Mortgage broking terms (2)

Question 1

Bankruptcy

Answer 1

When a party is unable to pay off their debts, legal proceedings is taken to relieve the party of unpaid liabilities.

Question 2

Covenant

Answer 2

A covenant is a binding condition placed on the property title, outlining specific restrictions related to the property.

Question 3

Credit limit

Answer 3

A credit card limit is the maximum amount you can spend with your credit card.

Question 4

Creditor

Answer 4

A party whom money is owed to.

Question 5

Debtor

Answer 5

A party who owes money.

Question 6

Default

Answer 6

A default is Failing to meet a financial obligation.

such as missing repayment schedule.

Question 7

Depreciation

Answer 7

Depreciation is where the value of an asset reduces over time due to wear and tear.

The value of the asset decreases annually and will be declared as an expense to reduce taxable income.

For e.g. when you purchase an equipment for your business, you don’t expense it straight away, you capitalise it .

When you capitalise it, it goes on your balance sheet as a fixed asset.

As you start to use the equipment over time, that is when you start to expense it.

for instance, Say the equipment you just purchased is worth $50,000 and you figured that you can use for 10 years.

This means that the equipment will lose its value by $5,000 every year.

Question 8

Discharge

Answer 8

A discharge is the release of a registered mortgage that was on the title of the property.

For e.g. when you sell your home or repay off the loan in full the bank no longer holds the title to your property, hence no mortgage.

Question 9

Easement

Answer 9

An easement is a portion of land registered on the property title, which gives someone the right to use the land. As a result, affecting the property’s value.

Question 10

Encumbrance

Answer 10

An encumbrance is an outstanding balance or charge, registered on the property title.

for e.g. A mortgage or caveat