Cash rate, mortgage insurance, body corporate, offset account…these are just a few of the words that may crop up during the life of your loan. But what do they all mean?
Below is a list of the most commonly used residential property-related terminology (from A-Z):
ARREARS – An outstanding or overdue amount.
BODY CORPORATE – The group responsible for the management of a strata building and its common areas.
CASH RATE – The official cash rate (OCR) is the term used in Australia and New Zealand for the bank rate and is the rate of interest which the central bank charges on overnight loans to commercial banks.
DEPOSIT BOND – A guarantee from a financial institution that a deposit will be paid to a seller. It can be useful for buyers with savings in a term deposit because it can be offered at the time of exchange – instead of a cash deposit.
EASEMENT – A right to use a part of land owned by another person or organisation, for example to access another property.
FIXTURES – Items that would cause damage to a property if removed. Their removal must be stipulated in the contract of sale and any damage made good by the seller.
GAZUMPING – When a seller accepts an offer from a buyer but then proceeds to formalise the sale of the property to another buyer with more favourable terms.
HOLDING DEPOSIT – A refundable deposit demonstrating the goodwill of the buyer to proceed with the purchase.
INTEREST ONLY LOAN – A loan where only the interest is paid for an agreed term, usually 1 to 5 years. The principal is then repaid over the remaining term of the loan by the conversion of repayments to principal and interest.
JOINT TENANTS – Equal holding of a property between two or more people. If one party dies, their share passes to the survivor or survivors.
LENDERS MORTGAGE INSURANCE (LMI) – The insurance borrowers pay to their lending institution if a borrower intends to borrow over 80% Loan to Valuation Ratio (LVR).
MORTGAGE PROTECTION INSURANCE – An insurance type a borrower chooses to take up to protect themselves should the policy holder pass away or be diagnosed with terminal illness.
NEGATIVE GEARING – Where the income from an investment property is insufficient to meet the interest costs of the loan used to fund the investment property.
OFFSET ACCOUNT – A non-interest earning account where the balance is offset against the home loan to reduce the total interest payable.
PRIVATE TREATY SALE – A private treaty sale is where a house is offered for sale at a negotiated price. Unlike an auction, the potential buyers do not know what others may be offering for the property.
REFINANCE – To switch mortgage providers and arrange a new loan for the same property.
STAMP DUTY – A State Government tax based on the value or purchase price of the property.
TORRENS TITLE – The name given to the system of registration of ownership and dealing with property. Under this system, title to a property is established by a statutory title issued by the Registrar General. It is the most common form of residential property ownership.
UNIFORM CONSUMER CREDIT CODE (UCCC) – This is the legal framework that governs the relationship between borrowers and lenders.
VENDOR – A party who offers a property for sale (also known as the seller).
ZONING – Statutory descriptions of the allowable uses of land as set out by local councils or planning authorities.
Don’t worry, there is no need to memorise this list. As your agents we are here to explain anything unfamiliar to you. All you need to do is ask.