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B C D
E F G
H I J
K L M
N O P
Q R S
T U V
W X Y Z
A term of a credit contract or
mortgage that entitles the bank, under certain circumstances
such as default, to be entitled to an immediate payment of all
or part of an amount of the contract that would otherwise not
A common example of this clause
would be where a certain number of payments become overdue,
and if not paid by a certain time, the entire debt can become
To agree to the terms of an
offer or a contract.
Interest you have earned or
incurred that is yet to be paid to you or charged out.
The process of allocating
expenses (eg Council, electricity, phone, water rates) on
settlement day that the seller has paid for but not used, and
which the buyer has not yet used but will be billed for.
A block of land that is created
out of a larger area.
The amount of the loan payment
multiplied by the number of equal periodic payments calculated
to pay off the debt at the end of a fixed period. This amount
includes accrued interest on the outstanding balance.
The period of time that one has
to repay a loan at the terms arranged.
This is the formal name for the
repayment schedule that shows each of your mortgage payments
with a breakdown of how much is applied to principal and how
much is applied to interest.
ANNUAL PERCENTAGE RATE (APR)
The annual effective rate of
the mortgage which is made up of the interest rate, plus fees
and charges that incur during the contract period. This rate
is likely to be higher than the stated note rate or advertised
rate on the mortgage, because it takes into account other
points and other credit costs. The APR allows homebuyers to
compare different types of mortgages based on the annual cost
for each loan.
A payment at regular intervals
of a certain amount of money for a term of years or during the
life of an individual.
Fees that are charged to cover
or partially cover the lender's internal costs of setting up a
loan approval for a home buyer.
An estimate of the value of a
property being used as security for a loan. The estimate is
made by a qualified professional called an ‘appraiser’ or
An overdue account that is yet
to be paid.
Money, property or goods owned.
Everything that a person or a
company owns or has a right to, from which a benefit can
derive. Net assets are assets that are in excess of
liabilities. Liquid assets are assets either in the form of
cash or that are readily convertible into cash.
The agreement between a buyer
and a seller where the buyer takes over the payments on an
existing mortgage from the seller. ‘Assuming a loan’ can
save the buyer money because it is an existing mortgage debt
whereby closing costs and new, possibly higher interest rates
are not applied.
Funds which can be withdrawn on
demand or without giving notice of intention to do so.
Automatic Teller Machine.
The public sale of property
with ownership given to the highest bidder, subject to a
reserve price being reached.
BAD (BANK ACCOUNT DEBITS TAX)
State or Territory government
tax (except ACT) on withdrawals from accounts on which a
cheque may be drawn.
A debt with little chance of
being recovered and that is then written off as a loss.
A statement of assets,
liabilities and net equity for any enterprise taken at a given
point of time.
Balanced Trusts invest in the
broadest spectrum of investment markets, including shares,
listed property trusts and government securities. The main
advantage in making this type of investment lies in the
flexibility afforded to their fund managers in being able to
alter the investment composition of the trust in the light of
changing economic and investment conditions, thus enabling the
pursuit of the best results.
A large loan repayment made in
order to clear a debt. Usually applied to a short-term
fixed-rate loan, which involves small payments for a certain
period of time with one large payment for the remaining amount
of the principal at a time specified in the contract.
A cheque that draws money
specifically from funds you own held in a bank account.
Enquiries that are made from
one bank to another to check on a customer's reliability or
When a debtor has his/her
estate placed into the hands of a receiver who then has the
responsibility for distribution of the estate.
BASIC VARIABLE LOANS
Basic Variable Loans are like
Standard Variable Loans, but having less features. In return
for the reduced facilities, the lender applies a more
competitive interest rate. As with Standard Variable Loans,
the interest rate can fluctuate over the term of the loan.
A person presenting a cheque to
a bank for payment.
BILL OF EXCHANGE
A bill of exchange is a
negotiable written order for payment of a specified sum to a
designated person. Bills of exchange are commonly used in
international trade. The person receiving a shipment of goods
must pay the sum specified in the bill before taking title to
the goods. Bills of exchange are often purchased by banks at a
discount, and they may pass through several hands before
redemption. It is sometimes called a bank draft.
BILL OF SALE
A written agreement whereby
ownership of property is transferred but the original owner is
allowed to retain possession.
BLUE CHIP STOCK
Shares in a well-established
company that are highly regarded in financial circles.
A corporation of the owners of
units within a strata building. The owner's form a
self-elected council for the management of the building and
A short-term loan that covers a
financial gap I time between the purchase of a new property
and the sale of an old property.
An individual whose business it
is to assist and arrange funding or negotiation of contracts
for a client but who is not responsible for lending the money
himself. Brokers generally charge a fee or receive a
commission for the services they perform.
