Account balance - See 'Balance'
Administration fees - Ongoing monthly fee that is charged by a bank for managing the bank account and providing the bank account services used by you.
Agent's Commission - This fee (usually a percentage of the sale price) is payable to a real estate agent for selling a house.
AML-CTF (Anti-Money Laundering and Counter-Terrorism Financing Act) - The AML-CTF Act is the law that requires information to be collected by specified organisations, including banks, from their customers. For example, to open a bank account, the AML-CTF Act requires Australian banks to perform a Customer Identification Process (CIP) on the customer and to keep that information. The AML-CTF Act requires the specified organisations to report large and suspicious transactions to a government department. The AML-CTF Act supersedes the Financial Transactions Reporting Act (FTRA), under which customers were identified using the "100 point check". See also 'Customer Identification Process'.
Amortisation period - Time taken to reduce the value of the debt through payment of regular instalments until the loan has been paid off in full. For most Home Loans the maximum amortisation period is 30 years.
Amount due - The amount of money that has to be paid on an outstanding account.
Annual percentage rate - The rate at which interest is charged over a yearly period in respect of money that is owed. Interest is usually calculated on a daily basis and may be charged monthly, quarterly or annually.
Appraised value - An estimate of the value of property offered as security for a home loan. The appraisal is undertaken for financial lending purposes and banks rely on licenced valuers for the appraisal, not real estate agents.
Arrears - The amount you have not paid in respect of scheduled repayments for a debt owed (i.e. past the due date). This is different from the balance owing.
Asset (secured) - An asset that has been offered by you to secure the repayment of a loan. For example, if you take out a loan to buy a car, you will usually be required to provide the lender (a bank or another creditor) the car as security for that loan. If you fail to repay the loan, the lender may claim the security (in this case the car) and sell it to recover some or all of the outstanding money owed by you. A secured asset cannot be sold by the borrower (debtor) without the written permission of the lender. When a secured asset is sold, the lender holding the security gets paid first, to the value of the outstanding balance of the loan plus fees. Only the loan that is secured can be cleared by this security.
Asset - Interest which is paid on accumulated interest as well as the original principal invested.
Assets – What you or your business entity owns or has a right to, from which a benefit can derive. Net assets are total value of your assets in excess of liabilities. Liquid assets are assets either in the form of cash or readily convertible into cash.
Australian business number (ABN) - A number issued to registered businesses in Australia by the Australian Tax Office (ATO). Each business has its own ABN and must use it on official paperwork and transactions and for tax (GST) purposes.
Australian Securities & Investments Commission (ASIC) - ASIC is an Australian government body that regulates banks and other financial services companies. ASIC is responsible for, among other things, consumer protection in superannuation, insurance, banking and credit. ASIC also regulates and enforces laws that promote honesty and fairness in financial products and services, in financial markets and in Australian companies.
Automatic deduction - See Direct Debit.
Balance (closing/final) - The amount in a bank account at the end of a period of time or at a certain point in time after all the transactions are taken into account up to that date.
Balance (opening/prior) - The amount of money in your account at the beginning of a period of time. The closing balance from the previous period becomes the opening balance for the next period.
Balance - The amount of money in your bank account. The balance can be positive/in credit or negative/debit.
Bank account - A financial product which allows you to deposit your money and gives you easy access to your money in the future. In Australia there is a large range of bank accounts that are designed to meet different customer requirements.
Bank cheque - A cheque issued by a bank for you that is in the bank's name. No individual or company name appears on the cheque. You can buy the cheque for cash and a small fee.. For example, at times that you need to pay cash, but it is not convenient to use cash, you can use a bank cheque instead.
Bank draft - This is similar to a bank cheque but is usually drawn in a foreign currency for payment overseas.
Bank fees - Charges made by a bank in return for the products and services provided.
Bank - In Australia, banks are financial institutions authorised under the Banking Act 1959. They offer a variety of financial products and services. For example, for individual customers they offer bank accounts, payments services, credit cards, home loans, car loans, investments and some times insurance. For companies they also offer a large range of products and services. In Australia one bank can usually meet all of your financial and insurance requirements.
Banking and Financial Services Ombudsman (BFSO) - A free and independent dispute resolution service that considers complaints about banks in Australia.
Bankruptcy - A legal process that people go through when they can not pay their debts. A bankrupt person gives control of most of the debts and assets to a bankruptcy trustee. The trustee decides which (if any) of the assets can be sold to pay off the debts.
Baycorp - Credit Advantage – Veda- Equifax – Dunn & Bradstreet- A company that holds the largest source of credit information about Australian people.
Body Corporate - A strata corporation incorporated in relation to land subdivided for residential purposes under a law providing for strata, that gives a right to occupy land for residential purposes. The Body Corporate usually has the responsibility for the management and upkeep of common areas of the property.
Borrower - A person using money that has been loaned to them by a bank or other lender or a person. Another name for a borrower is a debtor.
BPAY® - BPAY® is a service that allows people in Australia to easily pay their bills using their credit cards or from their bank accounts. BPAY® can be used on internet banking or phone banking. Most BPAY® payments are made over the Internet. BPAY® is registered to BPAY Pty Ltd ABN 69 079 137 518
Branch - A branch is like a bank shop where a bank's products and services are provided to their customers. In Australia bank branches are open for business during normal business hours (usually 9am to 4pm) and some also open on Saturdays.
Brick veneer - A type of building in which a structural timber frame is tied to a single brick external wall.
Bridging finance- Short term finance used when buying and selling houses to cover the gap between receipt of funds from sale of existing house and the payment of funds to purchase another house.
BSB - A BSB is a number which is like an electronic bank address in Australia. A BSB identifies both the bank and the branch of the bank in Australia. Each bank branch will have a BSB. Every bank account will have a BSB associated with it. When you are transferring money in Australia the BSB of the sending and receiving bank should be provided.
Building regulations - Designed to uphold the standards of public safety, health, and construction, these regulations are in place and have been formulated by responsible authorities to control the quality of buildings.
Building society- A financial services organisation which is similar to a bank but it is owned by members. Building societies were first developed so that they could lend money to their members for purchasing property or a business.
Capital Growth- The increase in value of an asset or investment i.e. the difference between the current values and the original purchase price. (Provided the result is positive, not negative)
Cash advance - This is a cash loan which is withdrawn from a credit card. Credit card issuers charge interest from the date when the cash advance is taken until it is paid back. A transaction fee may also be charged.
Cash - Money in the form of notes and coins.
Caveat Emptor - Latin for " Let the Buyer Beware " . This means that buyers of goods (in this case, landed property) are responsible to examine the goods ( the property being purchased) closely or read the fine print (to the contract) carefully before completing the purchase. Under common law this means that if someone is sold faulty goods he or she has no right to obtain compensation.
Certificate of Title - The document of title to the estate or interest in land also known as the ‘deeds’. It sets out the Crown description of the land, proprietorship and shows any registered interests such as mortgagees, charges and caveators. It also shows any restrictive covenants and easements which affect the estate or interest.
Chattels - Chattels are someone’s personal property. There are real chattels such as buildings and fixtures personal chattels such as personal goods and furniture etc.
Cheque account - An account offering you access to your money by writing cheques. You must make sure you always have enough money in your cheque account to cover the cheques that you have written. If you do not have enough money the cheque may be dishonoured (not paid) and you and the person who you gave your cheque to will be charged fees. In some cases this is considered illegal with serious penalties.
Cheque - A slip of paper that instructs a bank to pay a sum of money to the person (usually) named on the cheque. If you have a cheque account then you can write a cheque for a specified amount of money and give it to someone else, who will give it to a bank. That bank will ask your bank for the money from your cheque account and give it to the person (or company). If a cheque is made out to 'cash' or 'bearer', then whoever hands the cheque to a bank can exchange it for cash. A cheque crossed 'Not Negotiable' must be deposited into the bank account of the person named on the cheque.
Cleared funds - The amount of money in an account that is available for you to use. Cheques deposited into your account may take up to five working days before they become cleared funds and you can use them. During the five days the cheque funds are called uncleared funds.
Co-borrower - A person who borrows money jointly with you. Each individual is jointly and separately responsible for the repayment of the loan. This means that if one person does not pay the other person will be required to pay the full amount of the loan.
Common area - An area which is for use by many, not an individual. For example, home units have common areas such as stairs and driveways.
