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Glossary of Terms

Industry stuff in understandable language

We'd like to clarify some common banking terms for you:

Appraisal (sworn valuation) - an opinion of the value of a property; not a full valuation
Appreciation - when a property increases in value
Auction - a public sale of property, where sale is to the highest bidder who meets or exceeds the seller’s reserve price
Bridging loan - a short-term mortgage loan that enables the purchase of one property before the sale of another; the bridging loan is normally paid off when the first property is sold
Certificate of title - a document that shows who owns a property and the existence of any limitations affecting the title such as mortgages, easements or encumbrances
Chattels - movable items of personal property that may be specifically included in a contract of sale, even though they do not automatically transfer with the sale of the land
Conditional offer - an offer to buy that is subject to specified conditions, for example the approval of finance
Contract of sale - a document that outlines details of a sale; it is legally binding when signed by both parties
Conveyancing - the legal process by which ownership of a property is transferred from the seller to the buyer, usually undertaken by a solicitor or conveyancer
Cooling-off period - a period after the buyer signs a contract of sale during which the buyer can reconsider the purchase. It does not apply to property sold by auction
Counter offer - a new offer of price, terms or conditions made in reply to a previous offer that was not accepted
Default - failure to pay loan repayments on time, which may lead to sale of the secured property
Deposit - a percentage of the purchase price paid by the buyer when making a written offer to purchase a property; usually 10%
Easement - where someone has the right to access another person's land for a specific purpose, such as a driveway or public utilities
Encumbrance - a restriction on the unfettered right to use or transfer property, for example easement, mortgage or caveat
Equity - the difference between the market value of a property and the amount owed to financiers
First Home Owner Grant - a government scheme that gives first home owners a non-means tested one-off payment
Fixed rate - an interest rate that is fixed for a set period of time
Fixtures - items attached to a property that cannot be removed without causing damage to the property
Interest - the cost of borrowing money
Interest only loan - a loan where the borrower is only required to pay interest on the amount borrowed during a specified period; the borrower must still repay the full balance outstanding under the mortgage at the end of the term
Lien - a legal claim against a property that must be paid off when the property is sold
Market value - generally considered to be the price at which a seller is happy to sell and a buyer is willing to buy
Mortgage - a written contract that gives a lender rights over a house being bought by a borrower as security for a loan
Mortgage insurance - a policy that protects the lender against a borrower defaulting on a mortgage
'Passed in’ - where a property is not sold at an auction, usually because the seller’s reserve price is not reached
Purchase price - the amount agreed between a seller and a buyer as the price of a property
Reserve price - the minimum sale price for a property, as advised by the seller
Settlement - the time when ownership of a property passes from the seller to the buyer
Stamp duty - a government tax paid by a purchaser, generally when ownership of the property is transferred; it is based on the property’s sale price
Title - a legal document that identifies who owns the property and who else has an interest in the property
Title search - a search at the government land titles office to show who owns a property
Transfer of land - a legal document that conveys title to a property
Variable interest rate - a type of interest rate that goes up and down according to markets

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