The standards that are
formulated by local councils to control the quality of
Business finance concerns a
firm's acquisition of funds and the management of these funds
for various operations.
The current value of your
long-term assets ie house, property or business.
The monetary gain that is
obtained when you sell an asset for more than you paid for it.
CAPITAL GAINS TAX
A Federal tax on the monetary
gain that is made on the sale of an asset bought and sold
after September 1985.
The increase in value of an
asset or investment ie the difference between the current
values and the original purchase price (provided the result is
positive, not negative).
An investment where your money
(principal) is guaranteed safe; usually by a bank, government
body, or life insurance company.
A loan where the interest rate
is not allowed to exceed a set level for a period of time.
Unlike fixed rate loans, the interest rate is allowed to drop.
Consumer safeguards which limit
the amount that the interest rate on an adjustable rate
mortgage may change per year and/or the life of the loan.
Consumer safeguards which limit
the amount that monthly repayments on an adjustable rate
mortgage may change.
CASH MANAGEMENT TRUST
A unit trust where investors
(unit holders) pool their money into money market instruments
which are normally only available to professional investors
with hundreds of thousands of dollars to invest in the money
market. Cash trusts operate with a trust deed, a trustee
overseeing activities and a management company that is
responsible for the investment strategy.
The Latin for 'beware'. Usually
a caveat is in the form of a contract clause that stipulates a
Latin for 'let the buyer
beware', or in Australia 'you pays your money and you takes
your chances' . . .
CERTIFICATE OF TITLE
This document details of the
land dimensions and ownership details, and whether there are
any encumbrances on it.
Chattels are personal property.
There are two types of chattels. Real chattels include
buildings and fixtures. Personal chattels include clothes and
A cheque is a written order
from a cheque-account depositor directing his or her bank to
make funds available to a specified person or to 'cash'
(anyone presenting the cheque for payment). A cashier's cheque
is drawn by a bank against its own funds. Unlike a personal
cheque, it has unquestioned validity. A TRAVELLER'S Cheque is
a form of cashier's cheque.
Cheques are convenient to carry
and use, are less subject to theft than cash, and serve as
receipts after they are processed and returned. More than 90%
of monetary payments in business are made by cheques.
A bank receiving a cheque drawn
on another local bank sends it through a local clearinghouse,
which then adjusts the customers bank accounts.
A meeting between a buyer,
seller and lender or their agents where the property and funds
legally change hands. This is commonly known as
Usually include an origination
fee, discount points, appraisal fee, title search and
insurance, survey, taxes, deed recording fee, credit report
charge and other costs assessed at settlement. The costs of
‘closing’ are usually around three to six percent of the
A group of houses that share a
A fee which is payable to the
real estate agent, by the vendor, for the sale of property.
An agreement which is often put
down in writing, between a lender and a borrower to loan money
at some future date subject to the completion of paperwork or
compliance with stated conditions.
An area used by many, rather
than an individual. The area is owned by the tenants in
A property title that applies
when owners of units in a block form a company.
A single figure meant to
represent the entire cost of a credit product. The comparison
rate takes into account financial features in addition to the
interest rate. Comparison rates, if used, must be calculated
according to Credit Code regulations and a warning must state
the limits of the comparison rate. The bank will not generally
make use of comparison rates.
Interest that is paid on
accumulated interest as well as the original principal
CONSUMER CREDIT CODE
An act of Parliament that
governs the relationship that exists between borrowers and
CONSUMER PRICE INDEX (CPI)
Measures the national inflation
rate. The index is measured quarterly (December, March, June
and September quarters) and reflects changes in prices (up or
down) of a fixed 'basket' or list of goods and services.
CONTINUING CREDIT CONTRACT
A contract under which multiple
advances of credit are possible. Examples are: Overdraft, Line
of Credit, Credit Card
CONTRACT OF SALE
A written agreement that
outlines the terms and conditions for the purchase or sale of
The legal process for the
transfer of ownership of real estate.
COST OF CREDIT
An expression used, although
not defined, in the Credit Code in relation to advertising for
consumer credit. The cost of credit refers to interest rates,
amounts of fees and charges and may also extend to comparative
descriptions with competing products.
Additional signature or
signatures that guarantee the validity of a document.
A court or tribunal which has
legal jurisdiction that enables it to make decisions or
rulings about the application of the Credit Code. This
includes the Supreme Court of any state or territory, State
Credit Tribunals, Commercial Tribunals and Small Claims
Terms and conditions that
specify the usage of a block of land or the buildings on the
A note of temporary property
insurance put in place before the implementation of a formal
CRAA (CREDIT REFERENCE
ASSOCIATION OF AUSTRALIA)
The body which holds credit
details on individuals.
Money that is to be paid back
under an arrangement made with a lender. Also, a sum of money
that is paid into an account.
