Glossary

Research, knowledge and understanding is an essential
component in building Investor Confidence.

The Buy Australian Properties Glossary contains explanations of commonly used terms and ‘Industry Jargon’ used in the Property, Real Estate, Mortgage and Investment Industries.

Glossary – Mortgage, Property and Investment

AAcceptance – The agreement to an offer

Accrued Interest – The total of amount of interest which has accumulated over a specific time period

Adjustments – Alterations and changes to the initial purchase price to include incidental costs relating to the property. These may include, land tax, rates and other charges

Adjustment Date – The adjustment date is normally the Settlement Date and refers to the adjustments of incidental costs and expenses that relate to the purchase of property and include expenses such as land tax, rates and other charges.

Administrative Fund – Usually a strata fund where levies are held for the administration of building management

Administrator – An appointed person/company appointed to manage an estate. Administrators are usually involved in cases of insolvency, bankruptcy or liquidation

Advertising Fees – The fees charged to market and advertise the sale of a property. These are usually in addition to any commissions payable

All Monies Clause – This clause in a loan contract allows the lender to call on all monies held in the borrowers name with that lender to offset any debt the borrower may have with the lender if the borrower defaults on the loan

Amortisation Period – The length of time it will take the borrower to repay their loan in full

Annexure – An attached document – usually an attachment to a contract or originating document

Arrears – Time after the due date for payment

ASIC – Australian Securities and Investments Commission. ASIC is Australia’s corporate, markets and financial services regulator. ASIC is an independent Commonwealth Government body

Aspect – Facing in a particular direction e.g. ‘a northerly aspect’

Appraisals/Valuations – Written reports of the estimated values of properties, usually prepared by a valuer

Appreciation – An increase in value

Assets – All property (land and other) owned as distinct from liabilities. A borrowers’ assets include real and personal property, legal and equitable interests and rights of action

Assignee – the person who has been assigned an asset

Assignment – The process of transferring ownership of or in an asset to another person other than the current owner

Assignor – the person who assigns an asset to another person

ATO – Abbreviation for Australian Taxation Office

Auction – A property is sold to the highest bidder in specific time frame – there is no cooling off period
Authority-Usually a reference to a governing , statutory or private body

BBank Cheque – A cheque drawn from a recognised and authorised deposit taking institution which may include a bank, credit union or building society

Basic Variable – a variable home loan at a lower rate and with fewer features than a standard variable home loan

Basis Point – A measurement of fluctuation of an investment, equal to 1/100 of one percent. The relationship between percentage changes and basis points can be summarized as follows: 1% change = 100 basis points, and 0.01% = 1 basis point

Body Corporate – an administrative and legal entity comprised of all the owners within a group of units or apartments of a strata building complex. Owners elect a committee which manage, oversee and regulate matters regarding the property including administration and upkeep of the building and common areas. Can be also known as Owners Corporation.

Borrower – The person who borrows money

Boundary – The official boundaries /perimeters of a block of land

Break Costs – Fees that can be charged when a loan is paid off earlier than the full loan term

Brick Veneer – Single brick wall construction

Bridging Finance – a short-term loan used to bridge the gap between buying a new property and selling an existing one

Building approvals – the number of dwellings approved to be constructed in a given month, quarter or year.

Building Certificate – This certificate confirms that the building meets development requirements. An application for a building certificate may be made by the owner of the land on which the building is erected, or by any other person, with the consent of the owner of that land, or by the purchaser under a contract for the sale of property that comprises or includes the building or part, or by the purchaser’s Australian legal practitioner or agent, or by a public authority that has notified the owner of its intention to apply for the certificate.

Building Inspection – An inspection carried out by a qualified building inspector to report on any building defects and is done before the purchase of a new or existing property or on renovation completion. It will generally cover the following The electrical work on the property ,all plumbing and drainage, the conditions of the windows and doors, any fittings and fixtures within the home, all joinery (kitchen cabinetry, cupboards, etc), walls, underfloor space, the roof and roof space, driveways, retaining walls, guttering and downpipes.

Building Insurance – Building insurance covers the owner from damage/loss to the building
Buyers Agent- the person appointed by and acting on behalf of the buyer to purchase a property

CCall Option – An option which gives the buyer a right to ‘call’ on buying a property at a set price within a set period. There is no obligation to the buyer to do so.

Capital – Money, property, and other valuables which represent the wealth of an individual or business

Capital Gain – An income derived from a gain on a capital asset

Capital Gains Tax – As a tax on Capital gains, subject to exemptions this is a tax payable when /if you sell a property based on the increase in the capital value of your property. It is indexed so that nominal increases in value due to inflation are not taxed as well. The taxation regime also allows capital losses to be offset against other taxation liabilities (e.g. income tax) in certain circumstances. This is the tax you pay when you sell an investment property if you’ve made a profit.

Capital Growth (Capital Gain) – The amount by which your investment property has increased relative to what you paid for it. For example if you bought a property for $450,000 and it’s now worth $575,000, you’ve made a capital gain of $125,000.