Company Title - This Title applies when a company owns the whole of the property. By purchasing shares in the company, the purchaser obtains an entitlement to occupy a particular part of the property. See your solicitor before buying these as they can be difficult to finance.
Comparison Rate - The Comparison Rate provides an indicative interest rate that takes into account certain costs associated with setting up a loan. This rate includes the nominal interest rate/s, loan approval fee, any other up front fees and known ongoing fees. The Comparison Rate does not include government and statutory fees, since these are standard across all loans regardless of the lender. It also doesn't include other fees and charges that are 'event based' and which may or may not apply throughout the term of your loan (for example, redraw fees and early repayment costs). Often a comparison rate will not take into account a broker negotiated rate, or a special discount on fees, so check with your broker first if it applies to your home loan.
Compound Interest - Interest which is paid on accumulated interest as well as the original principal invested.
Consumer Credit Code - The Consumer Credit Code is a set of rules that regulate certain types of lending and borrowing transactions in Australia. Lenders such as banks must tell you what your rights and obligations are in any transaction. Credit transactions made for business or investments are not governed by the Consumer Credit Code.
Consumer Price Index (C.P.I) - Measures the national inflation rate. The index is measured quarterly (December, March, June and September quarters) and reflects changes in prices for goods and services.
Contract of Sale - A written agreement which details the terms and conditions regarding the purchase or sale of a property. It is usually prepared by the vendor's agent, solicitor or conveyancer.
Contract - A written agreement that shows terms and conditions.
Conveyancing - The legal process where ownership of real estate is transferred from one party to another.
Cooling off period - A period of time, which may vary between 24 hours and 14 days (depending on the type of contract), during which a person/organisation can decide not to continue with a contract. There are conditions to the cooling off period - it is important to always read the contract and to not give away rights to a cooling off period. Cooling off periods are different in different states in Australia.
Credit card - This is a plastic card that gives you access to money that the bank has agreed to lend you for a short period of time. It is important to manage the amount of money that you owe on your credit card and be aware of the interest that you are paying on the outstanding balance of your credit card. See 'Credit limit' and 'Credit'.
Credit file - A file or report that is kept by an agency such as Veda Advantage which shows your credit history such as loan applications you have made, credit you hold, defaults on loans, how you have repaid credit in the past and bankruptcy. Credit files or reports are kept and maintained by credit agencies and may be accessed by banks and financial organisations to help them assess any application for credit you make with them. Credit reports can hold both negative and positive information about your credit history. If you have always paid your bills on time and you have never defaulted on a loan or credit repayments, your credit report may assist you to secure credit. In contrast, a negative credit file may make it difficult for you to borrow money from a lender.
Credit history - See Credit file.
Credit limit - The maximum amount that a bank will lend you for a loan or a credit card.
Credit rating - A person's credit rating is based on their credit file or credit history. A person who has a credit file or a bad credit history is likely to have a poor credit rating. Banks and financial organisations refer to credit ratings when considering applications for loans and credit cards. A person with a poor credit rating may find it very difficult to obtain a loan or a credit card. Credit providers obtain this information through credit reporting agencies, such as Baycorp Credit Advantage.
Credit union - A co-operative organisation that provides loans to its members.
Credit - Credit can have different meanings.
It can be a transaction on a bank account that shows money going into the account.
It can mean the amount of money you have. If your bank account is $200 in credit, it means you have $200 in the account. Credit also means buying goods and services now, but paying for them later. For example, buying something with your credit card and paying it back later, or taking out a home loan to buy a house. See 'Credit card', 'Credit limit' and 'Debit'.
Creditor (secured) - A creditor who holds an asset belonging to the borrower/debtor as security for the repayment of the loan. Loans for the purchase of property are usually secured by the property. If the borrower/debtor fails to repay the loan, the secured creditor has the right to sell the secured asset in order to recover some or all of the money owed. Any assets or property which is provided as security for a loan must be listed in the loan contract.
Creditor (unsecured) - A creditor who has provided a loan to a debtor and there is no security. Credit cards are usually unsecured. Therefore, if the debtor fails to repay the loan, the creditor may need to take the borrower/debtor to court to recover the money owed.
Creditor - Someone who is owed money. The opposite to debtor. For example, a bank that lends money, a department store that lends money to customers in the form of store credit cards, or a telephone company that is owed money from customers are all called creditors.
Customer Identification Process - All individuals or entities seeking banking services need to verify their identity through a Customer Identification Process (CIP). Identification documents individuals could be asked to provide include passports, birth certificates, driver licences, utilities bills, Medicare cards etc.. The types of documents you might be asked to provide to verify your identity may vary for different legal entities, e.g. companies will be verified using a company search. See also 'AML-CTF'.
Debit card - A card that gives direct access to a bank account through ATM machines and EFTPOS. See also ATM card.
Debit - Most commonly, a debit is a withdrawal from a bank account.
Debt to Equity Ratio - This is the amount of the loan compared to the value of the property or asset purchased with the loan funds, expressed as a percentage. For example, a loan of $400,000 to buy a property worth $500,000 results in a debt to equity of 80%. Banks will place a limit on the debt to equity ratio depending on things such as the type of property, the location and the financial position of the borrower. Also known as Loan to Value Ratio (LVR).
Debtor - Someone who owes money. The opposite of creditor.
Debts (liabilities) - A debt is money that is owed. Another name for a debt is a liability.
Default - When you fail to meet the terms or requirements of a signed contract there is a default. For example, not making your scheduled repayments on a loan or not making them on time.
Deposit - An amount of money put into a bank account or money that is left with someone or a company to secure the purchase of an item.
Deposit Bond - A financial instrument commonly used in Australia as an alternative to a cash deposit. Deposit bonds facilitate residential or commercial property purchases.
Direct debit - A payment that is made directly from a bank account and is usually an electronic payment. A direct debit is usually a transaction that has been requested by the account owner to take place at a specified time and on a specified date. For example, in Australia companies often use direct debit for payroll processing.
Drawdown - The disbursement of loan funds provided by the Bank, normally at settlement time, but sometimes throughout your build or construction loan.
Easement - A right that an individual enjoys over land belonging to another. e.g. rights of way, rights of light, rights of support.
EFTPOS (Electronic Funds Transfer at Point of Sale) -This facility lets you use your ATM card (debit card) to purchase goods, pay for services, and withdraw cash at a supermarket, shop, or restaurant. Money is taken out of your bank account immediately to pay for the services.
Electronic banking - A way of banking that allows withdrawals, deposits and transfers to be completed and account information to be obtained electronically using processes such as telephone or Internet banking, ATMs or EFTPOS.
Encumbrance - A legal claim on a particular property. e.g. mortgage.
Equity - The part of an asset (house) which you own over and above the amount borrowed from the Bank which has a mortgage over the house property.
Expenses - The amount it costs you for your everyday living including food, transport, housing, clothing and entertainment.
Fittings - Things that can be removed from a property without causing damage to it, such as drapes.
Fixed rate loan - A loan priced at a fixed rate of interest for a set term. Interest rate and payments remain the same during the fixed term of the loan regardless of interest rate changes in the market.
Fixed term loan - A loan that you must repay within a certain time called the term.
Fixtures - Things that are affixed to and form part of the property. e.g. built - in air conditioning.
Floating loan - See 'Variable interest' and 'Fixed interest'.
Footing - The footing supports the building on its foundation.
Foreign exchange - A foreign exchange service changes one currency into another currency. The currency can be in cash or cheques, or as part of a payment.
Foundation - The compact sand, gravel, hard clay or rock upon which the footings rest.
Freehold - Common term used for an 'estate in fee simple'. This means that the proprietor of the land has absolute ownership of the property.
Frequent flyer program- A Frequent flyer program is a product or service offered by many airlines to reward customer loyalty. Sometimes points are also called "miles". Normally, once membership of the program has been obtained, the further you fly and the more money you spend with an airline or a group of airlines, the more points you earn. You can sometimes earn points when you hire a car and when you book hotels. Some credit cards also give you points for the money you spend with your credit card. Your points may be redeemed to receive free flights, to get into airport lounges, and to book hotels.
Funds transfer - Moving funds from one bank account to another.
Guarantee - With regard to a warranty: a promise or an assurance, especially one given in writing, about the quality or durability of a product or service. With regard to a loan: a legally binding promise given by a person (the guarantor) to pay a debt, if it is not paid by the borrower. It can be a secured or unsecured guarantee.
Guarantor - A person or company that provides a guarantee.
