Lending Terms – Griffin Professionals

Term	Definition
AAPR (Average Annualised Percentage Rate)	An annual percentage rate (APR) is the annual rate charged for borrowing or earned through an investment. APR is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan. This includes any fees or additional costs associated with the transaction but does not take compounding into account.
Amortisation period	The period of time a loan is calculated over (and repaid).
Application fee	The fee charged by a lender to cover or partially cover the lender's costs of setting up or establishing the loan.
Arrears	Payments that are overdue or payments that are to be made at the end of a period.
Asset Lender	A lending institution that lends finances based on the value of the asset, which will be held as security to the lender.
Assets	A resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide a future benefit (money, property, goods).
Assignment	Legal transference of a right or a title to a property, to another party.
Banker's Lien	The right of a Bank to retain a customer's securities until a liability to the Bank is discharged.
Borrower	A party, parties, or entity borrowing money to purchase, payoff, or refinance a product or effect.
Buyer's Agent	Individual to act on behalf of the buyer to find and negotiate on properties the buyer wishes to buy.
Capital	Capital is a term for financial assets or their financial value, as well as the tangible factors of production and facilities.
Caveat	Caveat is a Latin term that means "let him beware." There are many types of caveats in law and finance, with the most common being "caveat emptor," meaning "let the buyer beware," and "caveat venditor," meaning "let the seller beware." The legal applicability of these concepts can determine civil and criminal liability.
Charge (over property)	The term used to describe any right established over a borrower's property to secure a debt or performance of an obligation.
Collateral Security	Collateral is a property or other asset that a borrower offers as a way for a lender to secure the loan. If the borrower stops making the promised loan payments, the lender can seize the collateral to recoup its losses.
Comparison Rates Schedule (CRS)	Comparison Rate Schedule. The schedule displayed by a lender that give the annual percentage rate and the respective Comparison Rate, for the lender's loan products for specific amounts over specific terms.
Consumer Credit Code	Legislation designed to protect the rights of the individual (personal consumer) by ensuring banks and other financial institutions all adhere to the same rules when providing personal, domestic or household credit. It should provide borrowers with complete and honest information. Also known as the Uniform Consumer Credit Code or UCCC.
Contract of Sale	A written agreement outlining the terms and conditions for the purchase or sale of property.
Conveyancing	Conveyance is the act of transferring an ownership interest in property from one party to another. Conveyance also refers to the written instrument, such as a deed or lease, that transfers legal title of a property from the seller to the buyer.
CRS	Comparison Rate Schedule. The schedule displayed by a lender that give the annual percentage rate and the respective Comparison Rate, for the lender's loan products for specific amounts over specific terms.
Daily Interest	Interest calculated on a daily basis that varies according to daily account balance.
Debtor	A debtor is a company or individual who owes money also often referred to as a borrower.
Deed	A deed is a signed legal document that transfers a title to a new holder of a property granting them the privilege of ownership.
Depreciation	Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life and is used to account for declines in value.
Direct Debt	Where the Lender debits (deducts) a payment from client's bank, credit union or building society account.
Disbursement	Disbursement is the act of paying out or disbursing money. Examples of disbursements include money paid out to run a business, cash expenditures, dividend payments, the amounts that a lawyer might have to pay out on a person's behalf in connection with a transaction, etc.
Drawdown	A drawdown is the peak-to-trough decline during a specific recorded period of an investment, fund or commodity security.
DSR (Debt Service Ratio)	Debt Service Ratio is a measurement of the cash flow available to pay current debt obligations.
Encumbrance	An encumbrance is a claim against a property by a party that is not the owner. An encumbrance can impact the transferability of the property and restrict its free use until the encumbrance is lifted. e.g. Mortgages
Equity	Generally used to denote the financial interest of a person in a property or business enterprise, e.g. a person's equity in his house is the difference between its value and the amount still owed to a Lender. A person's overall equity refers to his net financial worth, or the difference between what he owns and what he owes (i.e. Assets - Liabilities = Equity).
Estate	An interest in land.
Exchange	The legal point of time when the vendor and the buyer swap documentation with a view to settlement.
Fittings	Items that can be removed from a property without causing damage to it eg, carpet and curtains.
Fixed Interest	A fixed interest rate is an interest rate on a liability, such as a loan or mortgage, that remains the same either for the entire term of the loan or for part of the term.
Garnishee Order	A court order taken out by a creditor on a person's employer or banker for the deduction of funds from his wages or bank account to repay a debt.