Capital Works – The capital works allowance is a deduction available for the structural element of a building including fixed irremovable assets; this is commonly referred to as the building write off. Only some properties will qualify for this allowance. For residential buildings constructed after 16 September 1987 your accountant can claim 2.5% of its historical construction cost. If you own a rental property, you may be able to claim a deduction (usually at the rate of 2.5% per year in the 40 years following construction) for the construction cost of buildings, extensions, such as a garage or patio, alterations, such as adding an internal wall, kitchen renovations or bathroom makeovers, structural improvements – such as a gazebo, carport, sealed driveway, retaining wall or fence.

Capped Loan – A loan with a fixed ceiling in terms of loan term or interest.

Cash Flow Positive – An investment property is deemed cash flow positive if derived income is more than associated outgoings after tax-deductible items have been claimed. Basically more rent is received by the investor than the mortgage repayments on this property including other outgoing such as interest on the loan, maintenance, insurance, land tax, rates, etc.

Caveat – A formal document preventing anyone else registering an interest in a piece of land . If a person with a competing caveatable interest lodges a caveat and gains priority ahead of a purchaser, the purchaser may incur considerable time and expense in ensuring that the caveator’s interest in the property is dealt with and eventually disposed of. The lodging of a caveat by a person with a competing caveatable interest could force a purchaser to delay settlement. This could have a flow-on affect if the purchaser’s loan expires and the purchaser cannot obtain the finance to complete the purchase.

Caveat Emptor – From the Latin – ‘Buyer Beware” A warning that notifies a buyer that the goods he or she is buying are “as is,” or subject to all defects

Certificate of Title – The document of title to land held under the ‘Torrens Title’ system. It shows who owns the land, and whether it is subject to mortgage, lease, easement or any other dealing which may adversely affect a potential buyer. It is the original documentary proof of land ownership.

Certified Copy – A true copy of an original document that has been authorised in writing by a Justice of the Peace, Commissioner for Declarations or Notary Public.
Cash rate/bank rate – the cash rate is the rate at which the Reserve Bank of Australia sets interest rates. The bank rate is the interest rate that banks offer and is above the cash rate to allowing for a profit margin.

Charge – An interest which is held over an asset by way of security. This can be fixed, floating or both

Chattels – any article of tangible property other than land, buildings, and other things annexed to land.

Cheque – includes both personal and bank cheques

Claim – is an assertion of a right (as to money or property). Depending on how it is defined in a contract certain facts may combine to give rise to a legally enforceable right or judicial action for non compliance. Someone may make a legal claim for money or property, it can also mean an interest in, as in a possessory claim, or right to possession, or a claim of title to land.

Collateral – Assets pledged as security for a loan. In the event that a borrower defaults on the terms of a loan, the collateral may be sold, with the proceeds used to satisfy any remaining obligations. High-quality collateral reduces risk to the lender and results in a lower rate of interest on the loan.

Commercial – Relates to business or Commerce

Commission – the fee payable to an agent for work performed during the sale (or property management) of the property. It is paid by the person who authorised the agent to act on their behalf (usually the seller – or landlord, in the case of property management) and is payable upon settlement of the property (or during the course of the property management period). It is usually based on a percentage of the property sale price but can be negotiated otherwise by prior agreement.

Common Area – An area shared by all occupiers under Strata Title. Owners contribute to the up keep of such but do not themselves own the area.

Common Property – Land or a tract of land considered as the property of the public in which all persons enjoy equal rights. A property owned by groups In a home /villa unit or flat development that part of the property owned and used in common by all the unit or flat owners or occupiers and which is maintained by the Body Corporate

Common Plan – A Strata Plan showing areas of common use for all tenants

Community Corporation – A legal entity owning land where the land is owned subject to a community scheme.

Community Lot – A lot within a Community Title Scheme

Community Plan – like a strata plan this plan shows common use areas for all tenants under a community scheme

Community Title – Community land is divided into lots and is owned by the members of the community scheme

Company Title – Owners of a company title property do not sell strata lots but effect transfer of property by selling their share in the company that owns the property

Comparison Rate – These rates do not include government fees but are tools used to identify the true cost of credit. They consider the amount, term, repayment rate/interest charges

Completion – The date the sale is completed – also known as contract end date – settlement.

Completion Date – The date of settlement of the contract

Compound Interest – Compound interest is interest calculated on the principal amount invested, which is then added to the principal amount, and compounded again The compound interest formula calculates the value of a compound interest investment after ‘n’ interest periods. A= P(1 + i)n :

Concession – A discount or partial exemption

Conditional Loan Approval – loan approval granted on the condition that the borrower satisfies the lender’s specified conditions

Conditions of Sale – The conditions under which a purchaser takes property sold to him. Where real property is the subject of sale the conditions contain provisions as to title to be accepted by the purchaser and how it is to be proved and the amount of deposit. When a sale is concluded, the purchaser signs a memorandum endorsed on the conditions, the whole becoming the contract of sale. Conditions of sale are frequently attached to goods specifying what warranties attach or do not attach and generally, the purchaser will be deemed to have notice of such conditions and the sale will be affected by them accordingly.