Home loan - A loan to finance the purchase of property/real estate to be used for the purposes of your home. It is important to only commit to a home loan amount that you are comfortable you can pay back, even if interest rates rise and/or property prices go down. See also 'Mortgage'. (Acronyms used HL, H/L)
Home units - A grouping of residential dwellings. They share common areas (e.g. gardens, storerooms) and are commonly registered under Strata Title.
Honeymoon rate - An initial special low interest rate for a specified period on a loan. It gives you an opportunity to make further repayments during the honeymoon period to reduce the amount owing on your loan. The loan will usually change to a higher variable interest rate at the end of the honeymoon period.
Income - The amount of money you earn, such as wages and salaries, rental income, interest and government allowances. For a business or a company, income is equal to revenue less expenses.
Interest only - An 'interest only' loan means that your repayments only go towards repaying the interest for a specified period, rather than repaying the principal amount of the loan. For example, paying your loan "interest only" means that the principal balance stays the same. Paying interest only can be good if you need extra money for buying furniture or improving your home. It is also popular for investment loans. (Acronymns used IO, I/O)
Interest - A charge on borrowed money or the return earned on funds invested.
Internet banking - Using the internet to manage your banking and for conducting transactions. In Australia the internet is very popular for checking bank account and credit card balances and making transactions such as transferring money, changing your personal details, paying bills and applying for new products and services. You will need to register with your bank to use their internet banking.
Inventory - A listing of items that could be included with a property, e.g. furniture, furnishings, dishwasher and other moveable items.
Investor - A person who lends money or buys assets or businesses and with the intention of making a profit.
Investment Home loan - A loan to finance the purchase of property/real estate to be used for the purposes of renting out to others. In Australia, these loans can, subject to tax advice, be claimed on for their interest as an expense, offsetting the income the property generates. Contrary to popular belief, it is not the property that the loan secures that makes your investment home loan an investment, it is the original purpose of the funds used that makes the loan claimable for tax purposes, as an investment home loan. It is important to only commit to a home loan amount that you are comfortable you can pay back, even if interest rates rise and/or property prices go down. See also 'Mortgage'. (Acronyms used IHL, Inv H/L)
Invoice (tax) - A bill that needs to be paid and also includes tax.
Invoice - In Australia an invoice is a bill that needs to be paid. After a bill has been paid a receipt will be issued/received. See BPAY®.
Joint debt - When two or more people borrow money together or incur a debt together. A lender can recover payment of the whole amount from either party, unless the contract limits the amount each party must pay. This is not affected by any private agreement held between the borrowers, nor is it affected by any family law property agreement.
Joint tenants - The holding of land by two or more persons where there is a right of survivorship i.e. on the death of one joint owner, the land as a whole vests in the survivors and can only be disposed of by will by the last surviving owner.
KYC (Know your customer) - This is the process that a bank should generally undertake so that it is providing the best service and advice to its customers. KYC is most important for private and premium bank customers that may have more complicated banking and investment needs. In order to meet KYC requirements banks may ask for information such as your employment details, salary, assets and liabilities.
Land tax - Based on the property value, it is a State Government tax which is payable by the owners of the property.
Lease - An agreement between two parties under which one is granted the right to use the property of the other for a specified period of time in return for a series of payment by the user to the owner.
Lease - An agreement between two people/parties where one party is granted a legal right to use or occupy the property of the other party for a specified period in return for payment.
Leasehold - The right to use and have exclusive possession (but not ownership) of real estate for a specified period and subject to the fulfilment of certain conditions as recorded in a lease agreement.
Liabilities - Debts owed by a company or individual.
Liability - See 'Debt'.
Life events - These are important events or milestones in your life. Some life events are predictable or planned, such as starting a family or retiring, whereas others are not, such as sudden illness or losing your job.
Loan - Money lent to a person for an agreed period of time (called the term). By the end of the term, the money must be repaid, often with interest added. See mortgage, interest and term.
Loan approval fee - This is a fee payable once in relation to the approval of a loan by a lender. The fee usually relates to document search costs, valuations and loan processing.
Loan Repayment Capacity - Your monthly fixed debt commitments divided by your monthly gross income expressed as a percentage.
Loan to Valuation Ratio - The amount of the loan financed as a proportion of the property value, expressed as a percentage.
Lump sum payment - A single payment of money towards repaying a loan, usually for a larger amount. This is in addition to your regular scheduled repayments.
LVR (Loan to Value Ratio) - See Debt to Equity Ratio.
Managed funds - An investment fund that pools together money that has been contributed by many investors for the purposes of investing the total amount in different investments such as shares, listed property trusts, bonds and cash.
Maturity - The end or expiry of an investment or a loan.
Minimum repayment - The minimum amount to be paid on an invoice or a loan.
Money order - Similar to a bank draft, a money order is an order for the payment of a specified amount of money, usually issued and payable at a bank or post office.
Mortgage broker - A person or company that will assist you to find the most appropriate home or residential investment loan for your situation. Mortgage brokers may charge you a fee for their services or be paid a commission from the lender.
Mortgage - A document drawn up between a borrower and lender, giving the lender a conditional right to property as security for the money lent.
Mortgage - A document drawn up between a borrower and lender, giving the lender a conditional right to the property held as security for the repayment of the money lent.
Mortgagee - The one who lends the money to purchase the goods or property.
Mortgagor - The one who borrows the money to purchase the goods or property.
Multiple listing - This happens when a person selling a property gives it to more than one agent. The first agent who has a buyer ready, willing and able to meet the price and terms acceptable to the vendor, receives the commission for the sale.
Needs - The basic things that you must have in your life so you can live comfortably such as food, clothing, and a home.
Negative Gearing- A way of obtaining tax advantages through an investment where the deductible expenses (typically including interest) exceed the income derived from the investment.
Net worth - Your assets less how much you owe on your assets is your net worth. In order to meet basic needs and life events, an increase in your net worth should be a basic financial goal of most people.
Offer to purchase - A written offer of a specified price for a specified property. The offer may be firm (no conditions attached) or conditional (certain conditions apply).
Offset account - A bank account that is linked to a nominated home or residential investment loan. The balance of the offset account reduces the amount of interest
payable on your linked loan. This does not mean that the loan does not have to be repaid, only that the amount of interest that is otherwise payable may be reduced. You will be able to access your money in an offset account.
Offshore account opening (Overseas account opening) - The process of opening an account in another country. An example of offshore account opening is opening an account in Australia when you live overseas or before you move to Australia.
Online account opening - The process of opening an account on the internet. In Australia, most bank accounts, credit cards and loans can be opened or applied for over the internet if you are already a customer of the bank which is offering the product or service. If you are not a customer of that bank, you may have to visit a branch in order to conduct the Customer Identification Process (CIP). See 'Customer Identification Process' and 'Offshore account opening'.
Original documents - Paperwork or documents that are not a copy or reproduction ie. not photocopied or faxed and all signatures on the document are original.
Overdrawn - When an amount of money is taken out of a bank account which is greater than the balance of the account. Fees will usually be charged for overdrawn accounts and dishonoured cheques.
Overdue - An amount of money that has not been paid by the due date and is still owed.
Over-the-counter - Any banking activity that is done in a bank branch.
Pay anyone - A term that means to transfer funds to another person or a business by using internet or phone banking.
Per annum (pa) - This means for the year. For example, if the interest rate on a personal loan is 9% pa the borrower must pay 9% in interest each year on the balance that is still owing.
Period - The same as time or term.
Personal Identification Number (PIN) - A number used as a security access code for your bank accounts when you use internet banking, phone banking, an ATM or EFTPOS. You should be very careful with your PIN and never write it down, never give it to someone else, and change it often.
Personal loan - A type of loan that is used for things like buying a car, a boat or furniture. Money is lent to you for a fixed period, at a variable or fixed rate of interest with repayments calculated at the start of the loan. Personal loans are popular for both secured and unsecured loans of $2,000 and more and should be considered instead of using your credit card for expensive purchases.
Phone Banking - In Australia, phone banking is another popular way to check bank account and credit card balances and perform transactions, transfer money, change your personal details, pay bills and apply for new products and services. You will need to register with your bank to use phone banking.
Plan - This shows the ground plan design, elevation of house, number and size of rooms, kitchen, bathrooms, laundry layout and position of the house on the land.
Principal - For an investment, the principal is the amount of money invested. For a loan, the principal is the amount of the loan (the face value of the loan) upon which interest is then calculated and charged.
