Articles

Balloon

A balloon payment is common for car and equipment finance.  It is a large payment due at the end of the loan term.  People are usually happy with balloon payments because they are likely to trade-in or sell their car after the loan term, enabling to pay the balloon without stress.

 

Body Corporate

Body Corporate is the common term for the body of members that oversee things like maintenance, insurance and upgrades on units and townhouses.  Body Corp fees/levies are generally charged to each property owner within the apartment building (or town house estate) quarterly.

 

Collateral

Something pledged as security for repayment of a loan, to be forfeited in the event of a default.

 

Conveyancer

A solicitor or representative responsible for preparing various documents and arranging settlement.

 

Credit History

A record of all your Credit Card and loan inquiries, defaults and court judgments resulting from unpaid loans.

 

Default

When a borrower does not make their repayments on time, they are said to be overdue or in arrears.  If the payments are overdue for 3 months or more, the lender will send out a notice of default, and record it on your credit file.

 

Equity

The difference between the value of a property and the loan against it.  If I own property worth $400,000, but have a loan against it worth $300,000, then I have $100,000 in equity.

 

Interest-Only

The lender generally will calculate interest daily, and add it to the loan account monthly.  If you have an interest-only loan, you need only repay this amount and none of the principle.

 

Lender

An umbrella term for banks, building societies, credit unions and non-banks.

 

LMI or Lender’s Mortgage Insurance

LMI is an insurance taken out by banks to protect themselves in case the borrower defaults.  LMI is often used as a reference to the once off insurance premium the borrower needs to pay when using a deposit smaller than 20% of the purchase price.  LMI does not protect the borrower.

 

LVR

LVR or the Loan-to-Value Ratio is the total loan amount divided by the value of the security.

 

Non-Bank

Used to describe a lender that doesn’t have its banking licence.  There are many non-banks that do home loans and car finance.

 

Principle

The amount owing on a property.

 

Security

A home loan is “secured” by house, therefore the house is known as the security.  When a house or car is used as security for a loan, the lender may repossess the security if the borrower defaults.

 

Split

A home loan can have multiple splits, which can be described as sub-accounts of the home loan.

 

Stand-Alone Loan

A loan with only one security.

 

Term

The length of a loan i.e. a term of 30 years.

 

Add comment