Consent – Generally required in writing is an authority or permission to act

Consideration – Under a contract of sale of land, the consideration is normally the purchase price.

Consumer Credit Code – This is uniform across Australia and regulates the consumer credit industry The NCC applies to credit contracts entered into on or after 1 July 2010 where: the lender is in the business of providing credit . It details rights and obligations of both borrowers and lenders for Home Loans and personal finance

Consumer Price Index (CPI) – An index measuring the prices at various times of a selected group of goods and services which typify those bought by ordinary Australian households. It allows comparisons of the relative cost of living over time, and is used as a measure of inflation

Contents Insurance – Insurance to protect the owner from loss/damage to the building’s contents – fixtures and fittings

Contract Date – The date on which a contract is signed and exchanged by all parties

Contract of Sale – An agreement relating to the sale of property which contains terms and conditions of sale. All contracts must be in writing. A well-drafted supply contract specifying clear terms and conditions will help avoid misunderstandings preventing disputes over alleged breaches of obligations between parties.

Conveyancer – A licensed person acting on behalf of another to effect a transfer, assignment, lease or other dealing with respect to a land interest.

Conveyancing – the process that legally transfers property ownership from one entity to another.
Conveyancing – Searched undertaking as part of the conveyancing process to confirm and establish the right to title and ownership. Defects of title may be revealed.

Cooling Off Period – usually refers o a contract period in whereby the buyer can rescind the contract with substantial penalty.

Cost Agreement – An agreement used between lawyers and their clients setting out the cost estimates. The client agrees to be bound to these.

Cost Disclosure – A written disclosure of a lawyers’ fees. These are required to be provided by law before a lawyer can accept a client retainer

Covenant – is a promise executed under a seal whereby one party promises to another that something has, or will be, done. Covenants can be positive in nature, such as an undertaking by a landlord to perform certain structural alterations to make leased premises suitable for the tenant. A negative covenant restricts an owner from doing something.

Credit – Monies advanced

Credit Advisor – A person who advises in relation o any form of consumer credit

Credit Agency – Under the Australian privacy law is an Agency for reporting credit activities to a bureau

Credit File – This file holds information regarding an individual and commercial credit worthiness and history. It also contains information regarding credit application and defaults

Credit History – A person’s history of credit activity.

Credit Limit – the limit set by an institution for the total amount of money that it will advance a person at any one time

Credit Reporting – the act of reporting a person’s credit history

Creditor – A person or entity to which money is owed

Cross-Securitisation/Cross-Collateralisation – when the financial institution uses your property (whether owner-occupied or investment) as security for other property you purchase.

DDamages – The costs and expenses incurred under a Breach of Contract. These are recoverable under Law.

Dealing Number – A registration number granted under the Torrens title system in relation to dealing.

Debenture – Is a document that either creates a debt or acknowledges it, and it is a debt without collateral

Debtor – A person or entity who owes money

Debt-to-Income Ratio (DIR) – used to assess loan affordability this is the ratio between a person’s debt and their income

Deed – A legal document with a longer lifespan than a contract and for which no consideration is required.

Default – Failure to comply with the terms of a contract. – Failure to repay a debt – may also be called a breach of Contract

Delinquency – A default in relation to an obligation

Deposit – Under a contract of sale a proportionate amount paid to secure the sale. Usually held in a Trust Account and paid towards the purchase price on settlement. A deposit can be lost for non completion of contract plus other costs and expenses in the event of the contract termination by the buyer without due cause.

Deposit Bond – A legal document guaranteeing payment to the seller of the deposit in the event that the contract is terminated by the buyer for a buyers’ breach

Deposited Plan – The official plan of the land stating the land measurements and also showing the location of registered covenants and easements.

Depreciation – A Tax incentive calculated on the diminishing value of a building over time. As buildings get older and items within it wear out, they depreciate in value. The Australian Taxation Office allows property investors to claim deductions related to the building (Capital Works) and Plant and equipment items in it. Depreciation can be claimed by the owner of an income producing investment property, which has the effect of reducing their taxable income – meaning they pay less tax.

Detached House – A free standing house- no common walls

Development Application – An application to Council for the development of a building

Development Consent – The formal grant of a development application, which may be subject to conditions and terms.

Direct Debit – The automatic deduction from a person’s bank account of funds payable to a specific person or entity

Disbursements – Incidental fees and charges

Discharge of Mortgage – A release of the owner from all liability and obligation to the lender under the mortgage

Disposable Income – Residual income remaining after tax, superannuation, debts and living expenses are deducted from all incomes received

Diversification – The spreading of investment funds among classes of securities and localities in order to distribute and control risk. This is a fundamental law of investing with confidence.