General Law System	System whereby all dealings on a property are made in the form of conveyances, whether the transaction is a sale, a mortgage, a reconveyance, etc. Under this system the mortgage is in fact a transfer of ownership. When a conveyance is prepared it forms part of the chain of title and must be carefully preserved in order to prove the "root? to title.
General Lien	Sets out in writing the Bank's right to retain property until a debt is paid. Includes Power of Attorney and other clauses generally contained in Bank security forms.
Gross income/profit	Gross income/profit is an individual or company's total pay/revenue before taxes or other deductions. This includes income from all sources and is not limited to income received in cash, but can include property or services received.
Guarantor	A guarantor is a person who guarantees to pay for someone else's debt if he or she should default on a loan obligation. A guarantor acts as a co-signer of sorts, in that they pledge their own assets or services if a situation arises in which the original debtor cannot perform their obligations.
Holding deposit	A refundable deposit based on the goodwill of the buyer to go ahead with the purchase.
Indemnity	Indemnity is compensation for damages or loss, and in the legal sense, it may also refer to an exemption from liability for damages. The concept of indemnity is based on a contractual agreement made between two parties, in which one party agrees to pay for potential losses or damages caused by the other party.
Instrument	An instrument is a tradable asset or negotiable item such as a security, commodity, derivative or index, or any item that underlies a derivative. An instrument is a means by which something of value is transferred, held or accomplished.
Interest	The Lender's charge for the use of funds or the return on deposited funds.
Interest only loans	A loan where the principle is paid back at the end of the term and only interest is paid during the term. These loans are usually for a short period of time, 1 to 5 years.
Joint and Several Liability	The Bank's joint account authorities, guarantee forms, etc are framed to ensure that joint account holders with debts due to the Bank of joint guarantors liable to the Bank shall be SEVERALLY liable, (i.e. individually), as well as JOINTLY. With Joint and Several Liability a creditor has as many rights of action as there are debtors; he can sue them jointly or severally until he has obtained payment, and an unsatisfied judgment against one debtor will not be a bar to an action against the others.
Joint Tenancy	Joint tenancy is a legal arrangement in which two or more people own a property together, each with equal rights and obligations.
Liability	Legal financial debts or obligations that arise during the course of business operations. Liabilities are settled over time through the transfer of economic benefits including money, goods or services.
LMI (Lenders Mortgage Insurance)	Lenders mortgage insurance (LMI) is a one off insurance premium that has a purpose of protecting the lender in the event that you default on your mortgage.
Loan	A loan is money, property or other material goods given to another party in exchange for future repayment of the loan value amount, along with interest or other finance charges. A loan may be for a specific, one-time amount or can be available as an open-ended line of credit up to a specified limit or ceiling amount.
LVR (Loan to Value Ratio)	Loan-to-value ratio (LVR) is an assessment of lending risk that financial institutions and other lenders examine before approving a mortgage. Typically, assessments with high LVR ratios are higher risk and, therefore, if the mortgage is approved, the loan costs the borrower more.
Maturity	The date on which the principal is returned to the investor.Sometimes paid periodically during the lifetime of the deposit, or at maturity.
Mortgage	A mortgage is a debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments. Mortgages are used by individuals and businesses to make large real estate purchases without paying the entire purchase price up front. Over many years, the borrower repays the loan, plus interest, until he or she owns the property free and clear.
Mortgagee	The Lender of the funds.
Mortgagor	The person borrowing money in the terms of the mortgage.
Negative Gearing	Gearing your investment so that the cost to maintain it (loan repayments, council rates, maintenance etc) out weigh the income produced by the investment, leading to a reduction in taxable income.
Net income	The income that is received by an individual AFTER TAX has been taken out.
Offset account	An offset account is similar to a savings or transaction account that’s directly linked to your home loan. It can help reduce the amount of interest you pay on your loan and help you pay it off sooner. The more money in your offset account, the less interest you'll have to pay. Basically, they work by offsetting up to 100% of the balance of the linked savings or transaction account against the balance of the linked loan.
Off the plan purchase	Buying a property from the plans only, not the finished product.
Portability	Where a new property can be used as security for an existing loan, i.e. when the loan is transferred to a new security property without needing to repay the loan, reapply, or restructure.
Power of Attorney	A written authorisation to another person, or persons, to perform certain acts for the signer, as if they were the signer.
Principal	The capital sum borrowed on which interest is paid during the term of the loan.
