Glossary

AAPR: The Average Annual Percentage Rate (AAPR), also known as the 'effective rate' or 'comparison rate', can be a useful tool in determining the real cost of a loan. The AAPR is the average interest rate payable over a seven year period. Not included in the AAPR are government fees, exit/discharge fees, service fees (e.g. redraw, internet usage fees, etc.) and any other fees that are 'specific event' driven such as the re-issue of a statement.
Additional payments: The ability to make extra payments to your home loan account.
Agent: Someone who acts on behalf of another person or organisation.
Allotment: When a large area of land is subdivided into lots, the smaller parcels of land are often known as allotments.
Amortisation period: The period of time that a loan will be repaid over and generally referred to as the 'loan term'.
Application fees: Fees charged by a lender for the setting up a loan. Also known as an 'establishment fee'.
Appraised value: An estimate of the value of a property being used as security for a loan as supplied by a registered valuer.
Appreciation: The increase in the value of an asset over time such as property.
Arrears: An overdue loan repayment.
Assets: Money, property or goods owned.
Auction: A public sale where the property is sold to the highest bidder.
Banker's lien: A charge over an asset such as cash taken by a bank to secure a loan.
Bankruptcy: The legal financial state an individual is in when unable to meet debts.
Body corporate: A corporation of the owners of units within a strata building.
Boundary: A line separating adjoining properties.
Breach of contract: Breaking the conditions of a contract.
Break costs: Penalty costs or charges for repaying a fixed interest rate loan prior to conclusion of the fixed rate period.
Bridging finance: A loan for the purchase of property whilst waiting on the sale of another. Such finance is therefore generally short term.
Building inspection: This is generally carried out prior to the purchase of a property to ensure the building is structurally sound. Contracts of sale can be made subject to the satisfactory building inspection.
Buyer's agent: Person to act on behalf of another in the negotiation of an asset purchase such as a property.
Caveat: A notice of warning given to a public authority, e.g. Titles Office, claiming entitlement to an interest in certain land.
Charge: The term used to describe any right established over an asset to secure a debt or the performance of an obligation.
Collateral security: Additional or supporting security given in addition to the principal security where the principal security is insufficient in value or quality to secure the proposed loan in its own right.
Comparison rate: An interest rate that takes into account certain fees and charges associated with a loan over a seven year period.
Comparison rate schedule: The schedule provided by a lender that details the comparison rate for a particular product (see comparison rate).
Consumer Credit Code: Legislation designed to protect the rights of an individual (personal consumer) by ensuring banks and other financial institutions adhere to the same rules when providing personal, domestic or household credit. Also known as the Uniform Consumer Credit Code or UCCC.
Contract of sale: A written agreement outlining the terms and conditions for the purchase/sale of a property.
Conveyancing: The legal process for the transfer of property ownership from one person to another.
COSL: Credit Ombudsman Service Limited is an External Disputes Resolution Scheme approved by ASIC (Australian Securities & Investments Commission. View more at the COSL website (external website).
Creditor: Someone who is owed money.
Daily interest: Interest calculated on a daily basis that varies depending on the daily account or loan balance.
Debtor: Someone who owes money to another.
Deed: A document in writing to prove an agreement of the parties whose deed it is, to the things contained in the deed.
Depreciation: The accounting principle where the cost of an asset is spread and accounted for over the life of the asset.
Direct debit: A payment authority put in place by one party to debit the account of another for monies due such as a loan repayment.
Disbursements: Typically a solicitor's incidental costs associated with a transaction sum as a conveyance and including items such as title searches, etc.
Draw Down: The funding of a loan by a lender to a borrower and normally on the day of settlement when a property purchase is concerned.
DSR: Debt service ratio. The percentage of income required to cover the loan repayments of a borrower.
Encumbrance: A charge such as a mortgage over an asset. A property under mortgage is said to be 'encumbered'.
Equity: The difference between the value of an asset such as property and the amount owed to a lender, i.e. Assets - Liabilities = Equity.
Exchange: The legal point of time when the vendor (seller) and buyer (purchaser) exchange documentation to effect the settlement of a property transaction. 
Fittings: Items that can be removed from a property without causing damage to it, e.g., carpet and curtains etc.
Fixed interest (fixed rate): An interest rate that is set for an agreed period.
Fixtures: Items that would cause damage to the property if removed, e.g. oven and bath etc.  
Garnishee Order: A court order taken out by a creditor (someone who is owed money) on a person's employer or banker for the deduction of funds from his wages or bank account to repay a debt.