A credit card allows its holder
to buy on credit from stores, restaurants, and a multitude of
other goods and service providers. The credit-card holder pays
the company issuing the card for those purchases, and the
company then reimburses the providers. With a 'charge card', a
customer may purchase items from a particular store, or fuel
of a particular brand. Both types of card offer the customer
the option of paying the full amount of the monthly debt
balance, or of paying only a portion per month, repaying the
remainder at an annual rate that can be as high as 18-21%.
Many credit-card companies also
impose an annual fee on credit-card holders. All credit-card
companies charge retailers a fee - typically, around 3% of the
purchase price - for each credit-card purchase. The cost to
retailers - estimated at $6 billion in 1983 - is 'hidden in'
the retail price of all goods and services sold by the firms
that accept credit cards from their customers.
A document under which credit
is, (or may be), offered by a credit provider. The credit
recipient is referred to as the debtor. In the bank, a
customer signs a terms and conditions letter, commonly called
a loan offer, and that document becomes a credit contract upon
CREDIT FEES AND CHARGES
Fees and charges which become
payable in relation to a credit contract or mortgage excluding
interest charges, transaction fees, government charges and
duties on deposits and withdrawals.
The maximum amount of credit
the borrower can use at any one time.
CREDIT RELATED INSURANCE
Home buildings insurance that
is taken out in relation to a credit contract, whether
financed under the credit contract or not.
The ratio, expressed as a
percentage, which results when a borrower’s monthly payment
obligation on long-term debts is divided by his or her net
effective income or gross monthly income.
A party to whom money is owed.
(The party owing the money is known as the debtor).
A cheque with two parallel
lines drawn vertically across, indicating that it must be paid
into an account and cannot be cashed.
Interest that is calculated on
a daily basis - therefore varying according to the daily
An account entry to charge a
withdrawal to a specified account.
A debt, in finance, is the
obligation to pay someone a sum of money. Usually a debt
arises from a transaction in which one person (the debtor)
receives something (eg goods, services, or money) from another
person (the creditor). In return, the debtor promises to repay
later under terms which are pre-arranged.
Most debts include a promise to
pay INTEREST at a specified rate.
If a debtor fails to meet their
repayment obligations, the creditor may take legal action to
enforce payment or otherwise seize property in lieu of
payment. In one procedure a JUDGMENT is obtained through a
court process against a debtor, requiring that payment be
made. If the debtor still fails to pay, state laws provide
that the sheriff or some other law-enforcement agency may
seize the debtor's property and dispose of enough of it to pay
the sum owed, plus any legal costs incurred in doing so.
A type of fixed interest
security, issued by companies (as borrowers) in return for
medium and long-term investment of funds. Debentures are
issued to the general public through a prospectus and are
secured by a trust deed that spells out the terms and
conditions of fund-raising and the rights of debenture
holders. Typical issuers of debentures are finance companies
and large industrial companies.
Taking advantage of lower
interest rates that may be available by the grouping of
multiple loans into one, lower interest rate loan.
Someone who owes money to
A legal document that states an
agreement or obligation relating to a property.
A failure to meet legal
obligations in a contract, specifically, failure to debt
repayments on a due date.
An annuity where income
payments do not commence ie payments are deferred until some
specified date in the future.
Failure to make payments on
time. This can lead to foreclosure.
The share of profits that are
distributed to shareholders of a publicly listed company.
DISCOUNTED VARIABLE LOANS
Commonly referred to as the
This type of loan has been used
by the banks to combat the entry of Mortgage Managers into the
market. It is the same as a variable rate loan, but has a
lower interest rate (normally between 1.5% and 2.5% less) for
an introductory period (between six months to a year). If you
decide on a Discounted Variable Loan, ask about any 'break
costs' involved. These are costs incurred if you discharge the
loan early, and can be considerable.
A tax system, where dividends
paid by a taxpaying Australian company to its shareholders,
carry a credit for the tax the company has already paid on its
profits. This means that shareholders receive a reduction to
the tax normally payable.
Money paid to make up the
difference between the purchase price and the amount of the
mortgage (or borrowings). Down payments are usually ten to
twenty percent of the sales price on Conventional loans, with
some products offering ‘no money down’ up to five percent
down payment terms.
EARLY TERMINATION PAYMENT
The cost applied when paying
out a loan early.
Money given by a buyer, to a
seller as part of the purchase price in order to bind the
transaction or assure payment.
A right to use a corridor or
passage of land which is owned by another party.
EFT (ELECTRONIC FUNDS TRANSFER)
Electronic transfer of funds
from one account to another.
ELIGIBLE TERMINATION PAYMENT (ETP)
This is the term used to
describe lump sum payments received when retiring or changing
employment, that can be rolled over into an Approved Deposit
Fund or Deferred Annuity. ETP's can include payments from a
superannuation fund, approved deposit fund, deferred annuity,
commutation of an annuity/pension, unused sick leave and
An outstanding liability or
charge (money owed) on a property.
