As a property investor, you've probably already come across many of the words and phrases listed below. But there's always a document or contract that throws up an unfamiliar investment term - so you may find this glossary useful!

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A
accrued interest interest that is owed, but hasn't been paid or charged yet.
additional repayments any money paid into the loan extra to the prescribed minimum repayments.
adjustments working out expenses - such as electricity and phone charges - that the vendor has paid for but not used, and which the buyer has not used but will be billed for. Done on settlement day.
affordability (housing) is measured by the Housing Affordability Index - the ratio of average household disposable income in an area to the income required to meet payments of a typical home. The higher the number, the more affordable property is.
all-in-one loan allows you to use money from the loan account for day-to-day purchases. The longer spare funds stay in the account, the more you'll save in interest.
allotment a portion of land
amortisation period the time you have to repay a loan at the arranged terms.
appraised value estimated value of a property used as security for a loan.
annual percentage rate (APR) the advertised rate of interest per annum.
assets any property, money or goods you own.
at call money which can be withdrawn from an account immediately.

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balance sheet an enterprise's statement of its assets, liabilities and net equity.
balloon payment a large repayment made to pay off a loan.
basic variable home loan at a variable rate lower than standard variable - but generally with fewer features.
bill of sale a written agreement where the original owner retains possession, but ownership is transferred.
body corporate a self-elected council of owners of the units in a strata building, formed to manage the building and common areas.
break costs charges for paying off a (generally fixed interest) loan before the end of its term.
bridging finance a short-term loan that plugs the financial gap between buying a new property and selling an old one.

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capital the value of assets such as house, property and business.
capitalising interest where interest owed is accrued and added to the total debt rather than being paid as you go along.
capital gain the amount you make in profit when you sell an asset for more than you paid for it.
capital gains tax a Federal tax on any profit you make on the sale of an asset acquired and sold after September 1985 (but does not include the primary residence).
capped loan has an interest rate that can't exceed a set level for a set period, but can drop.
caveat the Latin for 'beware' - usually seen in a contract clause that outlines a particular requirement.
caveat emptor Latin for 'buyer beware'.
certificate of title details land dimensions, ownership details, and any encumbrances.
chattels personal property. Real chattels are buildings and fixtures, personal chattels are clothes and furniture.
collared rate variable rate loan within a fixed upper and lower limit.
combination loans see split loan
common property an area used by all, not one person. Owned by the tenants in common.
company title when owners of units in a block form a company.
compound interest interest that is paid on both the accumulated interest as well as on the original principal.
construction loan used to fund the building of a new property.
contract of sale outlines the terms and conditions for the purchase or sale of a property.
contract a legally enforceable agreement between vendor and buyer that is exchanged when the deposit is paid.
covenant terms and conditions defining how a block of land or the buildings on it must be used.

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deed a legal document detailing an agreement or obligation regarding a property.
default rate the interest rate used when payments are not made or the facility goes above its limit.
deferred establishment fee charged when a loan is paid off within a prescribed time - within three years, for example.
deposit bonds guarantees that the buyer of a property will pay the full deposit by an agreed date. Guaranteed by the lender, and often used if cash isn't readily available.
discharge fee see mortgage discharge fee
draft forms of agreement provide a basic form of agreement that can be suitably adapted by each party's legal representatives to reflect the agreement reached between them. The Draft Forms of Agreement are designed to cover a number of different scenarios under which family members might agree to assist the borrower in purchasing a property in return for a share of a capital gain on the property being purchased, a lump sum payment, set repayments or repayments of interest and/or principal. It is not intended that the Draft Forms of Agreement be used by a party without obtaining legal advice.
draw down to access available loan funds.

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early termination charges fees incurred by paying off a loan early.
easement the right to use a passage of land which is owned by someone else.
encumbrance an outstanding liability or charge on a property.
end loan the loan amount left after you sell your existing home and pay the proceeds towards your bridging loan.
equity the difference between an asset's current market value (what it would sell for) and any debt or claim against it. In other words, your equity is the value of an asset or that portion of an asset that you own.
equity loan a loan secured by the part of the value of an asset (usually house) which you own.
equity mortgage a loan secured by the part of the value of an asset (usually house) which you own.
ERIC Effective Rate of Interest plus Costs
ETIA Early Termination Interest Adjustments
exchange of contract the point when vendor and buyer swap documentation and start the settlement process.
exit fees see 'break costs'.