Principal - The face value amount of a loan on which interest is calculated.
Principal & Interest - the type of repayment where you repay not just interest, but principle, thereby reducing the loan size (amortizing) to nil over time. (Acronyms P&I, PI)
Private banking - A service that most banks provide to their high net worth customers with more demanding, sophisticated or complicated banking requirements. Most banks will provide their private bank customers with relationship managers which have a personal knowledge of their customer's financial position and banking requirements. See also 'Retail banking'.
Private treaty sale - Sale of property via an agent through private negotiation and contract.
Rebate - An amount that is given back, returned or refunded.
Receipt - A record showing that a payment has been received or an invoice has been paid. Receipts are usually paper but may also be in electronic form for things that are bought using the internet or over the phone. Receipts usually have a reference number and show the amount of tax that is included in the payment. A receipt is important proof that goods and services have been paid for. See also 'Invoice'.
Redraw - A redraw facility gives you easy access to the money that you have repaid on your loan in excess of your scheduled repayment amounts. This facility may not be offered by all banks and may not be automatically available. Fees may apply. It is a convenient way to borrow money back from a bank without having to apply for another loan. See also 'Equity'.
Reducible interest - Loan interest that is calculated on how much you owe each day. As the amount you owe gets less you pay less interest.
Reducible - Something that can be brought down, or prices or costs that can be lowered.
Refinance - Paying off an existing loan with the proceeds from a new loan usually provided by a different lender, and may be done to obtain a lower interest rate or to consolidate debts into one loan.
Repossession - A lender may be able to claim or take possession of any property, assets or investments that have been provided as security for the repayment of a loan in circumstances where the borrower cannot repay the loan.
Reserve price - The minimum price a seller has specified he/she will accept at auction.
Retail banking (personal banking) - Services provided to meet your personal banking requirements. See also 'Private banking'.
Right of Way - A person may have the right to cross your property to gain access to their own property, or there may be a general pathway across the land. This is an example of an easement.
Risk grade - When lending money, a 'risk grade' is calculated so that a bank can assess how secure or risky a loan or investment is likely to be. The higher the risk grade given to an investment or the loan or the borrower, the higher the annual percentage rate that may be charged by the bank.
Roof pitch - The slope of the roof.
Savings account - An everyday bank account where your savings can be deposited and easily withdrawn.
Savings - Money that you put away for use at a later time. For example, you may save to buy a car or a house in the future. When a bank lends you money, they like to see a long history of steady saving. Saving is a good way to make sure you are able to meet your needs and the requirements of different life events. See also 'Term deposits'.
Scams and scammers - A person or an organisation that is not honest, lies or cheats customers or consumers. For example, internet banking fraud, door-to-door con artists and the phishing scam.
Secondary cardholder - If you allow another person to use an ATM card or credit card that is linked to your account, they are a secondary cardholder. The secondary cardholder is not responsible for any money owed on a credit card. The credit limit on the card does not change or double when an extra card holder is added.
Security - An asset offered by a borrower to a lender as security for the repayment of a loan. The security is aimed at ensuring that the lender is able to recover the full amount of the loan (selling the asset) if the borrower can't repay the loan. See 'Assets (secured)'.
Semi-detached - Two houses joined together with a common wall or walls; they are usually registered under Torrens Title.
Settlement date - The date on which the sale of the property is finalised; money and security changes hands and the new owner takes possession.
Simple interest - Interest is paid on a set principal only and not re-invested.
Sole agency - One agent or agency has the exclusive rights to sell a property.
Spending leak - Money that you spend but you don't notice. For example a daily cup of tea or coffee only costs $3 a day but over a year this would cost you $600.
Staff-assisted withdrawals - When you withdraw money from your bank account with the help of a teller in a bank branch.
Stamp duty - A duty (like a tax) charged by Australian states on certain transactions. For example, stamp duty will be payable on the purchase of a property or the transfer of certain other assets. The rate of stamp duty payable is different in each state.
Statement - A record summarising all the transactions that have occurred on your bank account (or any other account) and any fees charged or interest paid each month or each quarter. In the past, statements were on paper and mailed to customers, but most Australians now prefer to use the internet to check their accounts and print statements at home or at the office. Bank books are not often used in Australia.
Strata Title - Most commonly used for flats and units, this title gives you the ownership of a small piece of a larger property. You have sole right to a particular unit and can lease, sell or legally dispose of your unit as you desire. You also have an undivided share of the common land. You also become a member of the Body Corporate which controls maintenance.
Stratum Title - This title gives you legal ownership over a piece of property and also gives you a share in the company set up to look after the common areas of the flats or units you live in. It does not include "air space".
Superannuation - An investment vehicle which operates primarily to provide benefits for retirement.
Superannuation - This is Australia's mandatory pension scheme, or saving for retirement. An employer is required to contribute a proportion of a person's salary or wage to a superannuation fund on behalf of the employee. The money in the superannuation fund is invested with the aim of generating returns. When Australians retire the money that is in the superannuation fund is made available to them in a lump sum or in small amounts over their planned retirement.
Survey - Shows boundaries of the land and location of the building.
Tax file number (TFN) - A nine digit number issued by the Australian Taxation Office to individuals and companies to identify them for taxation purposes. Every Australian resident, and registered company should have a TFN. A TFN is different to an ABN. See also 'ABN'.
Teller - The person in a bank branch that is there to help you with your banking.
Tenants in common - Each tenant (or owner) owns a specified share of the land. Shares can be equal or unequal. Unlike joint tenants, there is no right of survivorship. Each share may be dealt with by sale, bequest, gift etc., as for sole ownership.
Term deposit - A banking product that offers a slightly higher annual percentage rate than savings accounts payable on the amount invested. A term deposit has a fixed term (which can vary) during which the amount invested cannot be accessed.
Term Deposit - Money invested for a fixed term at a fixed rate of interest which applies for the duration of the deposit.
Term - A period of time. For example, the length of time for which a deposit is made, or the time in which a loan must be repaid.
Terms and conditions - Terms and conditions set out the specific obligations of each party in respect of a transaction or product. They outline how a bank product or service can be used and should be read and understood before the product or service is used. Terms and conditions are available from your bank and may also be provided in booklets called Product Disclosure Statements.
Title search - A Search undertaken of records registered at the land titles office to confirm interests in land of a particular land property. A title search show interests such as proprietor, mortgagees, charges, and caveators. The search also reveals any restrictive covenants and easements which affect the estate or interest.
Torrens Title System - Title is under a system given the name of its South Australian author in 1858. The principles of this system are expressed in State Land Title and Real Property Acts and any act or acts amending or re-enacting them. This system gives a registered proprietor of an interest in land a perfect and unchallenged titles, subject only to the encumbrances and conditions mentioned on the title certificate.
Townhouse - Detached or attached housing forming part of a cluster of homes sharing some common grounds. Normally has own private entrance and private areas. Can be single or multi storey.
Transactions - The name given to movements of money such as deposits and withdrawals or transferring money between bank accounts.
Transfer of Land - A document registered in the Land Titles Office which recognises and acknowledges change of property ownership. This is also noted on the Certificate of Title.
Transfer - To move money from one bank account to another bank account.
Trust account - An account that is usually used by lawyers, accountants and other professionals such as stockbrokers to identify and control their clients' money.
Uncommitted Monthly Income - Your available net income once all monthly expenses including loan repayments have been taken into consideration. Also known as your surplus.
Unconscionable conduct - Behaviour that is considered unreasonably excessive, unfair or unjust.
Unencumbered - A property free of encumbrances, convenants, restrictions.
Utilities - A business that provides an essential service, such as the provision of electricity, water or public transport, generally under government regulation. Utility bills or invoices are often paid by using BPAY®.
Valuation - A report written by a registered valuer, detailing their opinion of the property value.
Variable interest - A type of interest where the rate may go up and/or down during the term of the loan.
Variable Rate Loan - A loan for which the interest rate changes as conditions in the money market change.
Vendor - One who offers a property for sale.
Wants - The things that are not essential to your survival, such as a mobile phone, candy and chocolate, a CD or DVD or designer clothes for example. See 'Needs'.
Will - A legal document stating how you wish your possessions to be distributed after your death.
Withdrawal - To take money out of a bank account, for example, using an ATM, EFTPOS or by cheque.
Zoning - Zonings fall into many categories, the two most common being commercial and residential. Local Councils and/or Planning Authorities control the use of land and designate it as such.
