Welcome to Select Financial

Below is a glossary of terms you may encounter when purchasing property or obtaining a mortgage. The list is by no means exhaustive, and definitions and terms may be interpreted differently to those included below.

	AAPR
	Average Annualised Percentage Rate. Sometimesreferred to as the Compulsory Comparison Rate, this figure takes into account the other costs associated with the loan etc, and expresses them as an average interest rate, to create a level field with which to compare like loan product interest rates.

	Acceptance
	Agree to the terms of an offer or contract.

	Additional repayment
	Extra funds paid into the loan in addition to the minimum monthly payments.

	Amortisation period
	The period of time a loan is calculated over (and repaid).

	Application fee
	The fee charged by a lender to cover or partially cover the lender's costs of setting up or establishing the loan.

	Arrears
	An overdue account yet to be paid.

	Assets
	Money, property or goods owned.

	Asset Lender
	Lending institution that lends finance based on the value of the asset, which will be held as security.

	Bankruptcy
	BankruptcyThe legal financial state and individual is in, when unable to meet debts (for Companies it's known as being 'wound up'). A debtor may be declared bankrupt by the Federal Court at either the debtors or the creditors instigation, and the debtors estate will be placed in the hands of an official receiver who will distribute the estate in accordance to the provisions of the Bankruptcy Act.

	Borrower
	A person, persons, or entity borrowing money to purchase, payoff, or refinance a product or effect.

	Buyer's Agent
	Person to act on behalf of the buyer to find and negotiate on properties the buyer wishes to buy.

	Capital
	The current value of your assets, including car, property, business, or money etc.

	Capital Gain
	The financial gain you get when you sell something for more than you bought it. Maybe subject to the capital gains tax, which is paid on the gained amount.

	Caveat
	A notice of warning given to a public authority, e.g. Titles Office, claiming entitlement to an interest in certain land. The caveat is registered and remains on the books as a warning to anyone who contemplates dealing with the property. It therefore prevents any action being taken without the previous notice of the person entering the caveat (the caveator).

	Collateral Security
	Additional or supporting security given in addition to the principal security.

	Comparison Rates Schedule (CRS)
	Comparison Rate Schedule. The schedule displayed by a lender that give the annual percentage rate and the respective Comparison Rate, for the lender's loan products for specific amounts over specific terms.

	Compulsory Comparison Rate Or CCR,
	is the figure expressed an interest rate, that takes into account some of the extra costs of a loan product. The formula used to calculate the CCR is regulated by the Uniform Consumer Credit Code and all Australian lenders are required to use the same formula.

	Consumer Credit Code
	Legislation designed to protect the rights of the individual (personal consumer) by ensuring banks and other financial institutions all adhere to the same rules when providing personal, domestic or household credit. It should provide borrowers with complete and honest information. Also known as the Uniform Consumer Credit Code or UCCC.

	Contract of Sale
	A written agreement outlining the terms and conditions for the purchase or sale of property.

	Conveyancing
	The legal process for the transferral of ownership of real estate

	Debtor
	Someone who owes money to another and can be compelled to perform an obligation.

	Deed
	A document in writing, which is signed, sealed and delivered by the parties thereto, to prove and testify the agreement of the parties whose deed it is, to the things contained in the deed.

	Depreciation
	The accounting practice where the cost of a fixed asset of a business is spread over the life of the asset. Depreciation is a non-cash expense which allows the money to be retained by the business, thus technically allowing the business the capacity to replace the asset over time.

	Direct Debit
	Where the Lender debits (deducts) a payment from client's bank, credit union or building society account.

	Disbursements
	Solicitors incidental costs involved when dealing with client on behalf of the Lender, e.g. searches, certificates pest reports, etc.

	Draw Down
	Act of transferring money from lending institution to the borrower after the loan has settled.

	DSR
	Debt Service Ratio.

	Encumbrance
	A charge or liability, e.g. a mortgage.

	Equity
	Generally used to denote the financial interest of a person in a property or business enterprise, e.g. a person's equity in his house is the difference between its value and the amount still owed to a Lender. A person's overall equity refers to his net financial worth, or the difference between what he owns and what he owes (i.e. Assets - Liabilities = Equity).