To sign the back of a cheque to
confirm or transfer ownership of that cheque to someone else.
The costs involved in the
recovery of a debt under a credit contract, mortgage or
guarantee. Enforcement expenses can include insurance, rates
and taxes payable for the property, but only if those expenses
are incurred after a breach occurs.
Actions taken such as court
proceedings, to recover money under a credit contract or
guarantee, taking possession of mortgaged property or any
other action taken to enforce a mortgage.
The amount of (or that portion
of) an asset actually owned. Equity is the difference between
the market value and the current amount of money still owing
on the loan. This is also referred to as the ‘owner’s
In finance, equity is the
capital furnished by the owners or shareholders of a business
firm. It is distinguished from debt, or funds supplied by the
firm's lenders and other creditors. On the firm's financial
statements, equity is equal to its net worth. When the
company's debts have been paid, the owners of equity are
entitled to all the remaining earnings and property of the
A loan usually secured by the
proportion of the value of your house which you own.
A loan secured by the part of
the value of an asset (usually house) which you own.
An escrow is a holding account
for money (or other securities) that is to be used for a
specific purpose. In the case of a mortgage, when you make a
mortgage payment, you are paying an additional amount above
the principal and interest which is to be held for taxes and
insurance. This money is held in escrow until it is time to
make a payment to your insurance company or to the tax
collector. At that time, the escrow agent will disburse funds
to make the payment.
ERIC - (Effective Rate of
Interest plus Costs)
Lending body fees which may or
may not be charged to set up a loan.
ETIA - (Early Termination
EXCHANGE OF CONTRACT
The legal point of time when
the vendor and purchaser swap documentation and start
enquiries with a view to settlement.
FID - (FINANCIAL INSTITUTIONS
State duty on the receipts of
Finance companies make cash
loans to consumers and also make loans for purchases of
durable goods, which are then security for the loans. In
addition, they finance consumer purchases by purchasing
installment credit contracts that retailers have negotiated
Items that can be removed from
a property without causing damage to it.
An interest rate that is set
for an agreed period of time.
FIXED RATE LOANS
As the name suggests, fixed
rate loans have fixed interest rates (or an interest rate
which does not fluctuate) for the period of the loan. The term
of these loans is normally between one and five years,
although some lenders offer ten year fixed rate loans. Many
borrowers feel more secure knowing that their repayments will
not change during the term of the loan, however, if interest
rates go down, borrowers may lose considerable savings which
would have resulted from a variable rate loan. Fixed rate
loans in general do not offer the value added features that
variable loans do. Borrowers should be aware that most lenders
do not allow extra repayments, or the use of an offset account
with fixed rate loans. Some do not even allow fortnightly
repayments. At the end of the fixed period, most loans revert
to the standard variable rate of the time, unless the borrower
chooses to fix for another term, at the prevailing fixed
These are items that would
cause damage to a property if they were removed. Their removal
must be set out in the contract of sale and any damage
incurred is to be made good by the seller.
A legal procedure in which
property securing debt is sold to pay a defaulting
A dividend distributed by an
Australian company out of profits on which company tax has
The dwelling and the land on
which it stands is owned by the owner indefinitely.
An account in which all
transactions have been suspended.
FUTURE VALUE OF MONEY
The future value of money is
the value that your money will have after it has compounded at
some interest rate for a period of time.
To legally divert a part or
whole of someone's money or property to someone else, for
example, to pay child support to the caring parent of a child.
GEARED EQUITY INVESTMENTS
Recently approved plan to build
wealth, using tax dollars, with minimum cash outlays.
The ratio of your own money and
borrowed funds in an investment.
GRADUATED PAYMENT MORTGAGE (GPM)
A type of flexible-payment
mortgage where the payments increase for a specified period of
time and then level off. This type of mortgage allows the
borrower to qualify more easily. The payments will gradually
increase over three to five years to a standard fixed payment.
This type of mortgage can cause
the principal to actually increase for the first few years,
resulting in an amount owed which is greater than the initial
borrowings. This is because the interest on the mortgage will
be more than the payment in its early stages.
GROSS MONTHLY INCOME
The total amount earned per
month, before any expenses are deducted.
A promise made as bound by the
terms of a contract.
A party who agrees to be
responsible for the payment of another party's debts should
the original party fail to pay or perform according to a
The top price offered by a
bidder at auction. If the reserve price is not reached and the
property is passed in, the highest bidder is given the first
option to negotiate with the vendor on a purchase price.
A deposit that is refundable,
based on the goodwill of the buyer to go ahead with the
HOME BUILDINGS INSURANCE
An insurance policy issued over
a mortgaged house. This is referred to by the Credit Code as
‘insurance over a mortgaged property’.
