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Some financial terms can leave you scratching your head, so here’s an explanation of some commonly used ones. They’re not legal definitions, just simple explanations.

Additional Repayments

When you make more than the minimum payments required under a loan.

Annual Percentage Rate

The annual rate of interest applying to a loan.

Building and pest reports

Reports carried out by qualified professionals on a property to identify any building or pest issues.

Credit facility (line of credit)

A type of loan, or pre-arranged credit agreement that allows the borrower to withdraw funds at any time up to a credit limit.

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Council certificate

A council document that confirms information about a property, such as zoning, use and development rules for it. Councils issue different certificates for different information types held by them about properties.

A document issued by a local government that confirms information about a property, such as how the land is zoned and how it can be used. Local governments, or councils, issues different certificates for different types of information about a property in their jurisdiction.

Discharge of mortgage

A mortgage is discharged when the borrower has no more repayments to make to the lender.

Equity

The difference between the market value of an asset, such as a property, and any debts owed against it.

Fixed interest rate

When the interest rate on a loan is fixed at an agreed rate for a set time period.

Insurance

A financial agreement with an insurer to protect assets, such as a home or income, against risks such as damage, theft or loss.

Interest only repayment option

An option that allows borrowers to repay only the interest accrued on a loan for a set period, during which no repayments are required to reduce the loan’s principal amount.

Investment Property Loan

A loan taken out to purchase, refinance or renovate a property that’s used for an investment purpose. Investment properties are not occupied as the primary residence of an owner.

Loan Account

An account the lender opens to record the transactions, such as repayments, made under the borrower’s loan agreement.

Loan Term

This is the period of time that a borrower has to repay the loan. It may be expressed as a maximum period of time, but a borrower may still be able to repay the loan sooner.

Mortgage

A legal agreement by which a lender secures a borrower’s loan by using a property (whether owned by the borrower or someone else). Taking security here means acquiring rights or control over the asset such as requiring its owner to properly maintain it and having power to sell it upon the borrower’s default and apply the sale proceeds towards repaying the loan

A legal agreement under which a lender secures a loan by using a property as security. This means that if a borrowers fails to meet the loan obligations, the lender may sell the property in order to repay the loan.

Mortgage repayment holiday

A period of time during which the lender has permitted the borrower to delay or stop making loan repayments.

Offset account

A deposit account linked to a borrower’s home loan account that uses the money in it to reduce, or offset, interest that would otherwise be paid on the loan.

Owner Occupier Loan

A loan used to purchase, refinance or renovate a property that the borrower lives in as their principal residence. This also includes vacant land on which the borrower intends to build a dwelling to be used as their principal residence.

Redraw facility

A loan that allows the borrower to access (by redrawing) repayments they’ve made on their home loan additional to the minimum repayments required.

Stamp duty

A state government tax or levy which, depending on the circumstances, a purchaser may need to pay when they purchase their property.

Strata title

A form of property ownership that involves shared responsibility of the title owners for common areas of property. Apartments and units are commonly under a strata title, catering for common areas such as stairwells, courtyards and parking precincts.

Title search

A search of the government’s land registry’s database to determine a property’s legal status, including (for instance) who owns it and whether any registered mortgages or easements encumber it.

Total amount owing

The balance owing on a borrower’s loan at a given point in time, including the unrepaid principal borrowed and all accrued interest, fees and charges at that time owing.

Valuation fee

A fee charged by a professional hired to determine the value of a property. Lenders often engage valuers to provide valuations on properties that the lender has, or is, considering taking as security (e.g. by a mortgage) for the borrower’s loan obligations.

Variable interest rate

A loan that has an interest rate that generally goes up and down according to the fluctuations in market rates.

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