Glossary

Agent (Real Estate)

A licensed and fully trained individual who aids in the process of selling a property.

ALI

The ALI Group Loan Protection Plan gives you protection for a wide range of critical life events across three areas; serious medical conditions, death and terminal illness and involuntary unemployment. ALI Group will pay you (or your estate), rather than the lender – which is usually the case with loan protection plans. This means is that you can choose how you use your payout.

Arrears

The amount you have not paid in respect of scheduled repayments for a debt owed (i.e. past the due date). This is different from the balance owing.

Auction

The public sale of a property where the highest bidder is normally the successful buyer.

Building Inspection

An inspection generally carried out prior to the purchase of a property to ensure the building is structurally sound. Contracts of Sale can be made subject to the satisfactory building inspection.

Building Insurance

Insurance taken out by the owner of the property to insure the property against risk such as fire, landslip etc. The responsibility to insure the property often passes to the buyer on exchange of contracts.

Cash rate

The interest rate which banks pay to borrow funds from other banks in the money market on an overnight basis. The cash rate is the Reserve Bank of Australia’s operational target for the implementation of monetary policy. It is also an important financial benchmark in the Australian financial markets.

Comparison Rate

The Comparison Rate provides an indicative interest rate that takes into account certain costs associated with setting up a loan.

Conditional Approval

Your loan application has been approved subject to given terms and conditions that MUST be fulfilled prior to unconditional approval being issued.

Contents Insurance

Sovers materials inside the home. For example electrical goods such as Plasma TVs and stereo systems, furniture, curtains and carpets. Certain items, such as expensive computers, may need additional insurance.

Contract Of Sale

A legally binding agreement relating to the sale of property, which expresses the terms & conditions of sale.

Conveyancing

The legal process for the transfer of ownership of real estate.

Cooling Off Period

A length of time in which the two sides to a purchase agreement, or contract, can think things over and cancel. The length of time may vary between each state and territory. This usually does not apply in the case of an Auction.

Default

When you fail to meet the terms or requirements of a signed contract there is a default. For example, not making your scheduled repayments on a loan or not making them on time.

Discharge

When you have a home loan, the bank holds the Certificate of Title on your property until the home loan is repaid. When you change lenders or have paid the full amount off your home loan, you need to go through a process to discharge the mortgage and remove the lender from your title.

Equity

The difference between the market value of the property and what is still owing on the mortgage. This will increase as the loan is repaid, or the property’s market value increases.

Expression Of Interest

An expression of interest is like a private sale / treaty; however a formal offer must be submitted for the property by a specific date.

Interest only

An ‘interest only’ loan means that your repayments only go towards repaying the interest for a specified period, rather than repaying the principal amount of the loan. For example, paying your loan “interest only” means that the principal balance stays the same. Paying interest only can be good if you need extra money for buying furniture or improving your home. It is also popular for investment loans.

Interest rate

The term used to describe the cost of borrowing money or the return to the owner of the funds which are invested or lent out. It is usually expressed as a percent per annum of the amount of money borrowed, lent or invested.

Lenders Mortgage Insurance (LMI)

Paid by the borrower and is usually required by lenders when you’re borrowing more than 80 per cent of the property’s value. It provides insurance to the lender in case the borrower defaults on the loan.

LVR

This is the amount of the loan compared to the value of the property or asset purchased with the loan funds, expressed as a percentage. For example, a loan of $400,000 to buy a property worth $500,000 results in a debt to equity of 80%. Banks will place a limit on the debt to equity ratio depending on things such as the type of property, the location and the financial position of the borrower.

Mortgage Protection Insurance

This type of insurance is taken out by a borrower to cover the borrower’s loan repayments in the event that they are not able to meet them through specific events such as serious illness or redundancy.

Passed In

A property is ‘passed in’ at auction if the highest bid fails to meet the reserve price set by the seller.

Pre-Approval

A general indication of how much you are able to borrow.

Principal and interest

A home loan with repayments of both principal and interest is one in which you pay interest and also repay part of the amount borrowed (principal) at the same time.

Private Sale / Treaty

A method of sale which has no specific closing date and is usually negotiated between a buyer and seller with the assistance of an agent. Reserve Price At auction, this is the minimum price acceptable to the seller of the property.

Settlement Of The Loan

Settlement of the loan happens with the settlement of a property purchase. It’s when the buyer’s lender transfers the borrowed funds to the seller or the seller’s mortgage holder.

Settlement Of The Property

Settlement of a property is when the balance of the purchase price is paid to the seller. The buyer receives the keys and becomes the owner of the property.

Stamp Duty

A State Government tax based on the purchase price of a property. Each state and territory has a different set of rules and calculations.

Strata Property

The Conveyancing (Strata) Act 1961 was introduced to enable the subdivision of lots into strata and the transfer of these titles. This allowed owners to split a piece of land and receive their title deed to a unit.

Tender

A tender is a very formal sales process, which requires potential buyers to submit a proposal in response to the request to owner’s advertised tender.

Unconditional Approval

Your loan application has been fully approved and is not subject to any terms and conditions.

Valuation

A professional opinion of a property’s value.

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