Glossary of terms Part 1

The lending world is full of jargon and technical terms, below is the first part of our series helping you with some of the tricky stuff…

Accrued Interest

Interest calculated but not yet added to the loan.

Amortisation

Systematic repayment of a loan through regular instalments over a period of time, e.g. weekly, monthly or fortnightly. The borrower pays the interest and part of the principal in each repayment.

Arrears

Amount that the loan is overdue for repayment.

Auction

A way to sell where all the buyers are in one place and make bids, or offers, until only one buyer is still bidding. An auctioneer runs the auction. The person selling usually sets a reserve price and doesn’t have to sell if the bids are under that amount. If you buy at auction you are committed to going through with the purchase, so you need to check everything out first and have your finance ready, including the money for your real estate deposit which is paid on the day.

 Baycorp (now called Equifax)

Association that lenders subscribe to which holds credit information on all of us. Individuals, for a small fee, can obtain a listing from Equifax or Credit Simple detailing their credit history.

Body Corporate

A group that all the owners in a block of flats or apartments belong to. It deals with the running of the building and shared areas like stairways, garages and access ways.

Bridging Finance

A short-term loan so that you can buy your home while waiting for other money to become available, such as money from selling another place. Once the other money becomes available it is used to pay back the bridging loan.

BBO/BEO

Buyer’s Budget Over … Buyer Enquiry Over… The seller is usually expecting a price 5–15% over BBO/BEO amount.

Capital Gain

The profit you make when the value of something you own goes up. If you buy something for $100,000 and it goes up to $150,000, the extra $50,000 is your capital gain, also known as equity. Currently there is usually no tax on capital gains on your own home.

Capital Value

You’ll see this term on your Rating Valuation (RV). It is the value of your property used for determining council rates fees, including land and buildings but not chattels, which are things like light fittings, carpets and curtains. It’s not always a fair reflection of the current market value.

Certificate of Title

This is the ownership paper for your property. It shows information about the land and house as well as the legal description of the land and if there are any mortgages/encumbrances.

Chattels

The removable items that come with your house, such as spa pools, ovens, curtains, light fittings and sometimes furniture.

Code of Compliance Certificate (CCC)

A certificate from your local authority to say the building complies with the building act. Check all buildings and alterations have a certificate before you buy (though some buildings may pre-date the law). The LIM (Land Information Memorandum) should contain details.

Company Title/Share

A property title where owners of units form a company. It is difficult to raise finance against this type of title because you are buying shares in a company and a new owner may have to be approved by all the existing owners. These types of titles usually sell at a discount compared to a similar Freehold property. Maximum lend could be 50-75% LVR.