What does that mean (Glossary)

The following is a list of commonly used terms and their meanings :

TERM MEANING

Loan to Value Ratio (LVR)

expresses the amount of a first mortgage loan as a percentage of the total appraised value of real property

Lenders Mortgage Insurance (LMI)

Insurance taken out to protect the lender against losses on the loan, in case you default - it does not protect or cover the borrower. The cost of Lenders Mortgage Insurance is paid by the lender or borrower depending on the LVR.

Mortgage Broker

A licensed lending professional who represents several different lenders, and usually offers more loan options than a commercial bank.

Mortgage Manager

A company responsible for managing every facet of a borrower's loan. They often source loans from mortgage originators.

Comparison Rate

Is the current rate combined with any foreseeable fees and charges. It is used to compare loans from different lenders to see which the better deal is. When advertising interest rates, it's compulsory that lenders provide a comparison rate.

Australian Credit Licence

A compulsory licence for a company, business or individual to engage in credit activities

Full Doc

Refers to a loan where all income and assets are documented. It is typically referred to as a "full doc" loan in the mortgage industry and is a common type of loan used for financing a home purchase

Lo Doc

Refers to a finance product commonly offered by a mortgage lender to consumers who cannot qualify for normal loan products or do not wish to give up their financial privacy

Principle and Interest Loan (P&I)

A loan where you are obliged to pay both Principle and Interest payments on a regular basis.

Interest Only Loan (IO)

A loan where your repayments cover the interest component of your loan. You normally have the option to make additional payments off the principle.

Offset Account

A savings account linked to your mortgage in such a way that the interest earned on your savings is applied to reduce the interest on your mortgage.

Specialist Lending

Lending products designed to meet special lending conditions such as customers with poor credit history

Credit Impairment

Where a customer has a credit history with adverse findings/defaults within it.

BAS

Business Activity Statements as used by companies and self employed people and entities.

Up Front Commission

A commission paid to a mortgage broker/manager on settlement of a loan.

Trail Commission

An ongoing commission paid to a mortgage broker/manager based on the outstanding balance of the loan.

Fixed Interest Rate

A loan where the interest rate is fixed for a nominated period of time

Variable Interest Rate

A loan where the interest rate is subject to change based on the current rate decided by the bank/funder.

Valuation

Is the process of estimating the potential market value of a property

Loan Split

A single loan contract broken into two or more loan portions.

Equity

The value of ownership in a property. For a house this typically represents the difference between the value of the property and the mortgage balance.

GST

The GST (Goods and Services Tax) is a value added tax of 10% on most goods and services transactions in Australia.

Line of Credit

A variable rate loan with maximum flexibility and options

Loan pre-approval

An approval for a pre-determined loan amount prior to having committed to a purchase or to confirm credit worthiness subject to a single (or several) outstanding items.

Loan Term

According to the loan agreement, the length of time between the date of disbursement of the loan and the date it needs to be fully repaid.

Security Property

The property/properties taken as security until the full loan amount is repaid.

Application Fee

This is a fee that may be charged by the lender to cover the costs of processing your loan application.

Professional Pack

Additional features built into your loan, typically comes with a yearly fee attached

Maximum Loan Amount

The maximum amount that can be borrowed. It's based on a borrower's disposable income, deposit, and the purchase price of the property.

Mortgage

A mortgage is the transfer of an interest in property to a lender as a security for a debt - usually a loan of money. While a mortgage in itself is not a debt, it is the lender's security for a debt.

Redraw facility

The ability to reclaim any additional funds paid into the loan above the minimum required payment.

Settlement Date

Is the date that a loan is settled - it typically represents when the funder provides the funds for you to purchase/refinance your home and effects a mortgage over the security offered.