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fittings any items that can be removed from a property without damaging it.
fixed interest an interest rate that is set for an agreed term.
fixtures any items that would cause damage to a property if removed. Can only be removed if agreed in contract of sale, and damage must be repaired by the seller.
freehold the property and the land it stands on belong to the owner until they choose to sell it.

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garnishee to legally divert someone's money or property to someone else, either wholly or partly.
gazumping coming in at a higher price and securing a sale where another offer has already been accepted.
gearing the ratio of your own money versus borrowed money in an investment. A 'highly geared' property has a high ratio of borrowed funds to owner's funds.
guarantee a legal contract accepting responsibility for discharging another's liabilities, such as the payment of a debt.
guarantor a party who has legally agreed to be responsible for the payment of another party's debts.

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holding deposit a refundable deposit put down by a buyer to show goodwill that they will complete the purchase.
housing affordability index shows the ratio of average household disposable income to the income required to meet payments on a typical property in a specific area. The higher the number, the more affordable the property.

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ILR (Indicator Lending Rate) the base rate which dictates interest rates for variable rate overdrafts and term loans.
inclusions items sold with a property e.g. lights, stove, fridge.
interest adjustment a charge sometimes made by lenders for loss of interest revenue when additional repayments are made on a fixed loan.
interest only interest payments are made only, not the principal - usually only for a short period.
interest only loan only the loan's interest is paid during the term - principal is paid back at the end.
introductory loan a loan is offered at a reduced rate for an introductory period (usually no longer than 15 months) to new borrowers.
inventory a complete list of items included with a property.

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joint tenants hold property equally between two or more people. If one party dies, their share passes to the survivor/s.

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land tax State Government tax paid by owners of investment property over a certain value and owner-occupiers with properties valued above a higher threshold.
land transfer fee State Government tax based on the selling price of a property (usually around $60).
liabilities debts or obligations.
lien the right to use property as security for a debt or loan.
line of credit a flexible ongoing loan arrangement with a specified limit.
loan maintenance fee an ongoing management fee charged over the life of the loan. Normally charged monthly.
loan security duty see mortgage stamp duty.
loan to valuation ratio (LVR) the ratio of the amount lent to what the security (usually the house) is valued at.

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margin the difference between the lender's interest indicator rate and the rate borrowers pay.
maturity the date a debt or investment must be paid in full.
mortgage the charge or assignment of property to secure the payment of a debt and where the property is redeemable upon payment.
mortgagee the lender of funds to buy property.
mortgagor the person borrowing money with a mortgage.
mortgage discharge fee administration fee covering the cost of finishing a loan.
mortgage insurance used by lenders to cover themselves against borrowers defaulting on their mortgage, then being unable to recover the debt by selling the property.
mortgage intermediaries companies and individuals that market and sell loans provided by mortgage originators.
mortgage offset account see 'offset account'.
mortgage originator lender who sources securitised funds to sell them on as loans.
mortgage protection insurance protects a borrower's loan repayments if they can't pay them due to, for example, illness or redundancy.
mortgage registration fee a State Government charge for registering a loan (around $100).
mortgage stamp duty a State Government tax based on the dollar value of a mortgage.

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negative gearing where the return from an investment property doesn't cover the maintenance costs and mortgage interest costs.

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off the plan buying a property - usually an apartment - from seeing the plans, before it is even built.
offer to purchase a legal agreement specifying the price for the purchase of a property.
offset account savings account linked to a home loan. The interest earned on the savings is offset against the interest charged on the mortgage, thereby reducing it. A 100 percent offset is where the interest rates earned and paid are the same.
old system title (common law title) is a collection of all the title documents going back to the original owner.
option to buy legally binding document giving someone the right to buy something - usually within a specific period - at a specific price.

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passed in at auction, a property is 'passed in' if the highest bid hasn't reached the vendor's reserve price.
portability a feature where a new property can be substituted as security for an existing loan.
principal the amount of capital borrowed - which interest is charged on.
principal & interest loan the principal and the interest are repaid together for the term of the loan.
private sale a property sold directly by the owners, not through an estate agent.
private treaty sale unlike auction, buyers negotiate on the price of a property set by the seller.

