First home buyer jargon explained

There’s a lot of lingo to get familiar with on the path to buying your first home. We take the mystery out of the jargon below.

Loan

A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.

Amortisation

Scheduled repayment of a loan through regular installments over a period of time (e.g. weekly, fortnightly or monthly repayments over a 30 year term). The borrower pays the interest and part of the principal in each repayment. Contrast to "Interest Only Loan".

Application fee

Fees 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.

Assets

A list of what an individual currently owns, such as real estate, savings accounts, cars, home contents, superannuation, shares etc.

Capped rate loan

A loan where the interest rate is guaranteed not to exceed a stated rate for a fixed period of time. The interest rate can fall.

Certificate of compliance

A certificate issued by Council (for a fee) confirming that all buildings on the land comply with Council's building regulations.

Certificate of title

A certificate issued by a government body that describes a title reference to a particular parcel of land, the registered owner of that land and any encumbrances (such as a mortgage) registered against the title.

Community title

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.

Covenant

Imposes conditions on the use of, or the nature of the dwellings erected on, a parcel of land

Credit Bureau

An organisation to which Lenders subscribe that holds credit information on individuals. For a fee, it is possible to obtain a listing that details your credit history.

Establishment fee

A fee charged by a Lender to set up a loan.

Fixed interest rate

An interest rate set for a fixed period. At the end of the fixed rate period, most lenders will allow you to fix again at the prevailing rates or revert to their standard variable rate.

Loan to valuation ratio

The ratio of the amount lent to the valuation of the security. Commonly called LVR. An example would be a Loan of $120,000 on a home valued at $130,000. The Loan to Valuation Ratio is $120,000 multiplied by 100 and divided by $130,000 - 92.3%.

Mortgagee

The lender of the funds and holder of the mortgage

Mortgagor

A person who borrows money and grants a mortgage over their property as security for the loan.

Strata title

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.

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