Down Payment – An upfront payment

Draw Down – The act of withdrawing money from the balance of the loan thereby increasing the principal

Drawdown of funds – Withdrawing funds from a designated loan account, common in house and land purchases with a construction loan where building progress payments are drawn down progressively according to construction expenditure over time.

Due Diligence – Ensuring that sufficient analysis has been conducted before entering any arrangement, contract or agreement .

EEasement – The right to use the land of another for a specific purpose. The most common easements are ‘right of way’. E.g. where a property owner grants a right to an adjoining owner for that owner to use part of the land to gain access to the adjoining owners land.

EFT – Electronic funds transfer

Encumbrance – An interest or right in property generally by a third party which usually diminishes the value of the land. It does not prevent the transfer of ownership. These may include things easements, mortgages, caveats, notices of intention to resume, or leases which are registered on the title.

Equitable Interest – is a right in equality and not necessarily a legal interest

Equity – The non tangible value a person holds with respect to their property. The equity held if property is valued at $500,000 with a mortgage of $300,000 would be $200,000.

Equity Loan – A loan taken out on the basis of the equity value of a property

Escrow – Something of value, such as a deed, stock, money, or written instrument, that is put into the custody of a third person by its owner, a grantor, an obligor, or a promisor,usually to be retained until certain conditions are met.

Establishment Fee – A fee payable to the lender by the borrower to establish a loan.

Established Home – A home that has been lived in previously.

Estate – A person’s liabilities and assets

Exchange of Contracts – the formal acceptance of a contract of sale.

Exclusions – Exclusion or limitation clauses are generally included within an agreement in which a supplier or manufacturer of a good or service, seeks to limit or exclude, a liability that may otherwise arise from the contract. Will also define what is not included in the contract or agreement.

Executor – A person or body appointed to handle a deceased person estate

Exemption – This acknowledges a person’s general liability to pay but exempts payment under specific reasons

FFee Simple – Freehold or fee simple the highest form of ownership. An owner may use the land in any way subject to zonings and ot government controls.

FHOG – First Home Owners Grant – a government incentive to promote first home ownership. Conditions and terms vary.

Final Inspection – Conducted immediately before settlement this inspection ensures the quality/condition of the property has not changed considerably from first inspection.

Final Inspection Report – A certification issued by a local council or building inspector that building works for a home are complete and the home is ready to be lived in.

Final Search – A title search carried out before settlement ensuring that no further encumbrances caveats etc have been recorded on title between exchange and settlement.

Finance Clause – A contract clause whereby the buyer ensures that it will have adequate finance to complete a sale by settlement.

Financial Advisor – A professional advisor who holds AFSL or is an authorised representative of an AFSL holder and can therefore advise on either business or personal finance.

First Home Buyer – Defined as person who buys property for the first time as a primary residence.

Fittings – generally described as items that can be removed from a property (Sheds, Curtains etc)

Fixed Charge – A charge over specific assets of a borrower that the lender may repossess of the borrower defaults

Fixed rate – A loan is locked in at a specific interest rate for a specified term or the full loan term.

Fixtures – Items of property that from part of the property ie that are affixed to the structures of the land. Usually in such a manner that they cannot be removed without damaging the property. The agent must list all fixtures to be included on the contract.(Driveway, Carport etc)

Floating Charge – A charge including future assets that will become a fixed charge on default of the borrower.

Folio Identifier – A title description of land registered under the Torrens title system law.

Foreclosure – A lender liquefies the assets of a borrower who has defaulted.

FIRB – Foreign Investment Review Board – examines proposals by foreign people and companies to invest in Australia and advises the Treasurer on those subject to the Foreign Acquisitions and Takeovers Act 1975 and Australia’s foreign investment policy.

Foreign Person – The term Foreign person means: a natural person not ordinarily resident in Australia; a corporation in which a natural person not ordinarily resident in Australia or a foreign corporation holds a controlling interest; a corporation in which 2 or more persons, each of whom is either a natural person not ordinarily resident in Australia or a foreign corporation, hold an aggregate controlling interest; the trustee of a trust estate in which a natural person not ordinarily resident in Australia or a foreign corporation holds a substantial interest; or the trustee of a trust estate in which 2 or more persons, each of whom is either a natural person not ordinarily resident in Australia or a foreign corporation, hold an aggregate substantial interest.

FIRB purchaser – a “foreign person” purchaser that requires FIRB approval in order to be able to legally purchase a property.

Freehold Interest – An interest in land ownership.

GGazumping – the seller accepts a bid of another person after having accepted a bid placed earlier.

Gearing – A general term describing a financial ratio that compares some form of owner’s equity (or capital) to borrowed funds. Gearing may be positive or negative.

Government Fees – Fees charged by the government including stamp duty

Group Title – similar to freehold whereby the title also includes common property owned jointly. Each lot has its own certificate of title and a registered number of entitlements. And there must be a body Corporate. Entitlements include voting rights and contribution of levies to the body corporate. The body corporate will own roads, common areas, facilities etc.