Administration fees - Ongoing monthly fee that is charged by a bank for managing the bank account and providing the bank account services used by you.
Agent's Commission - This fee (usually a percentage of the sale price) is payable to a real estate agent for selling a house.
AML-CTF (Anti-Money Laundering and Counter-Terrorism Financing Act) - The AML-CTF Act is the law that requires information to be collected by specified organisations, including banks, from their customers. For example, to open a bank account, the AML-CTF Act requires Australian banks to perform a Customer Identification Process (CIP) on the customer and to keep that information. The AML-CTF Act requires the specified organisations to report large and suspicious transactions to a government department. The AML-CTF Act supersedes the Financial Transactions Reporting Act (FTRA), under which customers were identified using the "100 point check". See also 'Customer Identification Process'.
Amortisation period - Time taken to reduce the value of the debt through payment of regular instalments until the loan has been paid off in full. For most Home Loans the maximum amortisation period is 30 years.
Amount due - The amount of money that has to be paid on an outstanding account.
Annual percentage rate - The rate at which interest is charged over a yearly period in respect of money that is owed. Interest is usually calculated on a daily basis and may be charged monthly, quarterly or annually.
Appraised value - An estimate of the value of property offered as security for a home loan. The appraisal is undertaken for financial lending purposes and banks rely on licenced valuers for the appraisal, not real estate agents.
Arrears - The amount you have not paid in respect of scheduled repayments for a debt owed (i.e. past the due date). This is different from the balance owing.
Asset (secured) - An asset that has been offered by you to secure the repayment of a loan. For example, if you take out a loan to buy a car, you will usually be required to provide the lender (a bank or another creditor) the car as security for that loan. If you fail to repay the loan, the lender may claim the security (in this case the car) and sell it to recover some or all of the outstanding money owed by you. A secured asset cannot be sold by the borrower (debtor) without the written permission of the lender. When a secured asset is sold, the lender holding the security gets paid first, to the value of the outstanding balance of the loan plus fees. Only the loan that is secured can be cleared by this security.
Asset - Interest which is paid on accumulated interest as well as the original principal invested.
Assets – What you or your business entity owns or has a right to, from which a benefit can derive. Net assets are total value of your assets in excess of liabilities. Liquid assets are assets either in the form of cash or readily convertible into cash.
Australian business number (ABN) - A number issued to registered businesses in Australia by the Australian Tax Office (ATO). Each business has its own ABN and must use it on official paperwork and transactions and for tax (GST) purposes.
Australian Securities & Investments Commission (ASIC) - ASIC is an Australian government body that regulates banks and other financial services companies. ASIC is responsible for, among other things, consumer protection in superannuation, insurance, banking and credit. ASIC also regulates and enforces laws that promote honesty and fairness in financial products and services, in financial markets and in Australian companies.
Automatic deduction - See Direct Debit.
Balance (closing/final) - The amount in a bank account at the end of a period of time or at a certain point in time after all the transactions are taken into account up to that date.
Balance (opening/prior) - The amount of money in your account at the beginning of a period of time. The closing balance from the previous period becomes the opening balance for the next period.
Balance - The amount of money in your bank account. The balance can be positive/in credit or negative/debit.
Bank account - A financial product which allows you to deposit your money and gives you easy access to your money in the future. In Australia there is a large range of bank accounts that are designed to meet different customer requirements.
Bank cheque - A cheque issued by a bank for you that is in the bank's name. No individual or company name appears on the cheque. You can buy the cheque for cash and a small fee.. For example, at times that you need to pay cash, but it is not convenient to use cash, you can use a bank cheque instead.
Bank draft - This is similar to a bank cheque but is usually drawn in a foreign currency for payment overseas.
Bank fees - Charges made by a bank in return for the products and services provided.
Bank - In Australia, banks are financial institutions authorised under the Banking Act 1959. They offer a variety of financial products and services. For example, for individual customers they offer bank accounts, payments services, credit cards, home loans, car loans, investments and some times insurance. For companies they also offer a large range of products and services. In Australia one bank can usually meet all of your financial and insurance requirements.
Banking and Financial Services Ombudsman (BFSO) - A free and independent dispute resolution service that considers complaints about banks in Australia.
Bankruptcy - A legal process that people go through when they can not pay their debts. A bankrupt person gives control of most of the debts and assets to a bankruptcy trustee. The trustee decides which (if any) of the assets can be sold to pay off the debts.
Baycorp - Credit Advantage – Veda- Equifax – Dunn & Bradstreet- A company that holds the largest source of credit information about Australian people.
Body Corporate - A strata corporation incorporated in relation to land subdivided for residential purposes under a law providing for strata, that gives a right to occupy land for residential purposes. The Body Corporate usually has the responsibility for the management and upkeep of common areas of the property.
Borrower - A person using money that has been loaned to them by a bank or other lender or a person. Another name for a borrower is a debtor.
BPAY® - BPAY® is a service that allows people in Australia to easily pay their bills using their credit cards or from their bank accounts. BPAY® can be used on internet banking or phone banking. Most BPAY® payments are made over the Internet. BPAY® is registered to BPAY Pty Ltd ABN 69 079 137 518
Branch - A branch is like a bank shop where a bank's products and services are provided to their customers. In Australia bank branches are open for business during normal business hours (usually 9am to 4pm) and some also open on Saturdays.
Brick veneer - A type of building in which a structural timber frame is tied to a single brick external wall.
Bridging finance- Short term finance used when buying and selling houses to cover the gap between receipt of funds from sale of existing house and the payment of funds to purchase another house.
BSB - A BSB is a number which is like an electronic bank address in Australia. A BSB identifies both the bank and the branch of the bank in Australia. Each bank branch will have a BSB. Every bank account will have a BSB associated with it. When you are transferring money in Australia the BSB of the sending and receiving bank should be provided.
Building regulations - Designed to uphold the standards of public safety, health, and construction, these regulations are in place and have been formulated by responsible authorities to control the quality of buildings.
Building society- A financial services organisation which is similar to a bank but it is owned by members. Building societies were first developed so that they could lend money to their members for purchasing property or a business.
Capital Growth- The increase in value of an asset or investment i.e. the difference between the current values and the original purchase price. (Provided the result is positive, not negative)
Cash advance - This is a cash loan which is withdrawn from a credit card. Credit card issuers charge interest from the date when the cash advance is taken until it is paid back. A transaction fee may also be charged.
Cash - Money in the form of notes and coins.
Caveat Emptor - Latin for " Let the Buyer Beware " . This means that buyers of goods (in this case, landed property) are responsible to examine the goods ( the property being purchased) closely or read the fine print (to the contract) carefully before completing the purchase. Under common law this means that if someone is sold faulty goods he or she has no right to obtain compensation.
Certificate of Title - The document of title to the estate or interest in land also known as the ‘deeds’. It sets out the Crown description of the land, proprietorship and shows any registered interests such as mortgagees, charges and caveators. It also shows any restrictive covenants and easements which affect the estate or interest.
Chattels - Chattels are someone’s personal property. There are real chattels such as buildings and fixtures personal chattels such as personal goods and furniture etc.
Cheque account - An account offering you access to your money by writing cheques. You must make sure you always have enough money in your cheque account to cover the cheques that you have written. If you do not have enough money the cheque may be dishonoured (not paid) and you and the person who you gave your cheque to will be charged fees. In some cases this is considered illegal with serious penalties.
Cheque - A slip of paper that instructs a bank to pay a sum of money to the person (usually) named on the cheque. If you have a cheque account then you can write a cheque for a specified amount of money and give it to someone else, who will give it to a bank. That bank will ask your bank for the money from your cheque account and give it to the person (or company). If a cheque is made out to 'cash' or 'bearer', then whoever hands the cheque to a bank can exchange it for cash. A cheque crossed 'Not Negotiable' must be deposited into the bank account of the person named on the cheque.
Cleared funds - The amount of money in an account that is available for you to use. Cheques deposited into your account may take up to five working days before they become cleared funds and you can use them. During the five days the cheque funds are called uncleared funds.
Co-borrower - A person who borrows money jointly with you. Each individual is jointly and separately responsible for the repayment of the loan. This means that if one person does not pay the other person will be required to pay the full amount of the loan.
Common area - An area which is for use by many, not an individual. For example, home units have common areas such as stairs and driveways.
