Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Work EM > Mortgage Terms (Australia) > Flashcards

Mortgage Terms (Australia) Flashcards

To memorise the terms used in my industry.

1
Q

What is a

What is an Application fee / Establishment fee used for

A

Fee charged to cover or partially cover the lender’s internal costs of considering a loan application. Also referred to as an establishment fee by some lenders. The fees are sometimes required to be paid upfront and are not usually refundable unless the loan is refused.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is Arrears

A

Being overdue in repayments.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Define Bona-fide

A

Genuine and above board.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is a Break costs

A

Costs incurred when a fixed rate loan is paid off before the end of the fixed rate period, or when additional payments are made in advance.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is Bridging finance

A

A short term loan that covers a financial gap between the purchase of a new property and the sale of a currently owned property.
If you are buying a new property whilst you are still looking to sell your existing property, you might want to look into something called a bridging loan. A bridging loan is a short term loan that gives you up to 6 months to sell the existing property, helping you navigate this awkward time as you transition to your new home.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is Capital gains

A

The monetary gain obtained when you sell your property for more than you paid for it.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is Capital gains tax

A

Tax payable on the profit made when selling an investment property.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is a Cash advance

A

A loan on a personal line of credit, typically a credit card attracting higher-than-normal interest.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is a Community title (specific to NSW)

A

A property title where several dwellings are erected on an estate and the owners own their property and land on freehold title, but have shared access to community facilities e.g. swimming pool, barbecue area, tennis court etc. All property owners pay levies for upkeep of the community facilities.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is a Company title

A

A type of ownership for a unit/flat/apartment in a building that is owned by a company. A purchaser buys particular shares in the company which gives the purchaser the right to occupy a specific unit/flat/apartment. Lenders are generally not enthusiastic about lending on company title properties.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is a Comparison rate

A

This is a rate that includes both the interest rate and the upfront and on-going loan fees, expressed as a single percentage.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is a Construction loan

A

Construction loans function very differently from a standard home loan. They typically charge interest-only repayments throughout the building process. The interest-only period ensures your repayments are kept at a minimum during construction before reverting to a standard mortgage post-completion.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is a Contract variation

A

Any variation or alteration to the terms of a contract.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is Conveyancing

A

Legal work carried out by your legal representative to transfer ownership of a property to another.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is a Credit report

A

A report outlining an individual’s credit history, public records and any credit black spots.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is a Creditor

A

A person or organisation who loans money on the expectation it is to be repaid.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is Daily interest

A

Interest calculated on a daily basis. Most variable rate loans calculate interest on a daily basis.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is Debt consolidation

A

To combine one or more debts previously held separately into one merged amount.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is Debt Servicing Ratio (DSR)

A

The Debt Servicing Ratio measures whether you can afford the mortgage payments. To calculate the DSR, the lender uses a number of factors to work out the amount of your income that is available to repay the debt.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is a Default

A

Failure to make a loan repayment by a specified date.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is a Deferred payment

A

An agreement between two parties where the amount due to be paid on a given date may be postponed until a later date.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is a Deposit

A

An initial cash contribution towards the purchase of the property, usually payable on exchange of contracts.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What is a Deposit bond

A

A substitute for cash deposit that guarantees the purchaser will pay the full purchase amount by the settlement date. Institutions providing deposit bonds act as a guarantor that payment will be made.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is Depreciation

A

The amount claimed on an investment property for the reduction in the value of an item due to usage, passage of time, wear and tear.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

What is a Equity

A

The value of an asset not subject to any lender’s interest. E.g. a property worth $500,000 with an outstanding mortgage debt of $150,000 - equity is $350,000.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

What is a Equity loan

A

A loan that uses the equity in your property to borrow for any personal purpose, including personal investment. It usually operates like an overdraft, where the borrower has a set credit limit to which they can draw funds. The term Equity loan can also refer to a Line of Credit loan.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