Guarantee – The promise by a third party to pay the lender all costs, expenses and where necessary damages payable by a borrower if the borrower does not meet their commitments. The guarantee can be in full or to a limited amount.

Guarantor – A person or party who promises to pay the borrowers debt in the case of the borrower being unable or unwilling to pay. Will usually includes, damages, recovery costs etc

HHolding Deposit – A token amount paid to the agent as a sign of good faith. This is not a legal requirement

Honeymoon Rate – A introductory loan period offering lower than usual interest rates or a decrease in fees and charges to encourage borrowers.

IIdentification Survey – Performed by a qualified surveyor assess the boundaries and any encumbrances by or on the land.

Inclusions – Specific items to be includes in the contract price.

Income Protection Insurance – Income protection insurance provides an income stream for you should you become unable to work due to an injury or illness

Indefeasibility – The act of having impenetrable ownership despite prior unregistered interests.

Indemnity – A legal exemption from liability for damages.

Instalment – A part payment known as a ‘tranche’

Insurance

Interest – the cost of the monies borrowed.usually expressed as a percentage of the amount borrowed this can be variable, fixed or split.

Interest-only – The repayment of the interest charges on the loan only. Loan repayments are generally lower than a tradition al loan as there is no money paid off the principal or actual amount owed.

Introductory Period – A introductory loan period offering lower than usual interest rates or a decrease in fees and charges to encourage borrowers.

Investment of Deposit – Conveyancing term describing the accumulation of interest on the paid deposit. The profits are usually split between the parties on settlement.

Investor – A person investing money over the longer term with the investment objectives of reasonable return and capital growth (appreciation). The opposite of a Speculator looking for higher returns short term usually with a higher risk factor.

Investment Property – A property that is not occupied by the owner, usually purchased specifically to generate profit through rental income and/or capital gains.

JJoint and Several Liability – Each party is liable personally and jointly with the other person. A person claiming against a joint and several clause may take action against one person, or the other or both.

Joint Tenant – Two persons own property together. The rule of survivorship applies. When a joint tenant dies then the surviving joint tenant automatically gains entitlement to the deceased person’s share of the property. Joint tenants have equal share

Joint Tenants – Each owner has equal shares and rights in the property

Joint Venture – A project which is undertaken by more than one person.

LLandlord – the owner of a property that is leased or occupied by tenants

Landlords Protection Insurance – Insurance to protect the Landlord. Depending on the particular policy the following may be covered. Accidental, malicious or intentional damage to the property by the tenant or their guests, theft by the tenant or their guests, loss of rent from absconding tenants,loss of rent from tenant hardship, loss of rent if the tenant defaults on payments, liability including for a claim against you by the tenant, and legal expenses incurred in taking action against a tenant.

Land Tax – State Tax payable on land value each calendar year. This tax must be paid before the land can be sold.

Land Tax Clearance Certificate – A statutory certificate issued certifying that no land tax remains unpaid.

Lenders Mortgage Insurance (LMI) – usually required by lenders when the borrowing more than 80 per cent of property value. It provides insurance to the lender in case the borrower defaults on the loan.

Life, Trauma and TPD Insurance – Covering accidents/circumstances which cause death (life cover), a serious health issue like cancer and illnesses impeding the ability to work (trauma cover) or a serious impairment that would take away the ability to work again (TPD cover).

Lease/Leasehold – owner of property allows another person to have possession of property in return for rent. A lease does not give the tenant ownership rights.

Leasehold Interest – An interest to lawfully occupy a property

Leasehold Mortgage – A mortgage over a lease

Legal Advisor – A qualified legal professional – e.g. lawyer, solicitor

Legal Interest – A right or interest at law rather than a right or interest in equity

Lender – Person or entity that lends money

Lenders Mortgage Insurance (LMI) – usually required by lenders when the borrowing more than 80 per cent of property value. It provides insurance to the lender in case the borrower defaults on the loan.

Lessee – tenant who has the right to use or occupy a property under a lease.

Lessee Disclosure – Provided by a tenant to a landlord regarding financial position

Lessor – landlord who holds title and conveys the right to use and occupy a property under a lease agreement (as defined under the Tenancy Act Qld 1994).

Lessor Disclosure – provided by the landlord to the tenant regarding the leased premises.

Lien – The right to hold an asset until specific conditions are met. The person holding the lien has the right to the asset should the condition not be met.

LOC (line of credit) – a facility available from financial institutions with an available credit limit that can be drawn down at any time..There are no set repayments off the principal amount.

Line of Credit Mortgage – A non fixed term facility allowing the borrower to user off-set savings to repay the mortgage whilst living on credit

Liquidator – A person /entity appointed to realise the assets of an insolvent person or company

Loan – money lent with an agreement that it is to be repaid with/without interest

Loan Approval – Formal approval that a loan application has been approved

Loan Fraud – An illegal, dishonest or fraudulent act committed in relation to a loan or loan application.