Principal & Interest Loan	A loan in which both the principal and the interest are paid during the term of the loan.
Property	A person's property is "what is he or she owns to do what they like with." It may be tangible or intangible, and may be given a monetary value (e.g. house, car, goodwill). Property may be classed 'real' which relates to land or interests in land (except leaseholds) and buildings, etc or 'personal', which relates to other kinds of property such as cars, bank accounts, leasehold interests in land.
Redraw	A mortgage with a redraw facility involves you overpaying on your repayments, which then allows you access to your banked overpayment funds, which then accrue interest over time.
Refinancing	To replace or extend an existing loan with funds from the same institution or another.
Search	An examination to confirm that the vendor is in a position to sell the property and that there are no encumbrances on the property.
Securitisation	Is the packaging of cash flow producing assets into a marketable security, e.g. property, roads, bridges, etc. The process where mortgage backed securities (in the form of bonds) are sold directly into the capital markets. Investors in the bonds comprise of Superannuation funds as well as other major institutions.
Security	An asset that guarantees the Lender their borrowings until the loan is repaid in full. Usually the property is offered to secure the loan.
Serviceability	Ability of borrower to make and meet repayments on a loan, based on the borrowers expenses and income(s).
Settlement	Finalisation of payment by the new owner, and assumption of possession.
Surety	The guarantee of the debts of one party by another. A surety is the organization or person that assumes the responsibility of paying the debt in case the debtor policy defaults or is unable to make the payments.
Tenants in Common	Property in the names of two or more persons and in which each has a separate and distinct share. When one person dies his share is not passed to the survivor(s) but becomes part of his estate for disposal according to his will.
Term of the loan	The lifespan assigned to an asset or a liability, over which the value of the asset/liability is expected to either grow or shrink, depending on its nature.
Third Party Security	Security provided for a mortgage by a third party (some one different from actual borrowers) who is legally different from the borrower or debtor.
Title Deed	Registration showing the ownership of a property
Title Search	Process to ensure that the vendor has the right to sell and transfer ownership.
Unencumbered	A property free of liabilities, restrictions or mortgages.
Valuation	A report as required by the Lender, detailing a professional opinion of a property's value.
Variable Interest Rate	A rate that changes in accordance with the rates in the marketplace.
Variation	Changing any part of the original loan contract.
Vendor	Person selling a property who is the current owner.
Discharge/ Termination/ Settlement fees	These may be charged when you pay out your mortgage in full to cover the final costs of the completion of the mortgage process, such as paperwork and other logistics.
Early discharge/ Early exit/ Deferred establishment/ Deferred application fees	If you pay out your home loan early, usually within 3-5 years after the loan is established, there is a fee involved. The law limits these fees to the recovery of a credit provider's loss caused by the early termination.
Refinancing fees	When you refinance your home loan you can be charged a range of fees by your new lender. Just remember that different lenders charge different fees and some may be negotiable.
Establishment/ Up front/ Start up/ Set up fees	An establishment fee is a one-off payment when you start your loan. If you are not charged an establishment fee, you may pay higher ongoing fees.
Rate lock fees	A mortgage rate lock is an agreement between a borrower and a lender that allows the borrower to lock in the interest rate on a mortgage over a specified time period at the prevailing market interest rate. The lender may charge a lock fee, which the borrower must pay if he or she does not lock the interest rate.
Ongoing/ Service/ Administration fees	They are charged every month or year for administering your loan. Some ongoing fees may only be payable in certain circumstances.
Annual fees	Typically, if you are under a package home loan with special discounts on interest rates, your lender might charge annual fees.
Valuation fees	This is a fee charged by the lender for conducting a mortgage valuation on the property that you are intending to take out a mortgage on. It’s a basic inspection of your property, and its purpose is limited to whether your home is suitable security to lend on.
Government imposed fees	State and government charges at the time of settlement
Stamp Duty/ Land Transfer Duty	Stamp Duty is a state government tax based on the purchase price of the property and generally paid prior to the settlement. It’s usually a percentage of the market value or purchase price of the property targeted depending on the state, type of property, whether it’s a new home or not.
Title search	A title search is a current copy of the Certificate of Title which shows the current owner, the land description and any dealings associated with it.
Split Loan	A split loan option basically allows you to neutralise the pros and cons of both fixed and variable rates. They’re particularly effective when the market is fairly volatile. You are basically hedging your bets against unpredictable interest rates.