What is a First Home Owner Grant (FHOG)

A

The FHOG scheme is a federal government initiative but is administered by each State or Territory Revenue Office.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

What is a Fixed interest

A

Your interest rate is locked in for a fixed term, you are then protected against possible interest rates rises for the selected ‘fixed’ term period.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

What is a Freehold title

A

The form of property ownership where the property and the land it stands on fully belong to the owner.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

What is a Gearing

A

Investment property is negatively geared when expenses exceed rental income. Investment property is positively geared when the rental income received is greater than the total amount of the expenses.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

What is a Guarantor

A

A guarantor is a third party to a loan who is helping the borrower obtain finance by offering additional security support. Guarantors are generally limited to spouses or immediate family members. A guarantor may be liable for the loan debt if the borrower defaults.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

What is a Hardship variation

A

It may be possible to vary the terms of your contract should you find yourself in a position where you are having difficulty meeting your repayment obligations.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

What is a Interest Only (IO)

A

A loan in which only the interest on the principal is repaid with each repayment for a specified period.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

What is a Introductory (honeymoon) rate

A

A reduced interest rate offered for a specified period of a loan, usually the first twelve months.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

What is a Joint tenants

A

Equal holding of property between two or more persons. If one party dies, their share passes to the survivor/s. A common arrangement for married couples.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

What is a Lender

A

A person or organisation who provides money to another under the proviso that it will be repaid according to set guidelines and terms.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

What is a Lenders’ Mortgage Insurance (LMI)

A

A form of insurance taken out by the lender to safeguard against a financial loss in the event of a security being sold due to the loan going into default. The borrower pays a once-only premium. The insurance covers the lender, not the borrower.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

What are Liabilities

A

A person’s debts or financial obligations, including existing credit card debts and personal loans.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

What is a Line of Credit

A

A flexible loan arrangement with a specified limit to be used at a borrower’s discretion. Also referred to by some lenders as an Equity loan or All in One loan.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

What is a Liquid assets

A

Are assets, either in cash or easily convertible to cash.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

What is a Loan to Valuation Ratio (LVR)

A

The ratio of the home loan amount compared to the valuation of the security. Commonly called LVR. E.g. for a loan of $270,000 on a home valued at $300,000, the LVR is $270,000 divided by $300,000 then multiplied by 100, and expressed as a percentage i.e. 90%.

42
Q

What is a Loan to Value Ratio (LVR)

A

The value of the loan divided by the value of the property that the loan is for (eg. if you buy a $500,000 property and need a $350,000 loan – your LVR is 70%).

43
Q

What is a Low documentation (Low Doc) loan

A

Loans available to applicants who may not have up to date or complete financial information available at the time of application.

44
Q

What is a Mortgage

A

A form of security for a loan usually taken over real estate. The lender (mortgagee) has the right to take the property if the mortgagor fails to repay the loan.

45
Q

What is a Mortgage foreclosure

A

Where the lender forces the sale of the property held under the deed of mortgage in order to recoup unpaid monies owed under the terms of the agreement.

46
Q

What is a Mortgagee

A

The lender of the funds and holder of the mortgage.

47
Q

What is a Mortgagor

A

The borrower (you).

48
Q

What is a mortising loan

A

The formal term for a standard principal and interest loan.

49
Q

What is National Consumer Credit Protection

A

Australian legislation covering consumer protection and consumer rights.

50
Q

Non-conforming loan

A

Specialist lenders provide these types of loans to borrowers who fall outside the normal eligibility requirements of mainstream lenders.

51
Q

What is a Offset account

A

An offset account is an account linked to your mortgage. The balance in the account ‘offsets’ the principal of the loan. Overall interest is calculated on the principal less the offset account balance.

52
Q

What is a Ombudsman

A

Independent body established within a particular industry to investigate and resolve disputes as an outside party to the dispute.

53
Q

What is the Principal on a loan

A

The amount of capital borrowed.

