Glossary

Are you confused by the many different terms related to mortgages and home loans? Home Loans Central offers you this extensive glossary of terms to help answer your questions.

A, B, C, D, E, F, G, H, i, J, L, M, N, O, P, R, S, T, U, V

• Acceptable referee - Individuals including solicitors, magistrates, accounts, and doctor/justices of the peace.
• Acceptance - Agreement between the buyer and the lender regarding the terms and conditions of a contract, offer, or agreement.
• Additional repayment - Additional payments made toward the overall loan amount that exceed the minimum payments required by the loan agreement.
• Application fee - The fee or cost associated with submitting a loan application for consideration; varies from lender to lender.
• Appreciation - The increase in value of a home or property over time when compared to the original purchase price.
• Bridge financing - A short term loan used to allow buyers to purchase a new home prior to the final sale of their current or existing home.
• Break cost - The cost to the borrower of terminating or early repayment of a loan prior to the end of the contractual loan term.
• Certificate of currency - The official certificate issued by an insurance company to confirm a property is fully insured.
• Comparison rates - A financial tool calculating the true cost of a mortgage loan; includes the interest rate, fees, charges, and other related costs of the loan. Generally expressed as an interest rate and used to help borrowers compare multiple loans.
• Contract of sale - A legally binding written agreement detailing the specific terms, conditions, and limitations related to the purchase or sale of a home or property.
• Cooling off period - A period of five (5) days following the signing of contracts; during this time, the contract may be cancelled by any party.
• Default - Term used to describe when a borrower fails to make a required debt payment on the specified due date.
• Depreciation - The decrease in value of a home or property over time when compared to the original purchase price.
• Debt service ratio - The amount of an applicant’s income used to make payments on the home mortgage debt; usually expressed as a percentage of the applicant’s income. Most lenders prefer the debt service ratio to be no more than 33%.
• Discharge fee - The fee charged by the lender at the time a loan is fully discharged.
• Down payment - The amount of money paid in cash toward the overall purchase price (may range from 1% to 10% or more); payment is made at the time of contract signing.
• Drawdown - When loan funds are debited at the time of contract signing and settlement.
• Equity - The value a borrower has in a home or property, calculated as the difference between what the property is worth and the outstanding loan amount owed on the property.
• Fixed interest rate - An interest rate that is set and locked at a certain amount for a set time period of the loan.
• Formal approval - When the lender makes formal approval of a loan application and offers a specific available loan amount.
• Gross income - A borrower’s total amount of income before payment of taxes.
• Home equity loan - A loan offered based on the equity amount a borrower has in their existing home or property. May be paid as a lump sum amount or set up as a revolving line of credit accessed via check, debit card, or direct withdrawal.
• Honeymoon rate - A term used to describe an introductory rate on a loan that is valid for a set period of time, often the first 12 to 18 months of the loan. When the introductory period ends the interest rate adjusts to the full rate agreed upon at the start of the loan.
• Interest only loan - A loan agreement requiring borrower to make payments based solely on the interest due on a loan rather than on a combination of principal and interest.
• Joint tenants - When a home or property is held and owned in equal parts by two or more people.
• Loan to Value Ratio (LVR) - A measurement comparing the amount of money owed on a home or property to the value of the home or property. Expressed as a percentage; for example, if the outstanding loan amount is $150,000 and the value of the property is $175,000, the LVR is 85.7%.
• Mortgage insurance - An insurance policy taken out by the borrower at the time of settlement, ensuring the lender will be repaid in full if the borrower defaults on the loan. Most lenders require mortgage insurance if the loan amount is greater than 90% of the value of the home or property.
• Mortgagee - The bank or lending institution providing the funds for purchase of a home or property.
• Mortgagor - The borrower receiving the funds lent by the bank or lending institution.
• Net Income - A borrower’s total amount of income after payment of taxes.
• Offset loan - A deposit account linked to the loan principal, helping to reduce interest costs on the loan.
• Ombudsman - A person or office charged with receiving and investigating borrower complaints about their bank or other lending institution.
• Portable loans - A specific type of loan which allows a borrower to sell their existing home or property and move to a new home or property without having to refinance or take out a new loan.
• Pre-approval - When a bank or lending institution offers a borrower written specification of the amount of loan for which the borrower is pre-approved; this amount is subject to specific terms and conditions before final approval is given.
• Principal and interest loan - A traditional type of loan in which the borrower makes monthly payments that are allocated to both principal and interest amounts of the loan.
• Refinancing - When a borrower takes out a new loan which is used to pay off or discharge a previous loan on the home or property. Often used as a tool to lower interest rates, reduce monthly payments, or access equity in a home or property that has appreciated in value.
• Settlement - Final completion of a home or property sale transaction; includes all final payments of fees and charges, resulting in the borrower receiving ownership documents for the home or property.
• Service fee - Any charge levied by the lender intended to cover costs associated with servicing of the loan; often charged on a monthly basis.
• Split loan - A specialty loan combining both a fixed rate and a variable rate applied to two separate parts of the loan; may also be a combination of a standard loan and a revolving line of credit.
• Stamp duty - A state government tax applied based on the home or property value and/or on the amount of money borrowed to purchase the property.
• Switching fee - A charge paid by a borrower when switching a loan from one type to another type, such as from a variable rate to a fixed rate loan, etc.
• Torrens title - A legal document specifying and granting legal ownership of a home or property.
• Transfer - A legal document filed with and registered in the local Land Titles Office to officially record ownership changes for a home or property.
• Uniform Consumer Credit Code (UCCC) - A federal law enacted by Parliament specifying uniform contracts among all lenders and credit providers. Every contract must clearly specify any and all charges or fees the borrower may be required to pay.
• Valuation - An official report issued by a professional property evaluator specifying the evaluator’s professional estimation of a home or property’s value; required by most lenders as part of the loan process.
• Valuation fee - The fee charged by a professional property evaluator for his or her professional services related to valuation of a home or property.

Click Here to Apply Now