Glossary

Appreciation – An increase in property value.

Asset – Anything of monetary value that is owned by a person.

Body Corporate – Maintains units and townhouses on behalf of the owners.

Borrowing Costs – Costs associated with your mortgage.

Builder – Person building the property, may be the vendor.

Buyer’s Market – When the demand for property is less than supply.

Capital Gain – The gain on the sale of a capital asset.

Cash Flow – A measure of cash inflow and outflow from a business. Positive cash flow means more money is coming into the business than is leaving it. Negative cash flow is the opposite.

Collateral – An asset (such as a car or home) that guarantees and secures the repayment of the loan.

Commercial Property – Property intended for use by all types of retail and wholesale stores, office buildings, hotels and service establishments.

Common Property – Land, amenities or areas of a building within a strata title property that are shared by all owners eg a driveway.

Completion – Council building inspector’s final ok.

Contract of Sale – An agreement in writing setting out the terms and conditions relating to the sale or purchase of a property.

Conveyancing – The legal process for transferring ownership of real estate.

Default – Failure to meet debt payments on a a due date.

Deposit Bond – Saves paying a cash deposit.

Depreciation – A decline in the value of a property.

Developer – Develops the site, may or may not be the vendor/builder.

Disbursement – Solicitor’s incidential costs involved when dealing with a client on behalf of the lender eg searches, certificates, pest reports etc

Dual Occupancy – A block of land which is zoned so that two distinct dwellings are permitted to be constructed.

Equity – The amount of an asset actually owned. Equity is the difference between the market value of the property and the amount still owed on its mortgage.

Fixed Rate Mortgage – A mortgage which the interest rate does not change during the term of the loan.

Interest-Only Loans – A loan where the principal is paid back at the end of the term and only interest is paid during the term. These loans are usually for short period, typically 1 – 5 years.

Internal Rate of Return (IRR) – The total rate of return generated by an investment over its life or a given timescale, taking into account sale and purchase prices and all cash flows associated with the holding.

Investment Property – A property that is leased out to produce income.

Joint Ownership – Equal ownership.

Joint Tenancy – A form of co-ownership that gives each tenant equal share and rights in the ?property,if one party dies, it automatically goes to the other partner.

Landlord Insurance – Protection against a bad tenant.

Lenders Mortgage Insurance (LMI) – This is insurance taken out by the lender – but paid for by the borrower – to cover themselves if the borrower defaults on the loan.

Loan Application Fee – Establishment fee – This is a fee paid to the lender for processing a loan.

Loan to Value Ratio ( LVR) – The ratio of the amount lent to the value of the property.

Low-Doc Loan – A loan where documents are needed to prove an applicant’s income.

Market Rent – The rental property offered on the open market.

Market Value – The price at which a seller is happy to sell and a buyer is willing to buy.

Mortgage – The amount of monet owed to the bank.

Mortgage Protection Insurance – Covers borrower’s loan repayments in the event that they are not able to meet them eg through illness or redundancy.

Negative Gearing – Where the return on an investment is not sufficient to cover the costs on the investment eg property maintenance and interest on the loan.

Offset Account – A savings account linked to your mortgage in such a way that the interest earned on your savings is applied to reduced the interest payable on your mortgage.

Off The Plan – To purchase a property before it is completed, having only seen the plans.

Principal & Interest (P&I) – A loan in which both the principal and interest are paid during the term of the loan.

Private Sale – A property sale where the buyer negotiates directly with the seller.

Property Manager – Controls letting agents

Refinance – The process of paying off one loan with the proceeds from a new loan using the same property as security.

Seller’s Market – When the demand for property is greater than supply.

Semi-detached – Also called a duplex. A type of construction where two buildings are attached together by a common wall.

Settlement – Bank pays builder/vendor.

Sinking fund – Quarter levy against possilble future repairs and maintenance.

Stamp Duty – A state tax on conveyance or transfer of real property calculated on the total value of the property (including chattels). This calculation varies from state to state.

Standard Variable – A variable rate home loan with comprehensive features.

Strat Title – A title to a unit or lot on a plan of subdivision associated with townhouses, units and blocks of flats and based on the horizontal and vertical subdivision of air space.

Subdivision – A tract of land divided into individual lots for a housing development.

Tenants in Common – A ownership of property, which is willable by each partner.

Title – Registration showing the ownership of property.

Title Issued – Title Office approval of Council Plans.

Vacancy Rate – Percentage of the year without a tennant.

Valuation – A written analysis of the estimated value of a property prepared by a qualified valuer.

Vendor – The owner selling the property.

Yield – The interest earned by or returned to an investor from an investment.

Zoning – Local authority guidelines for the permitted use of land.

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