called 'No Frills Loans' which have are generally cheaper than Standard Variable Rate Loans but do not have features such as a redraw facility or mortgage offset.
Break Cost	Relates to Fixed Rate Loans where the borrower terminates the loan contract before the expiry of the fixed rate period.
Certificate of Title	This document details the land dimensions and ownership details, and whether there are any encumbrances it.
Contract of Sale	A written agreement outlining the terms and conditions for the purchase or sale of the property.
CRAA	(Credit Reference Association of Australia) the body which holds credit details on all of us!
Default	Failure to meet debt payment on a due date.
DSR - Debt Service Ratio	Maximum of the applicants weekly, fortnightly or monthly wage which will support loan repayments over the agreed loan term. Usually expressed as a percentage - most lenders set a maximum DSR between 30% to 33%
Establishment Fee	Also called Application Fee. Fee which covers basic costs in setting up loan from initial interview to loan drawdown. Some lenders choose to absorb this fee.
Exit Fee	Fee imposed by some lenders where the borrower has sought refinance with another lender within the first few years of the loan.
FID	(Financial Institutions Duty) state duty on the receipts of financial institutions.
giroPost	A facility allowing you to conduct banking transactions through the post office.
Home Equity Loan	A home equity account gives you a revolving line of credit secured by the value of your house. This allows you to use the funds for any other purpose such as the purchase of a second property, or shares or other investments. The interest rate is generally higher than a standard variable rate, and these accounts are not suitable for everyone.
Honeymoon Rate	Honeymoon Rate Colloquial term applied to Introductory Loans. The rate can be fixed, capped or variable for the first 12 months of the loan. At the end of the term the loan reverts to the standard variable rate. Capped Rate The rate applied to Honeymoon (Introductory Loans) which is capped at a rate that will not rise above the prevailing Standard Variable Rate, but may fall. Fixed Rate The rate applied to Honeymoon (Introductory Loans) which is fixed at a set rate which will not change for the duration of the honeymoon rate period. Variable Rate The rate applied to Honeymoon (Introductory Loans) which is variable and usually set at a discount below the Standard Variable Rate.
Interest Only	Usually a short term arrangement 1 to 5 years, but some lenders have products providing 10 years interest only and 15 years principal and interest.
Legal Fee	May be charged where an outside party is used to prepare bank documentation.
Loan to Valuation Ratio	LVR). Refers to the maximum amount lenders will approve against the value of any property taken as security for your home loan. For example if you wish to purchase a property worth $100,000 the lender may approve a loan for 80% of the property value. It will then be up to you to provide the remaining 20% plus costs (mortgage registration and stamp duty etc).
Mortgage Insurance (MGI)	Some lenders may provide up to 95% of funds for a loan if you agree to take out mortgage insurance (MGI). This figure is a one off payment usually made at the time of settlement. The figure is not easy to calculate being based on variables such as the loan amount, the value of your property and the exact LVR (i.e. the figure between 80% & 95%). This payment allows the lender to recoup the unpaid principal in the event of default and the borrowers debt is transferred to the Mortgage Insurer.
Mortgage Offset	Offset accounts can help reduce your tax bill by offsetting taxable income from deposit accounts against interest paid in after tax dollars on mortgage repayments. However, not all offset accounts are equal, with many not paying the same interest as you are charged on your mortgage.
Mortgage Manager	A company / person responsible for managing every facet of a borrowers's loan. Often sources loans from mortgage originators.
Negative Gearing	Where the return on an investment is insufficient to meet the costs of the investment, leading to a reduction in assesable income for taxation purposes.
Ombudsman	The Australia Banking Industry Ombudsman provides an avenue through which customers can make complaints about thier bank and have them dealt with independantly.
Portable Loans	A portable loan allows you to sell your house and move to a new one without having to refinance. The main benefits of portability apart from not having to refinance is utilisation of stamp duty and not having to pay break costs if you are on a fixed rate. Most lenders however insist that the loan amount is the same or less. Make sure you know the terms of your loan.
Principal and Interest Loan	A loan in which both the principal and interest are paid during the term of the loan.
Redraw Facility	A redraw facility allows you to make additional repayments on your mortgage, and then have access to the additional repayments if you need to. Make sure you understand the conditions attached to the redraw facility that can include a minimum amount and a fee every time you use it.
Service Fee	Usually a monthly fee levied to cover bank cost of administering & maintaining the loan account i.e. fixed and variable costs such as staff, IT software / hardware
Standard Variable Rate	The rate which lenders apply to their 'premium' home loan product. Carries features such as a redraw facility, portability, salary account and mortgage offset.
Switching Fee	The lender may impose a switching fee where an existing borrower wishes to change from one loan type to another e.g. Variable Rate Loan to Fixed Rate Loan
UCCC	The Uniform Consumer Credit Code Legislation - a Federal act of Parliament to ensure uniformity amongst all credit providers. E.g. all loan contracts must now adhere to a uniform format as specified by the act. It must set out all fees / charges that the borrower (and, if required, guarantor) are liable for under the loan contract.

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