HOME EQUITY LOANS/LINES OF
Equity loans work a little like
an overdraft or credit card.
The facility is secured by a
registered mortgage over your property. You can draw down and
pay back the loan when you like (according to conditions). It
is often used by investors, and people with considerable
equity in their home.
The ratio, expressed as a
percentage, which results when a borrower’s housing expenses
are divided by his/her gross monthly income (conventional
ILR - (INDICATOR LENDING RATE)
The base rate on which interest
rates for variable rate overdrafts and term loans are set.
Items included with the
property eg light fittings, fridge, etc.
A statement indicating income
and expenditure for a period, usually a year.
Statutory forms as set out in
the Credit Code. An example of this type of form would be
‘Things You Should Know About Your Proposed Credit
Contract’ (Form 2).
The lending body's charge for
the use of funds advanced or the return on deposited funds.
Usually a short-term
arrangement whereby payments are made on the interest only,
not on the principal.
INTEREST ONLY LOAN
A loan where the principal is
paid back at the end of the term and only interest is paid
throughout the term of the loan. The loans are usually for a
short term (one to five years).
When a firm needs financing for
a somewhat longer period (typically 1 to 5 years), it often
turns to so-called term loans, generally from commercial banks
and life-insurance companies. A term loan is covered by a
contract in which the borrower agrees to repay the principal
and interest over a period of 1 to 5 years, usually in
installments. Alternatively, a company can lease assets.
LEASING enables a firm to contract for the use of equipment
without purchasing it.
INTERNAL RATE OF RETURN
A measure of the return on an
investment (or loan) which takes into account the time value
of money by showing the rate of interest at which the present
value of future cash flows is equal to the cost of the
investment or loan.
A list of items included with
the property, for example furniture, movable items, etc.
A lump sum investment product.
Technically, an investment or insurance bond is a single
premium lump sum investment, life insurance contract.
Money source for a lender.
The equal holding of property
between two or more persons. If one party dies, their share
passes to the survivor/s.
JUDGMENT AND EXECUTION
Most civil (or non-criminal)
cases are brought to secure money damages. If a jury awards
damages to the plaintiff, the court enters a judgment
entitling the plaintiff to collect a sum of money from the
Judgments are not, however, self-enforcing. If the defendant
refuses to pay, the plaintiff must locate money or property
belonging to the defendant and submit certain papers to the
sheriff, who can then seize the money or property.
The provisions of the Credit
Code that govern the financial information the bank must
disclose in credit contracts and statements for regulated
accounts. Any breaches of key requirements can result in civil
A State Government tax charged
to the owners of any property over a stipulated value, unless
the property is to be used as their principal place of
A document granting a period of
tenancy of a property under specific terms and conditions as
set out in the Lease Agreement.
LETTER OF CREDIT
A letter of credit is an
instrument issued by a bank, usually addressed to a
correspondent bank, stating that it will accept drafts charged
against it in the name of a person or company. Commercial
letters of credit are often used by importers and exporters to
finance the purchase of goods. A circular letter of credit,
often used by travellers, is one not addressed to any
particular bank. The TRAVELLER'S CHEQUE is a form of letter of
LENDER’S MORTGAGE INSURANCE
Insurance that protects the
bank as a lender against and financial losses that might
result should it become necessary to sell the mortgaged
property as a result of the borrower’s default. Mortgage
insurance does not relieve the borrower of his obligation to
meet the shortfall.
Someone's debts or obligations.
In law a liability is an obligation arising from a contract,
from the customary law of TORT, or from a specific statute. An
example of a contractual liability is the obligation of a
partner in a business to pay the firm's debts. An example of a
tortious liability is the obligation of a property owner to
pay compensation to victims of accidents resulting from the
owner's NEGLIGENCE. An example of a statutory liability is the
obligation of a violator of a traffic law to pay a penalty for
The right to hold property as
security against a debt or loan.
LINE OF CREDIT
A flexible loan arrangement
with a specified ceiling to be used at a customer's
LOAN SECURITY DUTY
Mortgage stamp duty.
LOAN TO VALUATION RATIO (LVR)
The ratio of the amount of the
mortgage loan to the valuation of the security (usually the
Permanent or long-term funds
are obtained by selling securities. Securities are of two
kinds: EQUITY, or STOCK, and DEBT, or BONDS. Bonds carry a
specific interest rate that is paid periodically until the
obligations mature, at which time the principal is repaid.
Equity is ownership in the firm and carries no specific rate
of return; if the firm is a Incorporated Company, the equity
is represented by stock, the holders of which are entitled to
share in the profits of the business. The common stock of
companies owned by the general public is bought and sold in
the STOCK MARKET.
LOW START LOAN
A loan where the initial
repayments are low and increase over time.