General Law System: A title system to recognise all dealings on a property
Government fees: State and government charges at the time of settlement, e.g. stamp duty and commonly known as 'statutory costs'.
Guarantor: An individual or company that agrees to be responsible for the payment of another person's debts or completion of another person's obligation under a contract.
Holding deposit: A refundable deposit paid by a buyer as a confirmation of their intent to proceed with a purchase. 
Indemnity: Security against damage or loss, i.e. one party indemnifies the other against certain action or occurrence.
Instrument: Formal legal document, e.g. a transfer or mortgage document.
Interest: The amount generated when a percentage is applied against a loan or deposit over a period of time.
Interest only loan: A loan where only the accrued interest for a given period, typically one month, is required to be paid. That is, the loan is not reduced each month as it would be with a 'principle' component is included in the loan repayment.
Joint and several liability: With joint and several liability a creditor (lender) has as many rights of action as there are debtors; he can sue them jointly or severally (individually) until he has obtained payment. That is, either/any party of a joint loan can be pursued for repayment.
Joint tenancy: Property in the names of two or more persons, where all persons have an equal interest in the whole property. When one person dies his or her interest in the property passes to the surviving party.
Liability: A debt which one is liable or responsible for.
Loan: An advance of funds from a lender to a borrower on agreed terms.
LVR: Loan to valuation ratio. The percentage of a loan amount against the value of a property.
Maturity date: The date a debt or investment must be paid in full.
Mortgage: A legal document that affords certain rights to a mortgagee (lender) and places certain obligations on a mortgagor (borrower). It is generally a form of security for a loan taken over real estate.
Mortgagee: The lender of the funds.
Mortgagor: The person borrowing money in the terms of the mortgage. 
Negative gearing: The gearing of an asset whereby the cost to maintain it (interest paid, council rates, maintenance etc.) is greater than the income produced (rent, Interest etc.) generally leading to a reduction in taxable income.
Net income: The income received by an individual after tax has been paid.
Net profit: The profit remaining in a business after expenses have been accounted for, but before tax.
Off the plan purchase: Contracting to purchase a property from the plans only, not the finished product. The property may not even have commenced construction.
Portability: The transfer of a loan from one security property to another, typically following the sale of the original property provided as security to a lender and without the need to repay, reapply, or restructure the loan.
Principal: The sum borrowed on which interest is paid during the term of a loan.
Principal and interest loan: A loan in which both the principal and interest are repaid during the loan term.
Redraw: The ability to draw back on loan repayments made over and above the minimum required or ahead of schedule.
Refinancing: The replacement of one loan with another, either from the same lender or a different institution.
Securitisation: Putting assets that produce cash flow into a marketable security, e.g. property, roads, bridges, etc. The process where mortgage backed securities (in the form of bonds) are sold directly into the capital markets. Investors in the bonds comprise superannuation funds as well as other major institutions.
Security: An asset over which a lender can register their interest where a loan has been granted, such as a mortgage over property.
Serviceability: Ability of a borrower to meet a lenders criteria for the making of repayments on a loan, based on the borrowers income and expenses.
Settlement: The final event leading to possession of a property by a purchaser and typically attended by your solicitor or conveyancing agent.
Tenants in common: A property in the name of two or more persons, who each have a defined share or percentage of ownership. When one party dies his or her share is not passed to the survivor(s) as it would under joint tenancy, but instead becomes part of their estate and subject to the provisions of their will.
Term: The length of a home loan or a specific portion within that loan.
Third party security: Security provided by a third party, i.e. some one other than the actual borrowers.
Title deed: The document confirming ownership of a property.
Title search: An examination of records held at a Lands Titles Office for the purpose of establishing ownership of a property and to confirm what encumbrances may exist. Titles searches can also reveal the property plan details along with various covenants.
Torrens system: A system in which ownership and all dealings on a property are detailed on one document. Each event relating to a particular property, such as a registration of mortgage, is recorded on the Certificate of Title. 
Unencumbered: A property free of encumbrance such as a mortgage or caveat.
Valuation: A report typically required by a lender to establish the value of a property in the professional opinion of a suitably qualified valuer.
Variable interest rate: A rate that is subject to change during the life of a loan, usually in line with movements in the 'cash rate' by the Reserve Bank or other related market influences.
Variation: The renegotiation, changing or amendment of a loan contract.
Vendor: Person selling a property who is the current owner.