54
Q

What type of loan is a Principal and Interest (P&I)

A

A loan in which both principal and interest are paid with each repayment during the term of the loan.

55
Q

What is a Redraw facility

A

A loan facility whereby you can make additional repayments and then access those extra funds if necessary.

56
Q

What is a Refinance

A

Switching your loan from one product (or lender) to another, usually with a better interest rate or conditions. Your initial loan is paid out and your debt is transferred across to the new product or lender.

57
Q

What is is when a bank Repossesses a property

A

To reclaim possession of goods or assets for failure to make payments within agreed terms.

58
Q

What is a Revert Rate & what type of loan is it for

A

The interest rate a construction loan reverts to when it goes from interest only to principle and interest

59
Q

What is a Secured loan

A

In this type of loan, the property being purchased is held as security against the loan.

60
Q

What is a Security

A

Usually the property offered as security for a loan.

61
Q

What is a Settlement

A

The day on which the process of changing title of a property occurs. Your legal representative will organise for the exchange of money and documents so that you become the legal owner of the property.

62
Q

What is a Settlement date

A

Date on which the new owner finalises payment and assumes possession of land. Sometimes called the “draw down” date, as this is the date the loan is usually fully drawn.

63
Q

What is Stamp duty

A

There are two main types of stamp duty that may be payable when borrowing to purchase a home:

64
Q

What is a Standard variable loan

A

A loan which has an interest rate that varies according to market forces. The loan usually has comprehensive features, such as offset and redraw facilities.

65
Q

What is a Strata title

A

The form of property ownership most commonly associated with units, apartments and townhouses, where the owner holds title to a particular unit, which is called a lot, in a strata plan.

66
Q

What is a Survey

A

A plan that shows the boundaries and the building position on a block of land.

67
Q

What is Tenants in common

A

Where more than one person owns separate, defined portions of a property. If one person dies, the relevant portion passes through the deceased’s estate rather than to the other property owner/s as with joint tenancy. Each owner can hold a specific share of ownership and has the right to dispose of their interest.

68
Q

What is a Term on a loan

A

The length of a loan or a specific portion within the loan.

69
Q

What is a Title search

A

A request to the Lands Titles Office to ascertain the ownership of a specified property and any encumbrances, covenants and easements that may be recorded on the title.

70
Q

What is a Torrens title

A

Torrens title is the most common form of property title in Australia. The Real Property Act (RPA) is the legislation that governs the operation of Torrens title. Ownership of the property is registered with the Land Titles Office and evidenced by the Certificate of Title, which shows the current owner’s name and any other interests in the property e.g. mortgages.

71
Q

What does Unencumbered mean

A

A property free of encumbrances (mortgages) or restrictions.

72
Q

What is a Unsecured loan

A

A loan in which no property is held as security, generally attracting a higher rate of interest due to increased risk on the part of the lender.

73
Q

What is a Valuation

A

A report required by the lender, detailing a professional opinion of property value.

74
Q

What is a Variable interest rate

A

The interest rate will vary depending on several factors, including the Reserve Bank’s current cash rate, and prevailing lender sentiment. There is Basic Variable, Standard Variable and variable.

75
Q

What is a Vendor for a loan

A

The person who is selling the property.

76
Q

What is a Discharge Authority Form used for

A

A discharge/refinance authority is used to release the security provided for a home loan. Only sent as part of a refinance deal.

77
Q

what is a Disbursement Authority Form used for

A

A disbursement authority is a document issued to an agency authorizing the liquidation/payment of obligations incurred. A loan is disbursed when the agreed-upon amount is actually paid into the borrower’s account and is available for use. The cash has been debited from the lender’s account and credited to the borrower’s account.

78
Q

When does a borrower require Borrower Legal Advice

A

All lenders have a mandate to ensure applicants have sought financial and independent legal advice before the loan closes

79
Q

What is a Solicitor Certificate & when is it required

A

If your bank has asked you to get a solicitor’s certificate, this means that a solicitor needs to review the loan documents, the guarantee and any other associated documents and explain them to you before you sign.