MANAGEMENT OF FUNDS
A company must allocate its
available funds among various uses on the basis of financial
plans. Such plans assume that the funds spent will produce
sufficient profits in order to pay the interest on debt
capital and to earn a satisfactory income to the owners on
their equity capital. Another task of business finance is the
management of a company's surplus funds. Proper analysis and
planning are necessary to assure that the funds will be
available where they are needed in the business at a future
The difference between the
lender's interest indicator rate (or other reference rate) and
the rate actually charged to borrowers.
The highest price that a buyer
would pay and the lowest price a seller would accept on the
sale of a property. Market value may be different from the
price a property could actually be sold for at a given time.
The date on which a debt or
other borrowing is due to be repaid in full.
Money cannot be defined as some
particular object but must instead be defined by the functions
it serves - to act as a medium of exchange and a standard of
MONEY MARKET LINKED LOANS
The interest rates charged on
Money Market Linked Loans are, as the name suggests, dependent
on fluctuations in the financial market. Not many lenders
offer this type of home loan.
A form of security for a loan
usually taken over real estate. The lender, the mortgagee, has
the right to take the real estate if the mortgagor fails to
repay the loan. The mortgage creates a lien on the property as
security for the debt.
Money paid to insure the
mortgage in most cases where the down payment is less than
A non-interest earning account
that is offset against a home loan to reduce the total
The lender of funds.
The person borrowing money in
the terms of a mortgage.
Occurs when the monthly
payments are not large enough to pay all the interest due on
the loan. This unpaid interest is added to the unpaid balance
of the loan. The danger of negative amortisation is that the
borrower ends up owing more than the original amount of the
A way of obtaining tax
advantages through an investment where the deductible expenses
(typically including interest) exceed the income derived from
Certain kinds of business
documents, or paper, can be exchanged for money because they
enable their holders to obtain legal interests on the basis of
the documents themselves. NEGOTIABLE INSTRUMENTS are usually
classified under the following three groupings:
1) commercial paper, which
includes formal documents involving a promise (eg, a
promissory note) or order (eg, a cheque) to pay a sum of
2) commodity paper, which
represents an ownership interest in property held by
another such as a trucker or shipper (for example, a bill
of lading); and
3) investment paper, which
includes stocks and bonds.
The borrower’s gross income
minus income tax.
Net worth is the value of
holdings after liabilities are satisfied.
The authority completed by
multiple debtors, who live at the same address, naming one of
them to receive Credit Code notices and documents on behalf of
OFFER TO PURCHASE
A legal agreement that details
a specific price for the purchase of a specific property.
A savings account that is
linked to your mortgage in such a way that the interest earned
on your savings is applied to reduce the interest on your
OLD SYSTEM TITLE (COMMON LAW
Consists of a 'chain' of the
title documents stretching back to the original owner.
OPTION TO BUY
A legally binding document
which gives a person, for a fee, the right to buy something
usually within a specific time frame at a specific price.
The fee charged by a lender to
prepare loan documents, make credit checks, inspect and
sometimes appraise a property. This is usually calculated as a
percentage of the value of the mortgage.
A pre-arranged limit to which a
person can exceed an account balance.
PASSED IN PROPERTY
Is 'passed in' at auction if
the highest bid fails to meet the reserve price set by the
The person or entity to which a
cheque is payable.
The periodic payment due on a
mortgage loan each payment period (normally a month) to cover
accrued interest and to repay a portion of the principal
balance. Most mortgages are set up where the payments will
reduce the principal balance a little with each payment until
the balance is zero when the last payment is made.
A regular payment made to a
person from a superannuation fund or from the Department of
Social Security or Department of Veterans Affairs.
Personal property, or
personalty, in common law, is anything of value that is
movable and not attached to the land. It is contrasted with
real property, or realty, which includes land, minerals, trees
or crops, and buildings.
Personal property covers all
other possessions, including minerals taken from the ground,
felled trees, and the lumber used to repair a house.
Primarily, however, personal property consists of such
tangible or corporeal possessions as automobiles, furniture,
clothing, and jewellery.
Although the BOND, the
MORTGAGE, and the LEASE are examples of property that is
valuable solely because it represents the ownership of real
property, each is generally regarded as personalty. They are
classified as incorporeal and intangible property.
This abbreviation stands for
principal, interest, tax, insurance. It is a common term to
describe the payment one makes on a mortgage, when that
payment includes taxes and insurance. Also called ‘monthly
Detailed illustration of a
house showing the internal layout and dimensions and the
position of the house on the land.
POWER OF ATTORNEY
A legal document authorising
one person to act on behalf of another.
PRE-CODE CREDIT CONTRACT
Credit contracts made before
the commencement of the Credit Code, or after commencement if
the loan offer was made before the commencement date.