	Exchange
	The legal point of time when the vendor and the buyer swap documentation with a view to settlement.

	Fixed Interest (Fixed Rate)
	An interest rate set for an agreed term.

	Garnishee Order
	A court order taken out by a creditor on a person's employer or banker for the deduction of funds from his wages or bank account to repay a debt.

	Government Fees
	State and government charges at the time of settlement, e.g. stamp duty.

	Gross Income/Profit
	Income from a person or company, before tax, superannuation or payroll deductions.

	Guarantor
	A person/s who agree to be responsible for the payment of another person's debts.

	Holding Deposit
	A refundable deposit based on the goodwill of the buyer to go ahead with the purchase.

	Indemnity
	Security against damage or loss; sum paid in compensation for loss incurred.

	Interest
	The Lender's charge for the use of funds or the return on deposited funds.

	Interest Only Loans
	A loan where the principle is paid back at the end of the term and only interest is paid during the term. These loans are usually for a short period of time, 1 to 5 years.

	Liability
	A debt which one is liable for; being responsible only to a limited amount.

	Loan
	An advance of funds from a lender to a borrower on the agreement that the borrower pays interest on the loan, plus paying back the initial amount of the loan at or over an agreed time.

	Lender's Mortgage Insurance
	If you borrow more than 80% of the value of the property you may have to pay for Lender's Mortgage Insurance. It covers the lender if there is a shortfall after the lender exercises their right to sell the mortgaged property. It does not protect you from having to pay what is owed on your mortgage.

	LVR (Loan to Valuation Ratio)
	the ratio of the amount lent, to the valuation of the property.

	Maturity
	The date a debt or investment must be paid in full.

	Mortgage
	A form of security for a loan usually taken over real estate. The Lender, the mortgagee has the right to take (repossess) the real estate if the mortgagor fails to repay the loan..

	Mortgage
	The Lender of the funds.

	Mortgagor
	The person borrowing money in the terms of the mortgage.

	Negative Gearing
	Gearing your investment so that the cost to maintain it (loan repayments, council rates, maintenance etc) out weigh the income produced by the investment, leading to a reduction in taxable income.

	Net Income
	The income received by an individual AFTER TAX has been taken out.

	Net Profit
	The profit remaining in a business after all expenses have been taken out, but BEFORE TAX.

	Off the Plan Purchase
	Buying a property from the plans only, not the finished product.

	Portability
	Where a new property can be used as security for an existing loan, i.e. when the loan is transferred to a new security property without needing to repay the loan, reapply, or restructure.

	Principal
	The capital sum borrowed on which interest is paid during the term of the loan.

	Principal & Interst Loan
	A loan in which both the principal and the interest are paid during the term of the loan.

	Property
	A person's property is "what is he or she owns to do what they like with." It may be tangible or intangible, and may be given a monetary value (e.g. house, car, goodwill). Property may be classed 'real' which relates to land or interests in land (except leaseholds) and buildings, etc or 'personal', which relates to other kinds of property such as cars, bank accounts, leasehold interests in land.

	Redraw
	Borrower is able to draw on pre-paid funds

	Refinancing
	To replace or extend an existing loan with funds from the same institution or another.

	Security
	An asset that guarantees the Lender their borrowings until the loan is repaid in full. Usually the property is offered to secure the loan.

	Serviceability
	Ability of borrower to make and meet repayments on a loan, based on the borrowers expenses and income(s).

	Settlement
	Finalisation of payment by the new owner, and assumption of possession. When you pick up the keys!

	Term
	The length of a home loan or a specific portion within that loan.

	Third Party Security
	Security provided for a mortgage by a third party (some one different from actual borrowers) who is legally different from the borrower or debtor.

	Title Deed
	Registration showing the ownership of property.

	Title Search
	Process to ensure that the vendor has the right to sell and transfer ownership.

	Unencumbered
	A property free of liabilities, restrictions or mortgages.

	Valuation
	A report as required by the Lender, detailing a professional opinion of a property's value.

	Variable Interest Rate
	A rate that changes in accordance with the rates in the marketplace.

	Variation
	Changing any part of the original loan contract.

	Vendor
	Person selling a property who is the current owner.

	(source: www.mfaa.com.au)

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