Loan Maturity – The date the loan becomes repayable

Loan Purpose – The purpose the loan (business, personal, investment).

LVR (loan-to-value) ratio – The relationship between the amount of the loan and the value of the property to calculate it, divide the loan amount by the value of the property then multiply by 100 to get a percentage.

Lock-In – A set rate of interest for a set time

Lot – A parcel of land – usually within a larger lot

Low-doc loan – A non- confirming mortgage whereby the borrower does not require PAYG information. They are popular with self-employed people and those who have not yet established a credit rating.

Lower quartile – the price point below which 25 per cent of sales were recorded. If there were 100 sales in a suburb, the 25th lowest price would be the lower quartile price.

Lump Sum Repayments – A repayment in full or larger than normal sum.

MMargin – The difference between the current and future value of a person’s security.

Margin Lending – Using the value of exiting security to invest in other securities

Market Value – As defined by the law, the highest price estimated in terms of money which a property will bring if exposed for sale in the open market allowing a reasonable time to find a purchaser who buys with knowledge of all the uses to which it is adapted and for which it is capable of being used and assumes a willing buyer and willing seller.

Maximum LVR – the maximum ratio a lender will to for a loan product

Median Price – Median price – This is the ‘Central Tendency’ and is not skewed by extreme sales at wither the higher or lower end. Simply. the median house price is the middle price of all sales recorded in a particular suburb, postcode, city or state. It is the ‘Central Tendency If there were 100 sales in a particular suburb, in ascending order, the median would be number 50 on the list. It is not the average sale price.

Minimum Repayment – The lowest repayment a borrower is required to make under the loan contract

Minimum Loan Amount – the lowest amount a borrower is allowed to borrow

Minimum Lump Sum Payment – the lowest amount a borrower can pay in a large amount

Minimum Redraw – the smallest amount a borrower is able to redraw at one time

Mixed Use – refers to the permitted use of a property for both commercial and residential uses.

Monthly Fees – Fees payable on a monthly basis

Mortgage – the formal document giving the mortgagee security of the land/property in return for the advance of money

Mortgage Aggregator – A Company that collects several independent brokers under one banner/umbrella

Mortgage Broker – A person assisting the borrower source a suitable loan/ lender in return for the payment of a commission

Mortgage Duty – Stamp Duty payable on a mortgage – not in all States

Mortgage Manager – Lender who arranges the funding for a loan

Mortgage Offset Account – A savings account used to offset the interest payable on a loan

Mortgage Originator – the person who lends the money

Mortgagee – The lender

Mortgagor – The borrower

NNegative Gearing – An investment strategy used where the generated income of the asset does not exceed the loan repayments. Gains are made through the capital increase in the value of the property over time. Investors often use negative gearing to reduce taxable income as the loss can be deducted from other earnings.

Net Income – Gross income less tax and super annuation deductions.

Non Conforming Mortgage – A non standard loan catering to borrowers not meeting the standard terms and conditions – self employed, high credit risk etc.

Notice of Sale – Formal statutory advice that there is a change of ownership in property

Novation – Variation to a legal document by consent

OOccupation Certificate – A statutory permission to occupy a property once it has been built.

Off the Plan/Off Market – Buying a property before it is built, having only seen the plans. The property is for sale before it is built. This is commonly used for apartments or units under construction or about to be built.

Offer – The making of an offer is the first of three steps in the traditional process of forming a valid contract: an offer, an acceptance of the offer, and an exchange of consideration. (Consideration is the act of doing something or promising to do something that a person is not legally required to do, or the forbearance or the promise to forbear from doing something that he or she has the legal right to do.)

Official Cash Rate – Determined by the Reserve bank of Australia.

Offset Savings – The amount of money held on mortgage offset account which is used to offset loan liability

Old System Title – Title ownership in Australia that requires ownership to be traced back 30 years to establish a ‘good root of title’ which ensure there are no other rights or interests in the land.

Ongoing Fees – Payable by the borrower from time to time as described in the loan document

Option to Purchase – option given to buy a property for a pre-agreed price and usually during a set period of time

Order on the Agent – Correspondence from the buyer’s conveyance or lawyer advising the agent to release the held deposit to the vendor

Origination Fee – A fee charge to the borrower for originating the loan

Overdraft – the amount withdrawn from the bank exceeds the funds available in the bank

Owner Occupied – The owner occupies the property and not a tenant

Owners Corporation – A body managing a strata building

PParty/Party Walls – Jointly owned shared walls in a building

Passed In – When a property fails to meet its reserve price at auction

Personal Property – This includes tangible and non tangible property owned by an individual

Pest Inspection – Usually prior to settlement this inspection is to detect any signs of pest infestation

Planning Certificate – A government issued certificate which describes the zoning of land, the planning instruments governing the use of the land and any affectations regarding the land such as flood risk, bushfire, etc.

