Australian Property Glossary

Annual percentage rate

The annual percentage rate is the interest rate charged on a loan over a year. In home lending, the rate affects how much interest you pay and how high your repayments may be.

A small change in the interest rate can make a large difference to repayments, especially on a large loan.

Application fee

An application fee is a fee a lender may charge when you apply for a home loan. Some lenders charge it upfront. Others may waive it as part of a loan package or promotion.

Application fees are only one part of the total loan cost. Buyers should also consider valuation fees, settlement fees, package fees and ongoing account fees.

Approval in principle

Approval in principle is an early indication from a lender that you may be able to borrow a certain amount, subject to conditions.

It is not the same as formal approval. The lender may still need to verify your documents, assess the property, complete a valuation and issue final approval.

Also known as: Pre-approval, conditional approval

Arrears

Arrears means payments are overdue. If a borrower misses loan repayments, the loan may be in arrears.

Falling into arrears can affect credit history and may lead to serious consequences if not addressed. Borrowers experiencing difficulty should contact their lender as early as possible.

Asset

An asset is something of value that a person owns. In property and lending, assets may include real estate, savings, shares, vehicles, business interests or other investments.

Lenders may ask about assets when assessing a loan application.

Bank valuation

A bank valuation is an assessment of a property’s value arranged by the lender.

The valuation helps the lender decide how much it is prepared to lend against the property. A bank valuation may be different from the purchase price or a real estate agent’s appraisal.

If the valuation comes in lower than expected, the buyer may need a larger deposit or a different loan structure.

Borrowing capacity

Borrowing capacity is an estimate of how much a lender may be prepared to lend based on income, expenses, debts, deposit, credit history and lender policy.

It is not based only on income. Two people earning the same amount may have very different borrowing capacity if their expenses, debts or dependants are different.

Bridging loan

A bridging loan is short-term finance that may help someone buy a new property before selling their existing property.

Bridging loans can be useful in some situations, but they can also be expensive and risky if the existing property does not sell as expected.

Building inspection

A building inspection is an inspection of a property’s condition, usually carried out before settlement or before a buyer commits fully to a purchase.

It may identify issues such as structural movement, roof problems, moisture damage, unsafe work or maintenance concerns.

A building inspection does not guarantee every defect will be found, but it can help buyers make a more informed decision.

Buyer’s agent

A buyer’s agent represents the buyer in a property transaction. They may help search for properties, assess value, negotiate with agents and manage the buying process.

This is different from a selling agent, who represents the seller.

Capital growth

Capital growth is the increase in a property’s value over time.

For example, if a property is bought for $700,000 and later sells for $850,000, the increase is capital growth before allowing for costs, tax and inflation.

Capital growth is not guaranteed.

Caveat

A caveat is a legal notice registered on a property title to show that someone claims an interest in the property.

Caveats can affect settlement and should be handled by a solicitor, conveyancer or settlement agent.

Certificate of title

A certificate of title records key ownership and legal details for a property.

It may show the owner, land description, mortgages, caveats, easements or other interests affecting the property.

Comparison rate

A comparison rate is designed to help borrowers compare loans by showing an interest rate that includes certain fees and charges.

It can be useful, but it may not include every cost or reflect every borrower’s situation.

Conditional approval

Conditional approval means the lender has given an indication of loan approval subject to conditions.

Conditions may include valuation, proof of income, deposit evidence, satisfactory documents or property approval.

It is not the same as unconditional or formal approval.

Contract of sale

The contract of sale is the legal agreement between the buyer and seller.

It sets out the purchase price, deposit, settlement date, inclusions, special conditions and other obligations.

Buyers should consider legal advice before signing a contract.

Conveyancer

A conveyancer helps manage the legal process of transferring property ownership.

They may review documents, prepare settlement paperwork, communicate with the other party, calculate adjustments and help complete settlement.

In some states, buyers may use a solicitor instead of or in addition to a conveyancer.

Council rates

Council rates are charges paid to the local council for services and infrastructure.

When buying property, council rates are usually adjusted between buyer and seller at settlement.

Credit score

A credit score is a number used by credit reporting bodies and lenders to help assess credit risk.

Lenders may also look at repayment history, defaults, credit enquiries, debts and overall application strength.

Deposit

A deposit is the buyer’s own contribution toward the purchase price.

For example, if a property costs $750,000 and the buyer contributes $150,000, the deposit is 20% of the purchase price before allowing for other buying costs.

Deposit bond

A deposit bond is a guarantee that may be used instead of a cash deposit in some property transactions.

Not every seller accepts deposit bonds. Buyers should confirm whether one is allowed under the contract.

Depreciation

Depreciation is the decline in value of an asset over time.

For investment properties, depreciation may relate to the building structure or certain fixtures and fittings. Investors should speak with a qualified accountant or quantity surveyor about depreciation rules.

Disbursements

Disbursements are expenses paid by a solicitor, conveyancer or settlement agent on behalf of a client.

They may include title searches, government fees, certificates or other transaction costs.