A statement disclosing key
financial information which may consist of more than one
document. Typically it is the terms and conditions letter
before it is signed by the customer.
The purpose for which more than
50% of the credit is to be used. If the credit is to be used
to purchase good or services, the predominant purpose is that
purpose for which the goods or services are intended to be
Expenses necessary to create an
escrow account or to adjust the seller’s existing escrow
account. Can include taxes, hazard insurance, private mortgage
insurance and special assessments.
A privilege in a mortgage
permitting the borrower to make payments in advance of their
Money charged for an early
repayment of debt.
The capital sum borrowed on
which interest is paid. The principal amount of the loan is
the amount still owed on the loan. As you make payments, only
a portion of each payment is applied to the principal; the
rest is applied to interest.
PRINCIPAL AND INTEREST LOAN
A loan in which both the
principal and the interest are paid during the term of the
The sale of a property without
an estate agent.
PRIVATE TREATY SALE
A property sale where the buyer
negotiates on a price set by the seller.
A statement specifying that
credit will be used wholly or predominantly for business or
investment purposes (or both).
The cancellation of a contract.
A receiver is a person
appointed by a court to take control of the assets and income
of a company or individual while litigation is pending
involving either, as in a BANKRUPTCY proceeding.
The court may appoint a
receiver when a creditor offers proof that action is needed to
conserve the assets of the firm or person. Such a receiver
collects income and makes disbursements from the funds in his
or her custody only as authorized by the court. In a
bankruptcy proceeding, the court may later appoint a TRUSTEE
either to liquidate the assets or to run the company until a
reorganisation can take place.
To replace or extend an
existing loan with funds from the same institution or another.
This can be done to obtain a lower interest rate or simply to
‘pull out’ part of the equity the borrower has already
built up in the mortgage.
A credit contract, mortgage,
guarantee or related document or transaction to which the
Credit Code applies.
Provisions of the Credit Code
that set out practical requirements for complying with the
RELATED CONTRACT OR TRANSACTION
Contracts or transactions which
are connected with regulated credit contracts. For example,
Credit related Insurance Contracts.
RENEGOTIABLE RATE MORTGAGE (RRM)
A loan in which the interest
rate is adjusted periodically.
REQUISITIONS ON TITLE
A process by which the buyer
requests additional information about the title of the
property from the seller.
The specified minimum price
that is acceptable to a seller at auction of property.
RIGHT OF WAY
Can be either somebody's right
to cross other property or a general pathway across your land.
RISE AND FALL CLAUSE
A building contract clause that
allows the final pricing to move up or down according to
fluctuations of material prices or wages.
The renewal of a loan facility
or continuation of a deposit at each maturity date, usually
including a revision of the interest rates. (The term is also
used to describe the transfer of Eligible Termination Payments
to an acceptable superannuation or rollover fund.)
An examination to confirm that
a vendor is in a position to sell a property and that there
are no encumbrances on it.
When a sales transaction
involves an extension of credit, the seller naturally wants to
ensure that the buyer will pay as promised by establishing a
legal interest in property held by the buyer that may be
enforced if the buyer defaults. The most logical property for
the seller to hold a secured interest or LIEN in is the
An asset that guarantees the
lender their borrowings until the loan is repaid in full.
Usually the property is offered to secure the loan.
A loan is said to be
self-amortising when the payment amount is calculated such
that there is no balance at the end of the loan period. Most
fixed-rate mortgages are self-amortising loans.
Two houses that share a common
wall or walls.
All the steps and operations a
lender performs to keep a loan in good standing, such as
collection of payments, payment of taxes, insurance, property
Date on which the new owner
finalises payment and assumes possession.
SHARED APPRECIATION MORTGAGE
A mortgage in which a borrower
receives a below-market interest rate in return for which a
lender (or another investor such as a family member) receives
a portion of the future appreciation in the value of the
property. May also apply to mortgages where the borrower
shares the monthly principal and interest payments with
another party in exchange for a part of the appreciation.
A person who buys a portion of
a public or private company's capital. By doing so that person
becomes a shareholder in that company's assets and receives a
share of the company's profit in the form of dividends.
Sources of short-term financing
(funds available to the firm for less than one year) are trade
credit, commercial bank loans, and, to a lesser extent,
commercial paper. Trade credit is a short-term debt that
results from credit sales to the firm. When the company
purchases goods on credit, it is in effect borrowing money
from the seller; this is an important source of funds for many
Commercial bank loans are
another major source of funds for many firms, particularly
those which need to finance seasonal increases in inventories
and provide credit for their customers. Larger companies often
sell commercial paper to obtain short-term funds.