Company Title - This Title applies when a company owns the whole of the property. By purchasing shares in the company, the purchaser obtains an entitlement to occupy a particular part of the property. See your solicitor before buying these as they can be difficult to finance.
Comparison Rate - The Comparison Rate provides an indicative interest rate that takes into account certain costs associated with setting up a loan. This rate includes the nominal interest rate/s, loan approval fee, any other up front fees and known ongoing fees. The Comparison Rate does not include government and statutory fees, since these are standard across all loans regardless of the lender. It also doesn't include other fees and charges that are 'event based' and which may or may not apply throughout the term of your loan (for example, redraw fees and early repayment costs). Often a comparison rate will not take into account a broker negotiated rate, or a special discount on fees, so check with your broker first if it applies to your home loan.
Compound Interest - Interest which is paid on accumulated interest as well as the original principal invested.
Consumer Credit Code - The Consumer Credit Code is a set of rules that regulate certain types of lending and borrowing transactions in Australia. Lenders such as banks must tell you what your rights and obligations are in any transaction. Credit transactions made for business or investments are not governed by the Consumer Credit Code.
Consumer Price Index (C.P.I) - Measures the national inflation rate. The index is measured quarterly (December, March, June and September quarters) and reflects changes in prices for goods and services.
Contract of Sale - A written agreement which details the terms and conditions regarding the purchase or sale of a property. It is usually prepared by the vendor's agent, solicitor or conveyancer.
Contract - A written agreement that shows terms and conditions.
Conveyancing - The legal process where ownership of real estate is transferred from one party to another.
Cooling off period - A period of time, which may vary between 24 hours and 14 days (depending on the type of contract), during which a person/organisation can decide not to continue with a contract. There are conditions to the cooling off period - it is important to always read the contract and to not give away rights to a cooling off period. Cooling off periods are different in different states in Australia.
Credit card - This is a plastic card that gives you access to money that the bank has agreed to lend you for a short period of time. It is important to manage the amount of money that you owe on your credit card and be aware of the interest that you are paying on the outstanding balance of your credit card. See 'Credit limit' and 'Credit'.
Credit file - A file or report that is kept by an agency such as Veda Advantage which shows your credit history such as loan applications you have made, credit you hold, defaults on loans, how you have repaid credit in the past and bankruptcy. Credit files or reports are kept and maintained by credit agencies and may be accessed by banks and financial organisations to help them assess any application for credit you make with them. Credit reports can hold both negative and positive information about your credit history. If you have always paid your bills on time and you have never defaulted on a loan or credit repayments, your credit report may assist you to secure credit. In contrast, a negative credit file may make it difficult for you to borrow money from a lender.
Credit history - See Credit file.
Credit limit - The maximum amount that a bank will lend you for a loan or a credit card.
Credit rating - A person's credit rating is based on their credit file or credit history. A person who has a credit file or a bad credit history is likely to have a poor credit rating. Banks and financial organisations refer to credit ratings when considering applications for loans and credit cards. A person with a poor credit rating may find it very difficult to obtain a loan or a credit card. Credit providers obtain this information through credit reporting agencies, such as Baycorp Credit Advantage.
Credit union - A co-operative organisation that provides loans to its members.
Credit - Credit can have different meanings.
It can be a transaction on a bank account that shows money going into the account.
It can mean the amount of money you have. If your bank account is $200 in credit, it means you have $200 in the account. Credit also means buying goods and services now, but paying for them later. For example, buying something with your credit card and paying it back later, or taking out a home loan to buy a house. See 'Credit card', 'Credit limit' and 'Debit'.
Creditor (secured) - A creditor who holds an asset belonging to the borrower/debtor as security for the repayment of the loan. Loans for the purchase of property are usually secured by the property. If the borrower/debtor fails to repay the loan, the secured creditor has the right to sell the secured asset in order to recover some or all of the money owed. Any assets or property which is provided as security for a loan must be listed in the loan contract.
Creditor (unsecured) - A creditor who has provided a loan to a debtor and there is no security. Credit cards are usually unsecured. Therefore, if the debtor fails to repay the loan, the creditor may need to take the borrower/debtor to court to recover the money owed.
Creditor - Someone who is owed money. The opposite to debtor. For example, a bank that lends money, a department store that lends money to customers in the form of store credit cards, or a telephone company that is owed money from customers are all called creditors.
Customer Identification Process - All individuals or entities seeking banking services need to verify their identity through a Customer Identification Process (CIP). Identification documents individuals could be asked to provide include passports, birth certificates, driver licences, utilities bills, Medicare cards etc.. The types of documents you might be asked to provide to verify your identity may vary for different legal entities, e.g. companies will be verified using a company search. See also 'AML-CTF'.
Debit card - A card that gives direct access to a bank account through ATM machines and EFTPOS. See also ATM card.
Debit - Most commonly, a debit is a withdrawal from a bank account.
Debt to Equity Ratio - This is the amount of the loan compared to the value of the property or asset purchased with the loan funds, expressed as a percentage. For example, a loan of $400,000 to buy a property worth $500,000 results in a debt to equity of 80%. Banks will place a limit on the debt to equity ratio depending on things such as the type of property, the location and the financial position of the borrower. Also known as Loan to Value Ratio (LVR).
Debtor - Someone who owes money. The opposite of creditor.
Debts (liabilities) - A debt is money that is owed. Another name for a debt is a liability.
Default - When you fail to meet the terms or requirements of a signed contract there is a default. For example, not making your scheduled repayments on a loan or not making them on time.
Deposit - An amount of money put into a bank account or money that is left with someone or a company to secure the purchase of an item.
Deposit Bond - A financial instrument commonly used in Australia as an alternative to a cash deposit. Deposit bonds facilitate residential or commercial property purchases.
Direct debit - A payment that is made directly from a bank account and is usually an electronic payment. A direct debit is usually a transaction that has been requested by the account owner to take place at a specified time and on a specified date. For example, in Australia companies often use direct debit for payroll processing.
Drawdown - The disbursement of loan funds provided by the Bank, normally at settlement time, but sometimes throughout your build or construction loan.
Easement - A right that an individual enjoys over land belonging to another. e.g. rights of way, rights of light, rights of support.
EFTPOS (Electronic Funds Transfer at Point of Sale) -This facility lets you use your ATM card (debit card) to purchase goods, pay for services, and withdraw cash at a supermarket, shop, or restaurant. Money is taken out of your bank account immediately to pay for the services.
Electronic banking - A way of banking that allows withdrawals, deposits and transfers to be completed and account information to be obtained electronically using processes such as telephone or Internet banking, ATMs or EFTPOS.
Encumbrance - A legal claim on a particular property. e.g. mortgage.
Equity - The part of an asset (house) which you own over and above the amount borrowed from the Bank which has a mortgage over the house property.
Expenses - The amount it costs you for your everyday living including food, transport, housing, clothing and entertainment.
Fittings - Things that can be removed from a property without causing damage to it, such as drapes.
Fixed rate loan - A loan priced at a fixed rate of interest for a set term. Interest rate and payments remain the same during the fixed term of the loan regardless of interest rate changes in the market.
Fixed term loan - A loan that you must repay within a certain time called the term.
Fixtures - Things that are affixed to and form part of the property. e.g. built - in air conditioning.
Floating loan - See 'Variable interest' and 'Fixed interest'.
Footing - The footing supports the building on its foundation.
Foreign exchange - A foreign exchange service changes one currency into another currency. The currency can be in cash or cheques, or as part of a payment.
Foundation - The compact sand, gravel, hard clay or rock upon which the footings rest.
Freehold - Common term used for an 'estate in fee simple'. This means that the proprietor of the land has absolute ownership of the property.
Frequent flyer program- A Frequent flyer program is a product or service offered by many airlines to reward customer loyalty. Sometimes points are also called "miles". Normally, once membership of the program has been obtained, the further you fly and the more money you spend with an airline or a group of airlines, the more points you earn. You can sometimes earn points when you hire a car and when you book hotels. Some credit cards also give you points for the money you spend with your credit card. Your points may be redeemed to receive free flights, to get into airport lounges, and to book hotels.
Funds transfer - Moving funds from one bank account to another.
Guarantee - With regard to a warranty: a promise or an assurance, especially one given in writing, about the quality or durability of a product or service. With regard to a loan: a legally binding promise given by a person (the guarantor) to pay a debt, if it is not paid by the borrower. It can be a secured or unsecured guarantee.
Guarantor - A person or company that provides a guarantee.