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redraw facility allows access to additional repayments made on a loan.
refinancing replacing or adding to an existing mortgage.
rental guarantee a guaranteed level of return on an investment property specified by a developer.
repayment principal and interest repayments require you to make payments of both the interest and the amount borrowed.
requisitions on title where a buyer makes a legal request for more details about the title of a property from the vendor.
reserve price vendor's minimum price acceptable at auction.
residential investment loan a loan for an investment property as opposed to an owner-occupied home.
right of way the right to cross a property or a general pathway across land.
rise and fall clause clause in a building contract that allows the final costs to change depending on changes in costs of materials or wages.

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search used to find out if the owner of a property can legally sell it and that there are no encumbrances on it.
securitisation turning a pool of diverse assets such as various home loans into a bond or other security which investors can buy and trade.
security an asset - usually the property itself - that guarantees the lender their money until the mortgage is repaid in full.
settlement date the date when the new owner makes a final payment and takes possession of a property.
Servicing capacity to meet principal, interest and other payments on a loan.
solicitors mortgages mortgages offered through solicitors firms, usually at higher rates and shorter terms than other lenders.
split loan where various loans are used to fund the same property. May have a portion variable, fixed or even a portion as a line of credit.
stamp duty on loan a State Government tax calculated according to the amount of a mortgage.
stamp duty on property purchase a State Government tax calculated according to the selling price of the property.
standard variable rate loan a home loan, usually with more comprehensive features than a basic variable loan. It is often the rate that fixed rates become at the end of their fixed term.
stepped different interest rates are paid on different amounts in the same account. e.g. 3 percent on amounts up to $10,000 and 3.5 percent on amounts over.
strata title gives ownership of a 'unit' of a larger building and membership of the body corporate.
stratum title Similar to a Strata Title, except the owner becomes a shareholder in the company that manages the common area, not just a member.
susceptibility report highlights the likelihood of future pest infestations in a property.

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tenants in common the holding of property by two or more people. If one dies, it is divided according to law.
title fees charged by the Land Titles Office for title search, transfer of property ownership, registration of the new mortgage and discharge of the old one.
title search legal process of discovering whether the vendor can sell and transfer ownership.
torrens title (or Certificate of Title) records ownership of a property, enabling owner to lease, sell or dispose of it.
transfer a document confirming a change of ownership as noted on the Certificate of Title, then registered with the Land Titles Office.

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unencumbered a property free of liabilities, encumbrances or restrictions.

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valuation a professional opinion of the property's value, written as report for the lender.
variable interest rate a rate that generally goes up and down according to the fluctuations in market rates.
vendor statement a list of their property's material particulars, made by the seller for the buyer.

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zoning local authority guidelines on how land should be used.

Things you need to know.* Only available if there is one security and for a limited time. Off the plan and Low Documentation loans are excluded. * Only monthly repayments are available if you choose the Interest Only option. * Minimum $2,000 withdrawal over the counter at any Commonwealth Bank branch and $500 electronically, both with a $50 drawing fee. Redraw not available if you choose the Interest Only option. Conditions Apply. ^If you have a relationship balance of $50,000 or more, you are exempt from the Monthly Account Fee and/or Withdrawal fees on a Streamline Account. Exemption excludes non-Commonwealth Bank ATMs here and overseas, transfer group payments to third parties, International Money Transfers and separate services such as bank cheques, periodic payments and transfers/deposits to other banks. As this advice has been prepared without considering your objectives, financial situation or needs, you should before acting on this advice, consider its appropriateness to your circumstances. If you have a complaint, the Bank's dispute resolution process can be accessed on 13 2221. Terms and Conditions issued by Commonwealth Bank of Australia for Streamline are available by calling 13 2221, from commbank.com.au or from any branch of the Bank.

3 Year Special Economiser (advertised as 3 year introductory rate) is a discounted Base Variable Rate for 3 years for new borrowings only, which converts to the Economiser Base Variable Rate current at the time after the 3 year period. .

Interest rate is current as at 13 August 2007 and is subject to change. All Comparison Rates are calculated on the basis of secured credit of $150,000 over a 25 year term. Comparison Rate Schedules are available by calling 13 2224 or by visiting any branch.

WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. A deferred establishment fee of $700 may be charged if the loan is repaid within 4 years. Applications for finance are subject to the Bank's normal credit approval. Full terms and conditions will be included in the Bank's loan offer. Other fees and charges may be payable. Commonwealth Bank of Australia ABN 48 123 123 124.