These unsecured promissory
notes are usually issued in large denominations and have
interest rates that are competitive with those of other
A person authorised to utilise
This is more of a facility than
a type of loan itself. A split loan allows you to split the
total amount you wish to borrow into a number of smaller,
different type of loans. Should variable rates rise, the rise
only affects a proportion of the total loan amount. This type
of loan is also used by a number of borrowers to separate
amounts borrowed for domestic and investment/business
A spreadsheet is a computer
program designed to facilitate the manipulation of data in the
form of words, numbers, or graphical element . The value of a
spreadsheet lies in the way it automates processes. This saves
time, for example, when a user wants to change a variable and
the computer calculates the effect of the change on the entire
program. Spreadsheets are popular tools in business, where
they now speed up and simplify such procedures as budgeting.
STAMP DUTY ON TRANSFER
A State Government tax assessed
on the selling price of the property.
STANDARD VARIABLE LOANS
The variable loan has undergone
many changes recently. There are now many facilities available
as standard with this loan such as redraw options and interest
offset accounts. This loan is still very common, but its
popularity with new mortgage seekers has been eroded somewhat
by the proliferation of Discounted Variable Loans. The
interest rate varies over the term of the loan.
Information which the Credit
Code requires the bank to give to applicants, debtors,
mortgagors or guarantors. Examples of this type of information
include: Information statements, pre-contractual statements
(or Terms and Conditions letter).
Notices which are required
under the Credit Code to be given to debtors, mortgagors or
A stepped account is one in
which different amounts of interest are paid on different
portions of the account, for example, two percent on the first
$1,000 and three percent on the second $1,000.
A body corporate incorporated
under strata titles legislation in relation to land subdivided
wholly or mainly for residential purposes, or a body corporate
whose issued shares give a right to occupy land for
This title gives you ownership
of a 'unit' of a larger building which you may sell, lease or
transfer at your discretion. Also entitles you to membership
of the body corporate.
A title that records your
ownership of a 'unit' of a larger property. Unlike a Strata
Title, the owner becomes a shareholder in the company that
manages the common area, not just a member.
An investment vehicle which
operates primarily to provide benefits for retirement.
Superannuation savings are usually made through trust funds
and if these funds meet prescribed government standards they
are eligible for tax concessions.
A legal term referring to a
person who undertakes to pay money, perform some duty, or
assume some responsibility in case another person (the
principal) fails to carry out the terms of a contract. A
surety differs from a guarantor (see GUARANTEE) in that the
contract of the latter is entered into separate from the
principal's original contract while the contract of suretyship
is made at the same time and by the same instrument as the
principal's contract. The surety has a much more direct
liability than the guarantor.
A plan showing the boundaries
of, and the building position within, a block of land. The
survey is prepared by a registers land surveyor.
Shows likelihood of future pest
TENANTS IN COMMON
The equal or unequal holding of
property by two or more persons. If one party dies, the
property is divided according to law.
The length of a home loan or a
specific portion within that loan.
Called a fixed interest
account. Money invested for a fixed term at a fixed rate of
interest applied for the duration of the deposit.
A document that gives evidence
of an individual’s ownership of property.
A policy, usually issued by a
Title Insurance company, which insures a homebuyer against
errors in the title search. The cost of the policy is usually
a function of the value of the property, and is often borne by
the purchaser and/or seller.
Process to ensure that the
vendor has the right to sell and transfer ownership. The Title
Search is usually performed by a Title company.
Records your ownership of a
piece of property. You are lawfully entitled to lease, sell or
dispose of the property as you desire. Also known as
Certificate of Title.
Usually a two storey dwelling
registered under a strata title.
A document registered with the
Land Titles Office that confirms the change of ownership as
noted on the Certificate of Title.
The Uniform Consumer Credit
A property free of liabilities,
encumbrances or restrictions.
A unit trust is an investment
which operates under the unit principle enabling investors to
share in a pool of professionally managed investments. The
success of a unit trust depends on the expertise and
experience of the management company which is responsible for
the trust's investment strategy. Common types of investment
undertaken by unit trusts are property, shares, mortgages, and
the Short Term Money Market.
The decision whether to make a
loan to a potential homebuyer based on credit, employment,
assets, and other factors and the matching of this risk to an
appropriate rate and term or loan amount.
A credit contract, mortgage,
guarantee or related document or transaction to which the
Credit Code does not apply.
A report as required by the
lender, detailing a professional opinion of the property's
VARIABLE INTEREST RATE
A rate that varies in
accordance with the rates in the marketplace.
A party who offers a property
A statement by the seller to
the buyer detailing material particulars regarding the
property in question.
VERIFICATION OF DEPOSIT (VOD)
A document signed by the
borrower’s financial institution verifying the status and
balance of his/her financial accounts.
VERIFICATION OF EMPLOYMENT
A document signed by the
borrower’s employer verifying his/her position and salary.
Single storey attached
Local authority guidelines as
to the permitted uses of land.