Plant and equipment – The removable items in the investment property like carpet, hot water systems, blinds, light fittings etc

POA – Price on application. The price is not advertised.

Portfolio (as in property portfolio) – The number and types of investment properties and individual or entity owns

Portability – The ability for a borrower to transfer his/her loan from one property to another without incurring set up fees and exit fees in the process

Possession – Having a right to occupy property as distinct from the ownership of that property

Possession Before Completion – The right to occupy a property before it is bought or sold

Post Completion Period – The period of time after settlement of a land contract when title has passed from seller to buyer

Power of Attorney – A written document in which one person (the principal) appoints another person to act as an agent on his or her behalf, thus conferring authority on the agent to perform certain acts or functions on behalf of the principal

PPOR or PPR – Principal Place of Residence. Generally, you live in tis residence(with your personal belongings) on a daily basis. Other factors may be used to determine whether a residence is your principal place of residence, such as: where your family lives, the extent of time you live in the residence. the, address you have your mail delivered to, if utilities (e.g. electricity, gas and telephone) are connected to the dwelling and the account(s) are in your name, if the address of the residence is recorded against your name on electoral rolls.

Pre-Approval – The approval given by the lender that the monies sought will be approved under certain terms and condition

Prescribed Documents – Legally required documents to complete a sale. Usually these will include but not be restricted to the title search, deposited plan and copies of any leases.

Principal – The amount of the loan.

Principal and Interest Loan – a loan requiring the repayment of the principal amount borrowed plus the interest.

Private Sale – The sale of a property without the services of an agent

Product Disclosure Statement – Referred to as a PDS this document explains the details of the loan specifically and the risks to the borrower

Property Cycle – Property cycle – property values usually follow a cyclical pattern of growth, decline, and return to growth.

Proxy – Permission to vote or act for some- one else

Put Option – An option allowing a buyer purchase land on pre-agreed terms. An option permitting its holder to sell a particular stock or commodity at a fixed price for a stated quantity and within a limited time period.

QQuantity Survey – Estimation and itemisation of all costs associated with the building construction

RRates Certificate – 603 Certificate issued by local council as to rates and charges due or payable to the council, by way of rates, charges or otherwise, in respect of a parcel of land.

Real Property – Land – including buildings and fixtures

Real Property Description – RPD – Method of describing a particular parcel of land using a plot and land number.. A plan search at the Titles Office provides a copy of the sub-divisional plan and dimensions of each lot on the plan.

Refinance – To obtain a new loan on different terms, usually involving the paying off of an existing loan by means of a new loan ( in whole or in part)

Registered Interest – An interest in land that is registered on the title of a property

Release – The right to legally walk away from a commitment or agreement

Rent – Monies paid or received in relation to the occupying o premises

Rental Yield – The return on an investment as a percentage of the amount invested. Gross rental yield can be calculated by multiplying the weekly rent by 52 (weeks in a year), then dividing by the value of the property and multiplying this figure by 100 to get the percentage.

Repayment – Monies paid by the borrower to the lender to satisfy all or part of the incurred debt

Replies to Requisitions – The replies by the vendor relating the quality of subject land title, provided in accordance with a contract

Requisitions on Title – Within a short period of time after exchanging contracts the buyer is entitled to question the seller about the property and any defects it may have.

Rescission of Contract – this puts both parties in position prior to the contract

Reserve Price – The minimum price set by the seller for auction

Residential – Residential zoning refers to an area being zoned for residential use only ( private occupancy)

Restriction as to User – Restrictions usually relating to zoning on how a property is used

Restrictive Covenant – Law a covenant imposing a restriction on the use of land for the purpose of preserving the enjoyment or value of adjoining land.

Reverse Mortgage – Usually for seniors/retirees this facility allows access to equity in their homes without having to sell it. Most often the loan is not paid out until the borrower dies, moves into a nursing home or relocates.

SSecurity – Collateral for a debt.

Self Managed Superannuation Funds – (www.ato.gov.au)Like other superannuation ( self-managed super funds (SMSFs) are a way of saving for your retirement. The difference between an SMSF and other types of funds is, generally, that members of an SMSF are the trustees. This means the members of the SMSF run it for their own benefit. SMSFs aren’t for everyone and you should think carefully before deciding to set one up. It’s a major financial decision and you need to have the time and skills to do it. There may be other, better options for your super savings. Either way you should certainly get professional advice. If you set up an SMSF you become a trustee of the fund. This means you’ll be responsible for managing your SMSF according to its trust deed and the laws and rules that apply to SMSFs. The key principle is that you run your SMSF for the sole purpose of providing retirement benefits to fund members. You need to manage your fund’s investments in the best interests of fund members and in accordance with the law. Your investments must be separate from the personal and business affairs of fund members, including yourself. You can accept money contributions for your members from various sources but there are some restrictions, mostly depending on the member’s age and whether they’ve exceeded the contribution caps. Generally you can’t accept an asset as a contribution from a member, though there are some exceptions. As a trustee you’ll have a number of administrative obligations – for example, you’ll need to arrange an annual audit of your fund, keep appropriate records and report to us on the fund’s operation. Accessing the super in your SMSF to pay benefits is generally only allowed when a member reaches what’s called their ‘preservation age’ and meets one of the specified conditions of release – for example, they retire. There are very limited circumstances, such as death or terminal illness, where a member’s super can be accessed before this. There are significant penalties for unlawfully releasing super benefits. The income of your SMSF is generally taxed at a concessional rate of 15%. To be entitled to this rate your fund has to be a ‘complying fund’ that follows the laws and rules for SMSFs. At some point you may need to wind up your SMSF. This could happen if all the members and trustees have left the SMSF or all the benefits have been paid out of the fund.