80
Q

what is Etrailing

A

in lending, trailing documents are items needed for the loan file that lag behind the consummation date. Banks should proactively identify the documents that are needed for a particular account, take steps to secure them, and track that they have been received.

81
Q

What is a Standard Variable Rate Loan

A

Standard variable rate loans are the most popular mortgage product in Australia, with almost half of all borrowers opting for this type of mortgage.

Standard variable rate loans carry flexible features such as offset facilities, redraw, extra repayments and the ability to split the loan. In order to access these features, however, the borrower generally pays a higher interest rate.

82
Q

What is a Basic Variable Rate loan

A

A basic variable loan generally carries cheaper rates, because they lack the above-mentioned extra features.

“A basic or ‘no frills’ loan is around 0.7% lower than a standard variable loan, and is ideal for first homebuyers and owner-occupiers,” Castilla explains. “However, beware of higher discharge fees [if you choose to close the loan] in the first three years.”

83
Q

What is PEXA & what is it used for

A

PEXA’ stands for Property Exchange Australia and is an Electronic Lodgment Network (ELN). i.e. a national online system providing for: preparation of electronic dealings and verification of lodgment acceptability.
- preparation of electronic dealings and verification of lodgment acceptability
- electronic settlement of real property transactions including payment of settlement monies, duties, taxes and any other disbursements, and
- electronic lodgment of dealings to the appropriate Land Registry.
All states do Pexa deals except ACT and NT which still use paper deals.

84
Q

What is a Caveat

A

A caveat is a legal notice that is placed on a property title to alert potential buyers and lenders that someone has an interest in the property. This interest can be a financial claim, such as a mortgage or a claim to a share of the property, or it can be a claim to the property itself.

A caveat can be placed on a property title by anyone who has a legal interest in the property, including the owner, a mortgage lender, or a government agency.

A caveat may exist if a notice has been given by a party declaring they have an interest in the property.

The property should not be purchased until the caveat has been removed from the title.

85
Q

What does is mean to Discharge of mortgage

A

A mortgage discharge is when a mortgage securing your home loan is removed from the title of your property once you have repaid your home loan in full. You’ll need to complete a mortgage discharge or release form to release the mortgage over the property you have provided as security to your home loan.

86
Q

What is the National Mortgage Form and when is it used

A

The National Mortgage Form (NMF) is a significant national initiative. It standardises the content and presentation of mortgages lodged for registration through all lodgment channels with land registries in participating Australian states and territories.
- Different specs for SA, WA and NSW
- Must have an information sheet attached for different signing requirements.

87
Q

Transfer of Interest

A

A Transfer of Interest allows an Interest such as a Mortgage or Encumbrance to be transferred from one interest holder to another

88
Q

What is an Encumbrance ( Lean)
What 3 type of legal claims does it cover on a property.
How does it impact the use of a property

A

An encumbrance is a general term that refers to any legal claim on a property. This can include caveats, liens, and other types of claims, such as zoning restrictions or easements. Encumbrances can impact the use or value of a property, and it’s important to be aware of them when purchasing a property.

An encumbrance is a claim against the property, e.g. an outstanding mortgage over the property, or an easement which means that others have a right to use the property.

It’s important to note that a caveat, lien, or encumbrance does not necessarily mean that a property is not a good purchase

Three common types of legal claims that can affect a property are caveats, liens, and encumbrances

89
Q

What is the Effective interest rate

A

The effective interest rate is the true rate of interest, fees and charges incurred over the life of a loan.

90
Q

What is a Floating charge

A

A floating charge is a security interest over a group of assets, which change in quantity and value such as stocks and inventory.

Floating charges support companies by allowing them to use current assets to finance business operations.

When a company fails to repay the security interest or enters liquidation, the floating charge converts to a fixed charge, after which the company is not allowed to use or sell the asset.