Drawdown

Drawdown is when loan funds are released by the lender.

In a normal purchase, funds are drawn down at settlement. In construction lending, funds may be drawn down progressively as stages are completed.

Easement

An easement is a legal right for someone to use part of another person’s land for a specific purpose.

Common examples include drainage easements, sewerage easements, access rights or utility services.

Easements can affect where buildings, pools, fences or other structures may be placed.

Equity

Equity is the difference between a property’s value and the debt secured against it.

Equity can change as property values and loan balances change.

Establishment fee

An establishment fee is a loan setup fee charged by some lenders.

It may be charged when the loan is approved or settled.

Exchange of contracts

Exchange of contracts is the point where both buyer and seller have signed and exchanged the contract.

The exact process and legal effect can vary by state and contract conditions.

Finance clause

A finance clause is a contract condition that gives the buyer time to obtain loan approval.

The wording matters. Buyers should understand deadlines, notice requirements and what happens if finance is not approved.

Legal advice is recommended before relying on any contract clause.

First home buyer

A first home buyer is someone buying their first home. Eligibility for grants, schemes or duty concessions depends on state, territory and program rules.

Being a first home buyer does not automatically mean a buyer qualifies for every grant or concession.

Fixed interest rate

A fixed interest rate stays the same for an agreed period, such as one, two, three or five years.

Fixed rates can provide repayment certainty, but may have restrictions on extra repayments, offset accounts or early exit.

Formal approval

Formal approval is when a lender gives final approval for a loan, usually after assessing the borrower, documents and property.

Buyers should not assume they have finance until formal approval is confirmed by the lender.

Guarantor

A guarantor is someone who provides additional security or support for a loan.

Some first home buyers use a family guarantee to reduce LMI or increase borrowing options. This can create serious risk for the guarantor, so legal and financial advice is important.

Government grant

A government grant is financial assistance provided under a government scheme.

For property buyers, grants may depend on location, property type, purchase price, buyer status, residency and occupancy requirements.

Rules change, so buyers should check current government sources.

Home loan

A home loan is money borrowed to buy property, usually secured by a mortgage over the property.

Home loans may be fixed, variable, split, principal and interest, interest-only, owner-occupier or investment loans.

Home loan pre-approval

Home loan pre-approval is an early lender assessment that indicates how much the borrower may be able to borrow.

It is usually conditional and not a guarantee of final approval.

Interest-only loan

An interest-only loan requires the borrower to pay interest for a period without reducing the principal loan balance through normal repayments.

Repayments may be lower during the interest-only period, but the loan balance does not reduce and repayments may increase later.

Interest rate

The interest rate is the cost charged by the lender for borrowing money.

Interest rates can have a major effect on repayments and total interest paid over the life of the loan.

Investment property

An investment property is purchased to produce rental income, capital growth or both.

Investment property has different risks and costs compared with buying a home to live in.

Joint tenants

Joint tenants are co-owners who own a property together in equal shares, with rights of survivorship.

This is different from tenants in common.

Buyers should get legal advice before deciding how ownership should be recorded.

Key handover

Key handover usually happens after settlement has been confirmed.

The real estate agent typically releases keys once the seller’s representative confirms settlement is complete.

Land tax

Land tax is a state or territory tax that may apply to land ownership depending on location, use, value and ownership structure.

Owner-occupied homes may be treated differently from investment properties.

Investors should speak with an accountant or check the relevant state revenue office.

Lender

A lender is the bank, credit union or financial institution that provides the loan.

Lenders have different rates, fees, approval policies and serviceability rules.

Lenders mortgage insurance

Lenders mortgage insurance, or LMI, is insurance that protects the lender if the borrower defaults and the lender suffers a loss.

The borrower usually pays the premium, but the insurance protects the lender, not the borrower.

Loan amount

The loan amount is the amount borrowed from the lender.

It may be affected by purchase price, deposit, fees, LMI and other costs.

Loan term

The loan term is the period over which the loan is scheduled to be repaid.

Common home loan terms may be up to 30 years, although the available term depends on the lender and borrower.

Longer terms may reduce regular repayments but can increase total interest paid over time.

Loan-to-value ratio

Loan-to-value ratio, or LVR, compares the loan amount with the property value.

Mortgage

A mortgage is a legal security registered over a property to protect the lender’s interest in the loan.

If the borrower does not meet loan obligations, the lender may have rights under the mortgage.

Mortgage broker

A mortgage broker helps borrowers compare loan options and apply for finance.

A broker may deal with multiple lenders, but not every broker has access to every lender.

Mortgage repayments

Mortgage repayments are the regular payments made toward the loan.

Repayments may be weekly, fortnightly or monthly and may include principal, interest or both.

Mortgage registration fee

A mortgage registration fee is a government fee to register the lender’s mortgage on the property title.

This is usually part of settlement costs.

Negative gearing

Negative gearing can occur when the costs of holding an investment property exceed the income it produces.

Tax rules can be complex, so investors should speak with an accountant before relying on any tax outcome.