Settlement – the completion for the transaction. When the buyer becomes entitled to possession of the property. A formal settlement occurs when the owners hand to the buyer the executed transfer documents and the Certificate of Title in exchange for payment of the balance of purchase monies.

Settlement Agenda – The document used in the settlement process detailing the specifics of what each party receives on settlement

Settlement Date – Simply the date on which final settlement takes place

Sinking Fund – A strata fund maintained and contributed to by the owners for emergency expeses regarding the upkeep of the property

Solicitors Fees – Fees charges by the solicitor in regards to the property sale or purchase

Special Conditions – These conditions form part of a contract and are specifically related to the individual contract for specific circumstances,

Split Loan – A loan having both fixed and variable components

Square – An old imperial unit of area measurement. 1 square = 10 feet x 10 feet in area, which in metric measure is equivalent to 9.29m2.

Stamp Duty – State tax which is payable for transactions regarding dutiable property – land

Standard Variable Rate – A varying or floating interest rate charged by the lender

Statutory Declaration – A legal declaration used to certify a fact and sworn by a JP or Solicitor

Strata Levy – Fee/contribution paid by all members for repairs and maintenance of a strata building

Strata Plan – The plan of strata title detailing the common areas and individually owned areas

Strata Title – A system of registered ownership of space in multistorey buildings. All the owners combined own the land as body corporate but with individual ownership of lots within the complex. All have absolute right to sell / transfer their strata-titled property to a new owner. Most common form of strata title is home units.

Subdivision – The division of land into separate blocks

Sub-Lease – A lease given by the original tenant to a third party

Supply and demand – The number of properties on the market at any given time determines supply-and-demand With many properties on the market, it’s a buyers’ market. With few properties on the market or properties on to the market selling quickly, it’s a sellers’ market.

Switching Fee – The fee payable by the borrower if changing from a variable to a fixed loan

TTax Invoice – Issued under Australian Tax Law notable containing an amount for GST

Tax File Number (TFN) – A number allocated to taxpayers by the Australian Taxation Office. The TFN is used by the Australian Taxation Office to match income and taxation details

Tenant – The occupier of the property paying rent to the owner

Tenants in common – two or more buyers own a property with unequal shares and rights.

Termination of Contract – The end of the Contract

Title Deed – document showing ownership of property. Also records details of any mortgage, encumbrance and area.

Title Search – A document evidencing a search of the land titles register which identifies a property

Torrens Title – Austral legal title to land based on record of registration rather than on title deeds [from Sir Robert Richard Torrens (1814-84), who introduced the system as premier of South Australia in 1857] Most common and simplest form of an individual certificate of title to a property.

Torrens System – This is the name given to a system whereby title to land is evidenced by one document issued by a Government Department.

Trust Account – Bank account relating to monies received or held by an agent or a developer for or on behalf of another person. Monies held in trust are protected at law.

Trustee – A person /entity that holds money for the benefit of others

Trust Money – The monies held by the trustee

UUnconditional Loan Approval – Final loan approval

Underwriting – The act of guaranteeing the performance of a contact financially

Unencumbered Property– Real estate with no other liens, claims, easements, leases, or anything at all that would diminish free and clear title.

Unit – An apartment

Urban Renewal – The process of rehabilitating urban (city) areas, by demolishing, remodelling or repairing existing structures and buildings, public buildings, parks, roadways and individual areas on cleared sites in accordance with a more or less comprehensive plan.

VVacancy Rates – a measure of how many dwellings are available for rent over a specified time period.

Valuation – An assessment of the market value of a property

Valuer – A qualified person who makes the valuation

Variable Rate – A varying interest rate subject to fluctuations over time in accordance with the market

Vendor – Seller

Vendor Finance – The vendor / seller loans the money for the purchase to the borrower

WWaive –To give up legal right

Waiver of Cooling Off Period – The agreement to be bound to a contract without the right of a ‘cooling off period’

Warranty – A legally binding promise

YYield – the return by an investor on an investment, shown as a percentage of the amount invested.

ZZoning – the legal permissible use for the property. Ie residential, retail , commercial or industrial