Home loan - A loan to finance the purchase of property/real estate to be used for the purposes of your home. It is important to only commit to a home loan amount that you are comfortable you can pay back, even if interest rates rise and/or property prices go down. See also 'Mortgage'. (Acronyms used HL, H/L)
Home units - A grouping of residential dwellings. They share common areas (e.g. gardens, storerooms) and are commonly registered under Strata Title.
Honeymoon rate - An initial special low interest rate for a specified period on a loan. It gives you an opportunity to make further repayments during the honeymoon period to reduce the amount owing on your loan. The loan will usually change to a higher variable interest rate at the end of the honeymoon period.
Income - The amount of money you earn, such as wages and salaries, rental income, interest and government allowances. For a business or a company, income is equal to revenue less expenses.
Interest only - An 'interest only' loan means that your repayments only go towards repaying the interest for a specified period, rather than repaying the principal amount of the loan. For example, paying your loan "interest only" means that the principal balance stays the same. Paying interest only can be good if you need extra money for buying furniture or improving your home. It is also popular for investment loans. (Acronymns used IO, I/O)
Interest - A charge on borrowed money or the return earned on funds invested.
Internet banking - Using the internet to manage your banking and for conducting transactions. In Australia the internet is very popular for checking bank account and credit card balances and making transactions such as transferring money, changing your personal details, paying bills and applying for new products and services. You will need to register with your bank to use their internet banking.
Inventory - A listing of items that could be included with a property, e.g. furniture, furnishings, dishwasher and other moveable items.
Investor - A person who lends money or buys assets or businesses and with the intention of making a profit.
Investment Home loan - A loan to finance the purchase of property/real estate to be used for the purposes of renting out to others. In Australia, these loans can, subject to tax advice, be claimed on for their interest as an expense, offsetting the income the property generates. Contrary to popular belief, it is not the property that the loan secures that makes your investment home loan an investment, it is the original purpose of the funds used that makes the loan claimable for tax purposes, as an investment home loan. It is important to only commit to a home loan amount that you are comfortable you can pay back, even if interest rates rise and/or property prices go down. See also 'Mortgage'. (Acronyms used IHL, Inv H/L)
Invoice (tax) - A bill that needs to be paid and also includes tax.
Invoice - In Australia an invoice is a bill that needs to be paid. After a bill has been paid a receipt will be issued/received. See BPAY®.
Joint debt - When two or more people borrow money together or incur a debt together. A lender can recover payment of the whole amount from either party, unless the contract limits the amount each party must pay. This is not affected by any private agreement held between the borrowers, nor is it affected by any family law property agreement.
Joint tenants - The holding of land by two or more persons where there is a right of survivorship i.e. on the death of one joint owner, the land as a whole vests in the survivors and can only be disposed of by will by the last surviving owner.
KYC (Know your customer) - This is the process that a bank should generally undertake so that it is providing the best service and advice to its customers. KYC is most important for private and premium bank customers that may have more complicated banking and investment needs. In order to meet KYC requirements banks may ask for information such as your employment details, salary, assets and liabilities.
Land tax - Based on the property value, it is a State Government tax which is payable by the owners of the property.
Lease - An agreement between two parties under which one is granted the right to use the property of the other for a specified period of time in return for a series of payment by the user to the owner.
Lease - An agreement between two people/parties where one party is granted a legal right to use or occupy the property of the other party for a specified period in return for payment.
Leasehold - The right to use and have exclusive possession (but not ownership) of real estate for a specified period and subject to the fulfilment of certain conditions as recorded in a lease agreement.
Liabilities - Debts owed by a company or individual.
Liability - See 'Debt'.
Life events - These are important events or milestones in your life. Some life events are predictable or planned, such as starting a family or retiring, whereas others are not, such as sudden illness or losing your job.
Loan - Money lent to a person for an agreed period of time (called the term). By the end of the term, the money must be repaid, often with interest added. See mortgage, interest and term.
Loan approval fee - This is a fee payable once in relation to the approval of a loan by a lender. The fee usually relates to document search costs, valuations and loan processing.
Loan Repayment Capacity - Your monthly fixed debt commitments divided by your monthly gross income expressed as a percentage.
Loan to Valuation Ratio - The amount of the loan financed as a proportion of the property value, expressed as a percentage.
Lump sum payment - A single payment of money towards repaying a loan, usually for a larger amount. This is in addition to your regular scheduled repayments.
LVR (Loan to Value Ratio) - See Debt to Equity Ratio.
Managed funds - An investment fund that pools together money that has been contributed by many investors for the purposes of investing the total amount in different investments such as shares, listed property trusts, bonds and cash.
Maturity - The end or expiry of an investment or a loan.
Minimum repayment - The minimum amount to be paid on an invoice or a loan.
Money order - Similar to a bank draft, a money order is an order for the payment of a specified amount of money, usually issued and payable at a bank or post office.
Mortgage broker - A person or company that will assist you to find the most appropriate home or residential investment loan for your situation. Mortgage brokers may charge you a fee for their services or be paid a commission from the lender.
Mortgage - A document drawn up between a borrower and lender, giving the lender a conditional right to property as security for the money lent.
Mortgage - A document drawn up between a borrower and lender, giving the lender a conditional right to the property held as security for the repayment of the money lent.
Mortgagee - The one who lends the money to purchase the goods or property.
Mortgagor - The one who borrows the money to purchase the goods or property.
Multiple listing - This happens when a person selling a property gives it to more than one agent. The first agent who has a buyer ready, willing and able to meet the price and terms acceptable to the vendor, receives the commission for the sale.
Needs - The basic things that you must have in your life so you can live comfortably such as food, clothing, and a home.
Negative Gearing- A way of obtaining tax advantages through an investment where the deductible expenses (typically including interest) exceed the income derived from the investment.
Net worth - Your assets less how much you owe on your assets is your net worth. In order to meet basic needs and life events, an increase in your net worth should be a basic financial goal of most people.
Offer to purchase - A written offer of a specified price for a specified property. The offer may be firm (no conditions attached) or conditional (certain conditions apply).
Offset account - A bank account that is linked to a nominated home or residential investment loan. The balance of the offset account reduces the amount of interest
payable on your linked loan. This does not mean that the loan does not have to be repaid, only that the amount of interest that is otherwise payable may be reduced. You will be able to access your money in an offset account.
Offshore account opening (Overseas account opening) - The process of opening an account in another country. An example of offshore account opening is opening an account in Australia when you live overseas or before you move to Australia.
Online account opening - The process of opening an account on the internet. In Australia, most bank accounts, credit cards and loans can be opened or applied for over the internet if you are already a customer of the bank which is offering the product or service. If you are not a customer of that bank, you may have to visit a branch in order to conduct the Customer Identification Process (CIP). See 'Customer Identification Process' and 'Offshore account opening'.
Original documents - Paperwork or documents that are not a copy or reproduction ie. not photocopied or faxed and all signatures on the document are original.
Overdrawn - When an amount of money is taken out of a bank account which is greater than the balance of the account. Fees will usually be charged for overdrawn accounts and dishonoured cheques.
Overdue - An amount of money that has not been paid by the due date and is still owed.
Over-the-counter - Any banking activity that is done in a bank branch.
Pay anyone - A term that means to transfer funds to another person or a business by using internet or phone banking.
Per annum (pa) - This means for the year. For example, if the interest rate on a personal loan is 9% pa the borrower must pay 9% in interest each year on the balance that is still owing.
Period - The same as time or term.
Personal Identification Number (PIN) - A number used as a security access code for your bank accounts when you use internet banking, phone banking, an ATM or EFTPOS. You should be very careful with your PIN and never write it down, never give it to someone else, and change it often.
Personal loan - A type of loan that is used for things like buying a car, a boat or furniture. Money is lent to you for a fixed period, at a variable or fixed rate of interest with repayments calculated at the start of the loan. Personal loans are popular for both secured and unsecured loans of $2,000 and more and should be considered instead of using your credit card for expensive purchases.
Phone Banking - In Australia, phone banking is another popular way to check bank account and credit card balances and perform transactions, transfer money, change your personal details, pay bills and apply for new products and services. You will need to register with your bank to use phone banking.
Plan - This shows the ground plan design, elevation of house, number and size of rooms, kitchen, bathrooms, laundry layout and position of the house on the land.
Principal - For an investment, the principal is the amount of money invested. For a loan, the principal is the amount of the loan (the face value of the loan) upon which interest is then calculated and charged.