Net rental yield

Net rental yield measures rental return after allowing for certain expenses.

It is usually more useful than gross yield because it considers more of the actual holding costs.

Offset account

An offset account is a transaction or savings account linked to a home loan.

Money in the offset account may reduce the loan balance used to calculate interest.

Off-the-plan

Buying off-the-plan means buying a property before it is completed, often based on plans and specifications.

This can involve settlement delays, valuation risk, market risk and contract conditions that should be reviewed carefully.

Owner-occupier

An owner-occupier is someone who lives in the property they own.

Owner-occupier loans and investment loans may have different interest rates, policies and conditions.

Pest inspection

A pest inspection checks for evidence of pests such as termites.

It is common for buyers of established homes to arrange a building and pest inspection before settlement or before the contract becomes unconditional.

Pre-approval

Pre-approval is an early indication from a lender that you may be able to borrow a certain amount, subject to conditions.

It is not a guarantee of final approval.

Principal

Principal is the loan amount borrowed or the remaining loan balance, excluding interest.

When borrowers make principal and interest repayments, part of each payment reduces the principal.

Principal and interest loan

A principal and interest loan requires repayments that include both interest and a reduction of the loan balance.

This is a common repayment structure for owner-occupiers.

Private treaty

Private treaty is a property sale method where the property is listed for sale at a price or price guide and buyers negotiate with the seller.

This is different from an auction.

Property purchase costs

Property purchase costs include more than the purchase price.

They may include deposit, stamp duty, conveyancing, inspections, lender fees, insurance, settlement adjustments and moving costs.

Quantity surveyor

A quantity surveyor estimates construction costs and may prepare depreciation schedules for investment properties.

Investors should speak with an accountant about whether a depreciation schedule is suitable.

Redraw facility

A redraw facility allows borrowers to access extra repayments they have made into their loan, subject to lender rules.

Redraw is different from an offset account.

Refinancing

Refinancing means replacing an existing loan with a new loan.

Borrowers may refinance to seek a lower rate, access equity, change loan features, consolidate debt or move to another lender.

Rental appraisal

A rental appraisal is an estimate of the rent a property may achieve.

Investors often obtain rental appraisals before buying an investment property.

Reserve Bank of Australia

The Reserve Bank of Australia, or RBA, is Australia’s central bank. Its cash rate decisions can influence home loan interest rates, although lenders make their own pricing decisions.

Security property

The security property is the property used by the lender as security for the loan.

If the borrower defaults, the lender may have rights over the security property.

Settlement

Settlement is the legal and financial completion of a property purchase.

At settlement, funds are exchanged and ownership transfers to the buyer.

Settlement adjustment

Settlement adjustments divide certain property outgoings between buyer and seller.

Examples may include council rates, water rates, strata levies and land tax where applicable.

Settlement agent

A settlement agent manages the settlement process in some states, including Western Australia.

They may handle transfer documents, settlement adjustments, communication with lenders and completion of settlement.

Stamp duty

Stamp duty is a common name for state or territory duty charged on many property purchases.

Some states call it transfer duty or conveyance duty.

The amount depends on the state or territory, property value, buyer type, property type and concessions.

Strata

Strata title is a form of ownership commonly used for apartments, units, villas and townhouses.

Owners usually own their lot and share common property with other owners.

Strata levy

Strata levies are contributions paid by owners in a strata scheme to cover building insurance, maintenance, administration and reserve funds.

Special levy

A special levy is an additional levy raised by a strata scheme for specific costs, such as major repairs or unexpected expenses.

Investors and owner-occupiers should review strata records before buying.

Tenants in common

Tenants in common are co-owners who own defined shares in a property.

This is different from joint tenants.

Legal advice is recommended before deciding how to hold property.

Title search

A title search provides information about a property’s legal title.

It may show ownership, mortgages, caveats, easements and other registered interests.

Transfer duty

Transfer duty is the formal term used in some states for stamp duty on property transfers.

It is usually paid by the buyer and calculated according to state or territory rules.

Unconditional approval

Unconditional approval means the lender has approved the loan without further major conditions.

Even then, borrowers still need to sign loan documents and complete settlement requirements.

Unconditional contract

An unconditional contract is a contract where conditions have been satisfied, waived or were not included.

Once a contract is unconditional, the buyer may be legally required to complete the purchase.

Valuation

A valuation is an assessment of a property’s value.

A lender may order a valuation before approving a loan.

Variable interest rate

A variable interest rate can move up or down over time.

Variable loans may offer flexibility, but repayments can change if rates move.

Vacancy

Vacancy is a period when an investment property is not rented.

Investors should allow for vacancy when estimating cash flow.

Water rates

Water rates are charges related to water services.

They may be adjusted between buyer and seller at settlement.

Zoning

Zoning controls how land can be used and developed.

Zoning may affect whether land can be used for residential, commercial, mixed-use, industrial or other purposes.

Buyers considering subdivision, development or major renovation should check zoning and planning controls with the local council or planning authority.