Glossary

Lending Hand Finance

Listed below are a number of commonly used financial terms and their meanings. Contact us if you require any further clarification.

100 Point of ID

When applying for a home loan we will need a way of identifying who you are. A point system is used by the Lenders and each applicant requires 100 points. For instance a drivers license and birth certificate together normally equal 110 points, where a Medicare card will only be 25 points. This will vary on the Lender.

Actual Interest Rate (APPR)

An interest rate that includes any fees that are payable (i.e. Monthly fees).

Assets

Property and valuable owned.

Austrac

ID authority of Australia (100 points of ID)

Bankruptcy

A perfon that is unable to pay their debts, or forced to declare bankruptcy. Bankruptcy will affect your credit record for 7 years.

Building Insurance

A requirement from ALL lenders. Insurance covering the building itself (not it’s contents).

Capital Gain

The profit made when an asset is sold for more than the purchase price.

CCC

Consumer Credit Code

Collaterol

The security of property being used to guarantee the loan.

Conveyancer

The person transferring the title of one property into the name of the new owners.

Credit Report

A credit report (or credit file) contains information about your credit history, identity and other data relevant for credit assessment purposes.

Depreciation

The amount of value an item, or asset will lose over time.

Default

Failing to pay a bill will mean a permanent mark on your credit record for 5 years.

Disbursements

Expenses.

Drawdown

Then a lender disburses the funds to the borrower (i.e. at every stage of a construction loan).

Equity

The difference of what you owe on the asset and what it is worth.

Favourable Purchase

The contract price is less then the valuation.

Home Loan

Funds a home buyer borrows to purchase the property, generally secured by a registered mortgage to the bank over the property being purchased.

Liabilities

Any debts owned.

Lenders Mortgage Insurance (LMI)

This covers the lender’s risk if a borrower defaults on their home loan and the lender has to sell the property securing the loan for less than what is owed on the loan.

Loan to Value Ratio (LVR)

The loan amount expressed as a percentage of the asset value.

Mortgage

A legal document which gives a lender an interest over a property to secure the payment of money, or the performance of an obligation owed, to a lender.

Refinance

The process of paying off a loan with the proceeds from a new loan (usually for a lower interest rate) using the same property as security.

Reverse Mortgage

A home loan for people aged 60 or over, a reverse mortgage allows you to borrow against the value of your home. You’ll receive either a lump sum or a regular monthly payment. The debt is usually paid from the sale proceeds of the home.

Security

The asset being used to guarantee the loan.

Serviceability

Every lender has it’s own criteria, but it is a way of working out what you can afford to repay with your income and any debts owed.

Settlement

When the sale of a property is legally finalised.

Shared Equity

A shared equity loan increases affordability by contributing up to 20% of the property value with no interest charged on this portion. A shared equity loan in return claims up to 40% of capital appreciation (and loses out if the property value decreases).

A shared equity home loan assists the borrower by:

  • reducing the upfront cost
  • reducing ongoing costs of purchasing a new property
  • reducing current monthly mortgage repayments
  • making expensive property more affordable

Split Loan

A loan that may have one half on a fixed rate, and the other half on a variable.

Stamp Duty

A State Government Tax. For contracts of sale it is calculated according to the sale value on the contract. For mortgages, it is calculated on the amount secured by a mortgage.

Valuation

A written opinion of a property’s value by a valuer.

Variable Rate

An interest rate that changes with the market.