Principal - The face value amount of a loan on which interest is calculated.
Principal & Interest - the type of repayment where you repay not just interest, but principle, thereby reducing the loan size (amortizing) to nil over time. (Acronyms P&I, PI)
Private banking - A service that most banks provide to their high net worth customers with more demanding, sophisticated or complicated banking requirements. Most banks will provide their private bank customers with relationship managers which have a personal knowledge of their customer's financial position and banking requirements. See also 'Retail banking'.
Private treaty sale - Sale of property via an agent through private negotiation and contract.
Rebate - An amount that is given back, returned or refunded.
Receipt - A record showing that a payment has been received or an invoice has been paid. Receipts are usually paper but may also be in electronic form for things that are bought using the internet or over the phone. Receipts usually have a reference number and show the amount of tax that is included in the payment. A receipt is important proof that goods and services have been paid for. See also 'Invoice'.
Redraw - A redraw facility gives you easy access to the money that you have repaid on your loan in excess of your scheduled repayment amounts. This facility may not be offered by all banks and may not be automatically available. Fees may apply. It is a convenient way to borrow money back from a bank without having to apply for another loan. See also 'Equity'.
Reducible interest - Loan interest that is calculated on how much you owe each day. As the amount you owe gets less you pay less interest.
Reducible - Something that can be brought down, or prices or costs that can be lowered.
Refinance - Paying off an existing loan with the proceeds from a new loan usually provided by a different lender, and may be done to obtain a lower interest rate or to consolidate debts into one loan.
Repossession - A lender may be able to claim or take possession of any property, assets or investments that have been provided as security for the repayment of a loan in circumstances where the borrower cannot repay the loan.
Reserve price - The minimum price a seller has specified he/she will accept at auction.
Retail banking (personal banking) - Services provided to meet your personal banking requirements. See also 'Private banking'.
Right of Way - A person may have the right to cross your property to gain access to their own property, or there may be a general pathway across the land. This is an example of an easement.
Risk grade - When lending money, a 'risk grade' is calculated so that a bank can assess how secure or risky a loan or investment is likely to be. The higher the risk grade given to an investment or the loan or the borrower, the higher the annual percentage rate that may be charged by the bank.
Roof pitch - The slope of the roof.
Savings account - An everyday bank account where your savings can be deposited and easily withdrawn.
Savings - Money that you put away for use at a later time. For example, you may save to buy a car or a house in the future. When a bank lends you money, they like to see a long history of steady saving. Saving is a good way to make sure you are able to meet your needs and the requirements of different life events. See also 'Term deposits'.
Scams and scammers - A person or an organisation that is not honest, lies or cheats customers or consumers. For example, internet banking fraud, door-to-door con artists and the phishing scam.
Secondary cardholder - If you allow another person to use an ATM card or credit card that is linked to your account, they are a secondary cardholder. The secondary cardholder is not responsible for any money owed on a credit card. The credit limit on the card does not change or double when an extra card holder is added.
Security - An asset offered by a borrower to a lender as security for the repayment of a loan. The security is aimed at ensuring that the lender is able to recover the full amount of the loan (selling the asset) if the borrower can't repay the loan. See 'Assets (secured)'.
Semi-detached - Two houses joined together with a common wall or walls; they are usually registered under Torrens Title.
Settlement date - The date on which the sale of the property is finalised; money and security changes hands and the new owner takes possession.
Simple interest - Interest is paid on a set principal only and not re-invested.
Sole agency - One agent or agency has the exclusive rights to sell a property.
Spending leak - Money that you spend but you don't notice. For example a daily cup of tea or coffee only costs $3 a day but over a year this would cost you $600.
Staff-assisted withdrawals - When you withdraw money from your bank account with the help of a teller in a bank branch.
Stamp duty - A duty (like a tax) charged by Australian states on certain transactions. For example, stamp duty will be payable on the purchase of a property or the transfer of certain other assets. The rate of stamp duty payable is different in each state.
Statement - A record summarising all the transactions that have occurred on your bank account (or any other account) and any fees charged or interest paid each month or each quarter. In the past, statements were on paper and mailed to customers, but most Australians now prefer to use the internet to check their accounts and print statements at home or at the office. Bank books are not often used in Australia.
Strata Title - Most commonly used for flats and units, this title gives you the ownership of a small piece of a larger property. You have sole right to a particular unit and can lease, sell or legally dispose of your unit as you desire. You also have an undivided share of the common land. You also become a member of the Body Corporate which controls maintenance.
Stratum Title - This title gives you legal ownership over a piece of property and also gives you a share in the company set up to look after the common areas of the flats or units you live in. It does not include "air space".
Superannuation - An investment vehicle which operates primarily to provide benefits for retirement.
Superannuation - This is Australia's mandatory pension scheme, or saving for retirement. An employer is required to contribute a proportion of a person's salary or wage to a superannuation fund on behalf of the employee. The money in the superannuation fund is invested with the aim of generating returns. When Australians retire the money that is in the superannuation fund is made available to them in a lump sum or in small amounts over their planned retirement.
Survey - Shows boundaries of the land and location of the building.
Tax file number (TFN) - A nine digit number issued by the Australian Taxation Office to individuals and companies to identify them for taxation purposes. Every Australian resident, and registered company should have a TFN. A TFN is different to an ABN. See also 'ABN'.
Teller - The person in a bank branch that is there to help you with your banking.
Tenants in common - Each tenant (or owner) owns a specified share of the land. Shares can be equal or unequal. Unlike joint tenants, there is no right of survivorship. Each share may be dealt with by sale, bequest, gift etc., as for sole ownership.
Term deposit - A banking product that offers a slightly higher annual percentage rate than savings accounts payable on the amount invested. A term deposit has a fixed term (which can vary) during which the amount invested cannot be accessed.
Term Deposit - Money invested for a fixed term at a fixed rate of interest which applies for the duration of the deposit.
Term - A period of time. For example, the length of time for which a deposit is made, or the time in which a loan must be repaid.
Terms and conditions - Terms and conditions set out the specific obligations of each party in respect of a transaction or product. They outline how a bank product or service can be used and should be read and understood before the product or service is used. Terms and conditions are available from your bank and may also be provided in booklets called Product Disclosure Statements.
Title search - A Search undertaken of records registered at the land titles office to confirm interests in land of a particular land property. A title search show interests such as proprietor, mortgagees, charges, and caveators. The search also reveals any restrictive covenants and easements which affect the estate or interest.
Torrens Title System - Title is under a system given the name of its South Australian author in 1858. The principles of this system are expressed in State Land Title and Real Property Acts and any act or acts amending or re-enacting them. This system gives a registered proprietor of an interest in land a perfect and unchallenged titles, subject only to the encumbrances and conditions mentioned on the title certificate.
Townhouse - Detached or attached housing forming part of a cluster of homes sharing some common grounds. Normally has own private entrance and private areas. Can be single or multi storey.
Transactions - The name given to movements of money such as deposits and withdrawals or transferring money between bank accounts.
Transfer of Land - A document registered in the Land Titles Office which recognises and acknowledges change of property ownership. This is also noted on the Certificate of Title.
Transfer - To move money from one bank account to another bank account.
Trust account - An account that is usually used by lawyers, accountants and other professionals such as stockbrokers to identify and control their clients' money.
Uncommitted Monthly Income - Your available net income once all monthly expenses including loan repayments have been taken into consideration. Also known as your surplus.
Unconscionable conduct - Behaviour that is considered unreasonably excessive, unfair or unjust.
Unencumbered - A property free of encumbrances, convenants, restrictions.
Utilities - A business that provides an essential service, such as the provision of electricity, water or public transport, generally under government regulation. Utility bills or invoices are often paid by using BPAY®.
Valuation - A report written by a registered valuer, detailing their opinion of the property value.
Variable interest - A type of interest where the rate may go up and/or down during the term of the loan.
Variable Rate Loan - A loan for which the interest rate changes as conditions in the money market change.
Vendor - One who offers a property for sale.
Wants - The things that are not essential to your survival, such as a mobile phone, candy and chocolate, a CD or DVD or designer clothes for example. See 'Needs'.
Will - A legal document stating how you wish your possessions to be distributed after your death.
Withdrawal - To take money out of a bank account, for example, using an ATM, EFTPOS or by cheque.
Zoning - Zonings fall into many categories, the two most common being commercial and residential. Local Councils and/or Planning Authorities control the use of land and designate it as such.