91
Q

What is a fixed charge for a business loan,
Why do lenders use them.

A

If the business isn’t able to stick to the terms of the agreement, then the lender will take control of these assets to recover the money that it’s owed.

If a lender has a fixed charge, they’ll also have a high level of control over the asset. In fact, the business won’t be able to sell, dispose, or transfer the asset unless they have permission from the lender.

92
Q

What is a Covenant on a property title

A

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

93
Q

What is an Easement

A

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.

94
Q

What is Amortisation on a loan

A

Amortisation is where the value of something decreases overtime such as the outstanding balance of a loan that reduces over time according to scheduled repayments.

95
Q

Certificate of Title

A

A certificate of title is a legal document which shows ownership of a property as well as land dimensions, encumbrances and caveats.

96
Q

7 year loan

A

A seven year mortgage, sometimes called a 7/1 ARM, is designed to give you the stability of fixed payments during the first 7 years of the loan, but also allows you to qualify at and pay at a lower rate of interest for the first five years.

97
Q

Upstamp ( topups)

A

Up-stamping of mortgages can be said to mean the practice or process of payment of additional stamp duties on a mortgage document in satisfaction of the increased facility granted over an earlier mortgage. This happens where a mortgagor had earlier borrowed money from a mortgagee using a particular property as security for a loan. If subsequently the mortgagor wants additional loan from the same mortgagee using the same property as security; what is required, is that the mortgagee should draft a new agreement and the new document up-stamped.

98
Q

List the types of loans

A

Bridging Loan
Construction Loan
Fixed vs variable home loan
Interest only home loan
Introductory Loan
Home loan on pensions - age and disability
Line of Credit Loan
Low Doc Loan
Non Conforming Loan
Self Employed home loans
Split Rate (principal and interest) loans
Variable (Principal and interest) loans
reverse Mortgages
Second Mortgages

99
Q

Non conforming Loan

A

Some people with a poor credit rating may struggle to be approved for a traditional home loan from as they are perceived as a greater risk to the lender. But not all is lost, as a non-conforming loan allows these people to secure a loan as lenders can use other evidence of your ability to repay a loan. A larger deposit is often needed as a sign that you are able to repay the loan and a higher interest rate is needed to offset the risk for the lender.

100
Q

Line of Credit Loan

A

Once you have owned a property for a while and you have built up some equity by making repayments, you can then apply for a loan called a line of credit. This type of loan allows you to access the funds whenever it is needed.

This product is a handy and creative way to manage your cash as the money can be used for virtually anything and paid back on your terms.

As long you have more cash coming in than going out these accounts can be useful. However, they can be very costly if the balance of the line of credit is not regularly reduced as it can have higher interest rates and reduce the equity in your home.

101
Q

Reverse Mortage

A

A reverse mortgage allows you to borrow money using the equity in your home as security. If you’re age 60, the most you can borrow is likely to be 15–20% of the equity

102
Q

Second Mortgage

A

A second mortgage is a charge over a property that already has another mortgage on it.

The mortgages are ranked in the order in which they were lodged.

So in the event that the debt isn’t paid and the property is sold, the first mortgage is paid back before any money is paid to the second or third mortgagee (lender).

Most people prefer to refinance their loan to another lender rather than obtain a second mortgage.

However, there are some situations where a second mortgage (2nd mortgage) is more appropriate:

Fixed rates: If your first mortgage is a fixed rate loan there may be high exit fees or you may not want to refinance because your fixed rate is much lower than the current variable rates. In this situation, you may borrow additional money using a second mortgage.
Guarantor support: If you’re helping your children buy their first home then you may guarantee their loan using a second mortgage over your property.

Private lenders: Many private lenders that can advance funds within 48 hrs will take a second mortgage behind a major bank as security for their loan but we recommend that you avoid using private lenders at all costs.

Work EM (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions